Too Big to Fail [117]
He then delivered to Willumstad the same warning that he had given to Fuld the month before when Fuld had sought bank holding company status for Lehman.
“I think the problem is it’s going to exacerbate what you’re trying to avoid,” he said. “When it would get disclosed, that would cause concern among the counterparties. It would exacerbate anything we had.”
Willumstad could see he wasn’t getting anywhere with his argument as Geithner rose to indicate that he had to get to his next meeting, saying only, “Keep me informed.”
On July 29 Lehman’s Gulfstream circled over the airport in Anchorage, Alaska, preparing for its approach to land to refuel. Aboard was Dick Fuld, heading back from Hong Kong, where he and a small Lehman team had met with Min Euoo Sung of the Korea Development Bank.
Fuld was in uncharacteristically good spirits that day, confident that he was finally getting closer to a deal. He had had a productive conversation with KDB, and both sides had agreed to continue talking. It would still be a “long putt,” he knew, but KDB had become his best hope. Min had indicated that he would be interested in buying a majority stake in Lehman. He knew Min was still anxious about Lehman’s real estate portfolio—the toxic assets weighing it—but Min also seemed to be upbeat about the prospect of making KDB a major player on the world stage. There hadn’t been much discussion about price at the meeting at the Grand Hyatt in downtown Hong Kong, but Fuld was confident that a deal might finally be at hand.
Fuld was also pleased with himself for having kept the talks out of the press. He had been so concerned about leaks this time around that he had instructed the team he took with him to the meetings—Bart McDade, Skip McGee, Brad Whitman, Jesse Bhattal, and Kunho Cho—not to answer their phones. McGee had gone so far as to mislead his staff back in New York by leaving a voice-mail for Mark Shafir, who had gone on the earlier trip to South Korea, telling him that he had flown to China to visit with clients. Fuld had organized the meeting in Hong Kong, as opposed to the more likely Seoul, partly so that if anyone was tracking the firm’s plane, its destination would lead to less speculation.
On the return trip the Lehman team watched The Bank Job, a British heist movie, on the plane’s large screen. Fuld had already seen it and made the case for an action film instead, but McDade, who was increasingly taking control of the firm, won out.
As they taxied to the refueling station, Fuld’s good mood suddenly vanished: The maintenance crew had discovered an oil leak. As the pilot tried to coordinate a repair, the Lehman team ate lunch on the plane as it sat on the tarmac. But after an hour, it was uncertain whether that damage could be repaired.
McDade started calling his secretary to see if they could book a commercial flight home.
“When’s the last time you flew commercial?” McDade ribbed Fuld, who was plainly not amused.
On August 6, 2008, a team of bankers from Morgan Stanley arrived at the Treasury building and was escorted up to a conference room across from Paulson’s office for what they all knew would be an unusual meeting. Looking for help with Fannie Mae and Freddie Mac, Paulson had called John Mack a week earlier to hire his firm as an adviser to the government. Paulson would have chosen Goldman were it not for the obvious public relations problem or the fact that it was advising Fannie. He also briefly considered hiring Merrill Lynch, but Morgan Stanley seemed the best option.
Mack had originally been reluctant even to take the assignment, for the cost of serving as Treasury’s adviser on Fannie Mae and Freddie Mac was that the firm could not conduct any business with the mortgage giants for the next six months, and therefore stood to lose out on tens of millions of dollars in fees. “How can we tell our shareholders we’re walking away from this kind of money? I’m going to get asked about why I did that,” he told his team.
But after