Too Big to Fail [111]
Curl was soon escorted to a conference room, where he paid careful attention as Fuld walked him though his idea in greater detail. He wanted to sell a stake of up to a third of Lehman Brothers to Bank of America and merge their investment banking operations under the Lehman umbrella.
As Curl listened, he was dumbfounded, though characteristically gave no sign of what he was thinking. Far from the plea for help he had been expecting, the pitch he was hearing struck him as a reverse takeover: Bank of America would be paying Fuld to run its investment banking franchise for it.
Fuld also suggested that any investment would “boost our stock price” overnight, creating even more value for Bank of America. He rationalized that buying a stake in Lehman—as opposed to buying the entire firm—would provide incentive for the firm’s savvy bankers to stay in their jobs. “You’re not going to be able to keep these people if they can’t see a financial upside,” he argued, making a relevant point about most full-bank mergers—namely, that the talent usually cashes out and leaves.
Curl nodded appreciatively throughout the presentation, before finally stating that the boss—Lewis—would be interested in entertaining the prospect of a deal only if he had a clear path to taking control of the firm in a reasonable amount of time.
Cohen, interjecting on behalf of Fuld, suggested that they should think about a time frame of two to three years, depending on how successful the investment was.
That was more along the lines of what Curl wanted to hear. He told them he was intrigued, but that he and Lewis had often disagreed about whether they should acquire an investment bank or continue buying up other commercial banks. “I don’t like the retail business,” Curl confided, “because of the susceptibility of litigation and attorneys general and regulators.
“I’d prefer a deal with you,” he continued, “but to be honest, Ken would probably prefer to buy Merrill or Morgan.”
Fuld was confused. What was Curl signaling?
“So do you think we have something here?” Fuld asked.
“I don’t know,” Curl said. “I need to talk to the boss. It’s obviously his decision.”
By late afternoon, Paulson, unshaven and wearing jeans, was pacing the halls and pestering his staff with so many questions about the Fannie and Freddie proposal that his chief of staff, Jim Wilkinson, finally took him aside and said forcefully, “You’ve got to get out of our hair and let us do our jobs.”
To blow off steam, Paulson decided to take a quick bike ride around the near-empty Washington streets. He couldn’t stop thinking about the plan and what it might mean to his legacy: He, a Republican, a man of the markets, was going to ask for authority to invest U.S. taxpayer money in the two institutions that were perhaps most responsible for the housing boom and bust. On the other hand, after decades of political infighting over these two entities, he would have the opportunity to undo them. But would he actually need to use the authority that he was asking for? Would simply having the authority be enough to calm the markets? As he pedaled his bike, he hoped that would be the case.
When Paulson returned, Michele Davis, his communications chief, was trying to figure out where he could physically announce the proposal. “We can’t have reporters and camera crews in the building,” she said. “We could have you go outside on the steps.” Nason, walking over to a window, warned that the forecast called for a thunderstorm.
“I don’t know what to do,” she said,