Too Big to Fail [114]
Parr was asked by one of the directors to offer some perspective on how bad the market really was. An assured speaker, Parr launched into his regular skeptical boardroom speech.
“It’s tough out there,” he said forebodingly. “Having been through Bear Stearns and MBIA”—two former clients—“there are some lessons we’ve learned.” Trying to make certain that Lehman’s directors understood the gravity of the situation they were facing, he told them, “Liquidity can change faster than you can imagine,” suggesting they should not think Bear Stearns was a once-in-a-lifetime event. “Rating agencies are dangerous,” he went on. “Wherever you think you stand with the rating agencies, it’s worse…. And let me tell you, it’s difficult to raise money in this environment because asset prices are hard for outside investors to under—”
“Okay, Gary,” Fuld said, impatiently cutting him off in midsentence. “That’s enough.”
An awkward silence fell over the room for a moment. Some directors thought Fuld had become upset with the negative direction Parr had taken; others believed that he had rightly quieted him for shamelessly plugging his services. Within ten minutes, Parr slunk out of the room.
An hour later, back in his office at Lazard in Rockefeller Center, Parr was informed by his secretary that Dick Fuld was on the phone.
“Goddamit, Gary!” Fuld screamed when Parr picked up the receiver, half-expecting an apology. “What the hell are you doing trying to scare my board and advertising yourself to them like that? I should fire you!”
For a moment Parr didn’t respond. Frustrated that Lehman hadn’t yet signed an engagement letter, Parr snidely fired back, “Dick, that might be difficult because you haven’t hired us yet.” Then, collecting himself, he said, “I’m sorry. I didn’t mean to go down a path you didn’t want me to go.”
“You’ll never do that again,” Fuld said, and the phone went dead.
The next day, Fuld—perhaps fearing that he was beginning to become unwound—realized that berating Parr had been a mistake; the stress was beginning to get to him. In his mind he had cut off Parr for running an advertisement for Lazard, not for suggesting the firm was imperiled. But the damage had been done. He called Parr back, hoping to mend the relationship and to invite him for another meeting.
“Have you recovered from the phone call?” Fuld asked contritely.
Ken Wilson was standing in line at Westchester County Airport at 6:45 on the morning of Thursday, July 17, on his way to Montana to start a vacation and do some fly-fishing, when his cell phone rang.
“Kenny, we really need you,” President Bush told him. “It’s time for you to do something for your country.” Wilson and the president knew each other from Harvard Business School, but Wilson knew this call had not been the president’s idea. This was classic Paulson; he must be really hurting. If Paulson wanted something, he would keep going until he got it, even if it meant enlisting the highest authorities.
That weekend, Wilson, after talking it over with his colleagues at Goldman, called Paulson. “I’ll do it.”
On the evening of July 21, Paulson arrived for a dinner in his honor at the New York Fed, organized by Tim Geithner as an opportunity for the secretary to get together with Wall Street leaders—Jamie Dimon, Lloyd Blankfein, and John Mack among them.
The dinner would be the second gathering of Wall Street heavyweights he’d attended that day. He had earlier been to a private luncheon in his honor at the offices of Eric Mindich, a former protégé at Goldman Sachs who now ran a hedge fund called Eton Park Capital, where he pressed his case for the pending GSE legislation. Paulson was feeling slightly better about the overall situation, as both Wilson and Jester had agreed to join Treasury, and the prospects for the legislation’s passing were improving. And as he mingled among his former colleagues, he congratulated John Thain of Merrill, who days