Too Big to Fail [130]
Although McDade didn’t require Fuld’s blessing to release the numbers—he and his cohorts had already stripped Fuld of any real authority—he did need Fuld’s cooperation in leading the earnings call. For better or worse, he was still the public face of the firm, and his presence would be a key factor in helping to calm the markets.
Given the complexities of their current situation, however, McDade was worried about Fuld’s emotional state. “I don’t know if he can do it. He’s under an enormous amount of stress,” McDade told Gelband before he went to see Fuld. From a public relations point of view, however, they had few alternatives, and McDade knew Fuld would want to lead the earnings call. Fuld wouldn’t have it any other way.
Hank Paulson looked dispirited Tuesday morning as he walked into the main conference room across from his office in the Treasury Building, his team of advisers in tow: Tony Ryan, Jerimiah Norton, Jim Wilkinson, Jeb Mason, and Bob Hoyt. Their 10:00 a.m. meeting with Jamie Dimon and JP Morgan Chase’s operating committee had been set up weeks earlier as part of a series of all-day meetings the firm had scheduled to establish better relations with the government. That strategy that had been devised by Rick Lazio, a former Republican representative from New York, whom Dimon had hired as executive vice president of global government relations and public policy. Internally, JP Morgan’s operating committee trips to Washington were jokingly referred to as “OC/DC.” With the financial system teetering, Dimon knew that there would be calls for tighter federal regulation of Wall Street and wanted to make certain that he had shaken all the right hands well in advance.
“Thanks for coming down here,” Paulson said somewhat sheepishly as he opened up the meeting. He was, in fact, still preoccupied with reaction to the takeover of Fannie and Freddie just forty-eight hours earlier. He believed that he had made exactly the right moves in orchestrating the affair, but investors hadn’t seemed to agree. Far from stabilizing them, as he thought they might, the markets seemed to be on the verge of tanking again.
Perhaps most grating of all was the reaction from Congress. He was particularly upset with Senator Dodd, whom he had personally briefed on Sunday, soon after the announcement. Dodd, he thought, had tacitly signaled his support, but the following day had publicly mocked him, quipping that his request for temporary powers—which Paulson had clearly indicated that he didn’t intend to utilize—was merely a big ruse. “[A]ll he wanted was the bazooka, he didn’t want to use it,” Dodd wryly observed to reporters in a conference call on Monday.
“We certainly accepted him at his word that that was all that was going to be necessary,” Dodd said. “Fool me once, your fault. Fool me twice, my fault.” And then Dodd openly raised the question that until then had only been whispered around Washington: “Is this action going to produce the desired results, or are there other actions being contemplated?”
Senator Jim Bunning, who had sparred with Paulson over the summer, going as far as to brand him a Socialist, was even more pointed: “Secretary Paulson knew more than he was telling us during his appearance before the Banking Committee. He knew that Fannie and Freddie were in an irreversible state of damage. He knew all along he was going to have to use this authority despite what he was telling Congress and the American people at the time.”
Paulson had allotted less than an hour to the JP Morgan meeting, even though he knew how important it was to Dimon. “I’ve been trying to encourage opening up the lines of communication between Wall Street and Capitol Hill,” he now told the bankers, explaining that when he ran Goldman, he hadn’t “appreciated how important it was to establish the right relationships in Washington.”
“Trying to get things done here ain’t as easy as it seems,” he said, his audience laughing at the clear reference to the nationalization