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The press conference ended. Buffett looked at his watch as they walked off the stage. “I’ve got to get back to Omaha,” he said.

“Warren, what’s happening here?” asked Maughan. He had never spoken to any of the angry government officials, had never attended a Salomon board meeting, and the ship was sinking. “Do you have any views on who should form the management? Is there any direction you want to give me as a strategy?”

“If you have to ask me questions like that, I picked the wrong guy,” Buffett said. He walked away without another word, leaving his $700 million and his reputation in the hands of a man he had met thirty hours before.95

“And then, when it was over, they were swinging cameras in our faces and banging us. It was a mob scene. I went out and got in a cab. And one or two reporters noticed that, which they felt was the new Salomon. Instead of a string of black cars waiting for us out there.”

On Monday morning, Maughan went out to The Room to shore up the staff’s devastated morale. He took off his jacket and rolled up his sleeves. The firm, he said, had faced three tests. The first was character. By firing Mozer and his number two, Thomas Murphy, and accepting the others’ resignations, the firm had passed that test.

The second was confidence. By regaining at least partially the Treasury Department’s good graces, Salomon had passed that test.

The third was will. “This is not the same firm,” said Maughan, “but we must keep aspects of the old culture while we bring in a new one.”96

Some of the traders stirred uneasily. What did that mean, a new culture?

But at least Salomon had gotten one lucky break. Overnight, news had flashed over the wire that Soviet Premier Mikhail Gorbachev had been ousted in a coup. The stock market immediately dropped 107 points. Business coverage, which had been drilling on Salomon all day Friday, suddenly shifted focus as the world turned its attention toward Gorbachev, held under house arrest by eight of his own military and state officials. With tanks rolling into Moscow and Russians demonstrating in Parliament and protesting in Leningrad, customers got on the phones, and the bond desk did a brisk business that morning.

“There are lots of ways of getting off the front page,” said a salesman, “but sending in the Red Army has got to be the most creative.”97

49

The Angry Gods

New York City • 1991–1994

The regulators’ confidence that Salomon could survive on Buffett’s reputation alone was almost certainly misplaced. Salomon barely survived even after the Treasury partially reversed itself. Some of its biggest customers simply felt revulsion toward the firm. First the huge and influential California Public Employees’ Retirement System, then the World Bank washed their hands of Salomon. Buffett fell asleep each night with visions of the hundreds of billions of dollars of Salomon debt that would fall due over the next few weeks staggering through his dreams like sickly sheep. He had a sense that, for once, matters were simply not under his control. “Events could do me in, and I couldn’t get off the train. I didn’t know where the train was going to go.

“I couldn’t do anything about what the troops were going to do every day. I couldn’t do anything about discovering things that I didn’t know existed when I went in. I couldn’t do anything about what Jerry Corrigan felt about everything that had taken place, or what the U.S. Attorney for the Southern District of New York or the Antitrust Division of the Justice Department would do. I knew it was terribly important that it get worked out right, and I knew that was something that—no matter how hard I worked—I had no control over. I could stay up all night and think about things, but that wasn’t necessarily going to guarantee a good outcome. And it made a lot of difference to a lot of people. It would change my whole future life.”

Buffett had to return to New York the following week. Senator Daniel Patrick Moynihan wanted to see him about Salomon,