Too Big to Fail [131]
He asked Dimon what he thought of the move. Dimon, who had encouraged Paulson to pursue the conservatorship, responded positively but diplomatically: “It was the right thing to do. We could see just how big the problem was becoming over the weekend,” and added that it had become clear that certain Fannie and Freddie bonds wouldn’t roll on Monday. Dimon tactfully avoided mentioning the fact that the stock market didn’t seem to be steadying.
“If you guys believe that, share it,” Paulson said before they got up to leave. “I could use the help. No one around here wants to listen to my analysis.”
After that singular plea for help from the Treasury secretary, JP Morgan’s top executives splintered into smaller groups to make several obligatory courtesy drop-bys on the Hill to their federal overseers. Charlie Scharf, head of the firm’s consumer business, and Michael Cavanaugh, its new CFO, went to see Sheila Bair, head of the FDIC; Steve Black paid a visit to James Lockhart; and later in the day, there was a meeting scheduled with Barney Frank for several members of the team.
But the most important of the visits was Dimon’s, with the Federal Reserve’s Ben Bernanke. Dimon brought Barry Zubrow, the firm’s chief risk officer, along with him. Zubrow, a relative newcomer to JP Morgan, was quickly becoming one of its key executives. A former banker at Goldman Sachs, where he had worked for more than twenty-five years, he was a close friend of Jon Corzine, the deposed Goldman boss who had gone on to become governor of New Jersey. If anyone at JP Morgan understood the risks in the market as well as Dimon, it was Zubrow.
As Dimon and Zubrow entered the Federal Reserve’s Eccles Building on Constitution Avenue, Zubrow sneaked a quick look at his BlackBerry before passing through the security X-ray machine. He was alarmed at what he saw: Lehman’s stock had plunged 38 percent, dipping to about $8.50 a share.
In Lower Manhattan’s financial district, Robert Willumstad, AIG’s CEO, sat on the thirteenth floor of the Federal Reserve Bank of New York waiting to meeting with Tim Geithner. With the markets in turmoil, he had returned to see Geithner to press him again to consider making the discount window available to his company. While Geithner may have spurned his abstract request last month, this time Willumstad had come with a more detailed proposal to turn AIG into the equivalent of a primary dealer like Goldman Sachs or Morgan Stanley—or Lehman Brothers. “It’s going to be a few minutes. He’s on the phone,” Geithner’s assistant told him.
“No problem, I have time,” Willumstad replied.
Five minutes passed, then ten. Willumstad looked at his watch, trying to keep from getting annoyed. The meeting had been scheduled to start at 11:15.
After about fifteen minutes, one of Geithner’s staffers, clearly embarrassed, came to speak with him. “I don’t want to hide the ball on you,” he said. “He’s on the phone with Mr. Fuld,” he revealed with a knowing smile, as if to indicate that Willumstad might be waiting a while longer. “He’s up to his eyeballs in Lehman.”
Finally, a half hour later, Geithner appeared and greeted Willumstad. Geithner was clearly overwhelmed, his eyes darting around his office as he nervously twisted a pen between his fingers. He had also just flown back from an international banking conference in Basel, Switzerland.
After some pleasantries, Willumstad explained the purpose of his request for this meeting: He wanted to change—no, very much needed to have—AIG’s role in the finance sector codified. He said that he wanted AIG to be anointed a primary dealer, which would give it access to the emergency provision enacted after Bear Stearns’ sale, and thus enable it to tap the same extremely low rates for loans available only to the government and other primary dealers.
Geithner stared poker-faced at Willumstad and asked why AIG FP deserved access to the Fed window, which, as Willumstad was well aware, was reserved for only the neediest of financial institutions, of which there were now far more than usual.