Too Big to Fail [115]
What still had Paulson worried, however, was Lehman, and particularly a secret meeting that had been scheduled for after the dinner: He and Geithner had helped orchestrate a private meeting between Dick Fuld and the boss, Ken Lewis, in a conference room at the NY Fed. Fuld had been ringing Paulson for the past two weeks about Bank of America, trying to get Paulson to make a call on behalf of Lehman.
“I think it’s a hard sell, but I think the only way you’re going to do it is go to him directly,” Paulson had told Fuld. “I’m not going to call Ken Lewis and tell him to buy Lehman Brothers.”
As the dinner was ending, Paulson walked over to Lewis and said affably, “Those were some good earnings,” reaching out to clasp Lewis’s hand and giving him a knowing look about the upcoming meeting. Although earlier that day Bank of America had reported a 41 percent slide in second-quarter earnings, the results were far better than what Wall Street analysts had expected. That positive surprise followed a series of stronger-than-expected earnings from Citigroup, JP Morgan Chase, and Wells Fargo, all of which were at least temporarily buoying the market.
When Paulson turned to leave and other executives started to get up and mill around, Geithner approached Lewis and, leaning close to him, whispered, “I believe you have a meeting with Dick.”
“Yeah, I do,” Lewis replied.
Geithner gave him directions to a side room where they could speak in private. Geithner had apparently already given Fuld the same instructions, because Lewis noticed him across the room looking back at them like a nervous date. Seeing Fuld start to walk in one direction, Lewis headed in the other; with half of Wall Street looking on, the last thing either of them needed was to have word of their meeting get out.
The two men eventually doubled back and found the room, but when Lewis arrived, Fuld was in the midst of a heated argument with a Fed staff member. It was only the second time the men had ever met, and the sharp tone of his hectoring startled Lewis.
For about twenty minutes Fuld explained how he pictured a deal might work, reiterating the proposal he had made to Curl a week earlier. Fuld said he’d want at least $25 a share; Lehman’s shares had closed that day at $18.32. Lewis thought the number was far too high and couldn’t see the strategic rationale. Unless he could buy the firm for next to nothing, the deal wasn’t worth it to him. But he held his tongue.
Two days later, Lewis called Fuld back.
“I don’t think this is going to work for us,” Lewis said as diplomatically as he could, while leaving open the possibility that they could discuss the matter again.
Fuld was beside himself as he called Paulson at 12:35 p.m. to relay the bad news. Now all he was left with was the possibility of the Koreans, and he pressed Paulson to make a call to them on his behalf—a request that Paulson, having already interceded with Buffett and Bank of America, was now resisting.
“I’m not going to pick up the phone and call the Koreans,” Paulson told him. “If you want to scare someone, call them up and tell them I said they should buy Lehman Brothers,” he said, explaining that his involvement would only heighten suspicion about the firm’s prospects. “Dick, if they call me and want to ask questions, I’ll do what I can to be constructive.”
It was just the latest bad piece of news of a very long day. That night, Bart McDade forwarded Fuld an e-mail from a trader with more speculation about where the negative rumors were coming from. “It is clear that GS [Goldman Sachs] is driving the bus on the hedge funds kabal [sic] and greatly influencing the downside momentum, LEH and others. Thought it was worth passing on.”
Fuld replied: “Should we be too surprised? Remember this, though—I will.”
CHAPTER ELEVEN
Robert Willumstad could feel the perspiration begin to soak through his undershirt as he strode along Pearl Street at 9:15 a.m. on Tuesday, July 29, in Manhattan’s financial district. Although the humidity was