Too Big to Fail [101]
It was that comment that Blankfein recalled the following day to a director over breakfast. “I don’t know why he’d say that,” Blankfein said quizzically. “It can only get worse.”
CHAPTER TEN
One afternoon in late June, Dick Fuld stepped into the bustling lobby of the Hilton Hotel on Sixth Avenue at Fifty-third Street. He was late, which made him even more anxious about the meeting he was about to attend. Within days of Bart McDade’s being named Lehman’s new president, he had made a startling demand of Fuld: He wanted to rehire Michael Gelband and Alex Kirk, the two senior traders Joe Gregory had fired. The men, whom Gregory used to call the “the naysayers,” were among the most vocal opponents of the firm’s escalation of risk over the years.
“We need these guys,” McDade had told Fuld, regarding his decision. “They already know the positions,” referring to Lehman’s portfolio of toxic assets, which they still hoped to sell. And McDade said that both of them had the support of “the troops on the trading floor,” which was critical in restoring confidence.
McDade hadn’t given Fuld much choice in the matter. And, given that Fuld had just handed McDade authority over the day-to-day operations of the firm, he felt he had to go along with his wishes for the good of the firm, as embarrassing as it might be to have his own judgment challenged so publicly. Before he did, however, he told McDade, “Look, you’re not hiring either guy back until I talk to them.”
Now Fuld was on his way to a face-to-face with Gelband, whom he hadn’t seen in over a year.
The tension was palpable as they both took seats in a dark meeting room. “We need to clear the air,” Fuld said, acknowledging that there was still some unfinished business to resolve. “Let’s understand: You’re coming back. I want to fucking hear from you.”
Gelband, a broad six-footer with a closely shaved head, didn’t appreciate Fuld’s aggressive tone and had no patience for bullying or bluffing. As far as he was concerned, he was doing Fuld a favor by returning amid the turmoil. Indeed, ironically enough, before agreeing to come back to Lehman he had been recruited to take Joe Cassano’s job at AIG.
“How’s that, Dick?” he asked.
“The last time we talked, okay, not the last time, but when you were at the firm and you and I talked about your bonus, I got the sense that you were unhappy with it, and that pissed me off, because you made a shitload of money in 06,” Fuld said, pouring himself a glass of water.
Gelband thought this was an unusual way to begin a meeting that he believed had been intended as something of a reconciliation. They had had a frank discussion about his bonus the year that he left, when he had earned more than $25 million, but he didn’t remember having complained about it too vociferously. “That’s interesting, because I didn’t have a problem with my bonus,” Gelband said. “In fact, I was completely fine with it.”
“Well, that’s not what Joe told me,” Fuld said.
For a moment they set aside their differences and talked about the firm, reminiscing about the better times and reviewing Lehman’s prospects. It was clear the company would have to unwind its positions as quickly as possible and try to get the best possible price for them. Gelband said he would have to conduct an inventory of the assets to get a sense of their value. Fuld also told him that it was his intention to raise additional capital.
“There is just one thing you need to understand,” Gelband said as the meeting was coming to a close. “The one reason I am coming back is because of Bart.”
As Fuld knew, Gelband had been a longtime friend of McDade’s; they had been classmates at the University of Michigan Business School, and it was McDade who had helped Gelband get his initial job interview at Lehman. “Well, yes, Bart is going to be running the day-to-day business,” Fuld said, trying to sound nonchalant, “but I hope it has something to