Too Big to Fail [139]
Now, two months after the Countrywide acquisition had been completed, Lacker was threatening to force the bank to slash its dividend. Bank of America had not disclosed the conversations, hoping they’d be able to resolve the matter before the news ever leaked. The bank had been working the phones that afternoon with the Richmond Fed to try to figure out where the bank now stood with Lacker, but it was having little luck. “We’re going to need your help,” he told Wilson. “Otherwise, we can’t move forward.”
Wilson recognized the gambit all too clearly: Bank of America was using the Lehman situation as a bargaining chip. The bank would help Lehman, but only if the government would do it a favor in return. Lewis, through Curl, was playing hardball.
Wilson promised to look into the matter and then immediately called Paulson. “You’re not going to believe this…”
At 10:00 p.m., a frustrated Bart McDade was still holding court in the boardroom on the thirty-first floor at Lehman Brothers. He had just learned that Bank of America wasn’t coming up to New York in the morning, though he didn’t yet understand exactly why. “We’re playing against the clock,” he railed.
Hours earlier, McDade had implored Fuld to go home and get some sleep before tomorrow’s earnings call, for which he needed to be on his best form. Since Fuld left, he had been reviewing various drafts of the press release. What should they say? What could they say? How should they say it?
McDade had just finished coaching Lowitt, his CFO, through his part of the presentation when Wieseneck and Whitman returned from their meeting with JP Morgan and Citigroup.
Before joining everyone in the boardroom, they huddled with Jerry Donini and Matt Johnson, along with a half-dozen other bankers. Whitman described the entire meeting to them. “It was unbelievable,” he concluded his account, shaking his head. “It was like a JP Morgan risk convention!”
The group then joined McDade in the conference room, where, after Wieseneck and Donini walked the group through the SpinCo plan, Wieseneck shared the advice that JP Morgan and Citigroup had given them earlier. “We’ve got to be careful how we message if we intend to raise capital or not,” Donini warned.
It was about 1:30 a.m. before everyone finally packed it in. A small fleet of black Town Cars lined Seventh Avenue in front of the building to whisk the bankers home. They’d need to be back at the office only five hours later, giving them time for perhaps a brief nap and a shower, before a day that they suspected would determine the course of their futures.
CHAPTER THIRTEEN
The day’s papers for Wednesday, September 10, 2008, were strewn everywhere in Dick Fuld’s office, where a sleep-deprived Bart McDade and Alex Kirk had arrived at 6:30 a.m. for last-minute preparations for the looming conference call, scheduled to begin in only three and a half hours. The news was not good.
The lead of the New York Times read: “Only days after the Bush administration assumed control of the nation’s two largest mortgage finance companies, Wall Street was gripped by fears that another big financial institution, the investment bank Lehman Brothers, might founder—and that this time, the government might not come to the rescue.”
Several paragraphs down came the quote that succinctly stated the threat that now faced them: “Some may worry that Treasury has taken on so much taxpayer burden they don’t have any remaining capacity to take on the burdens of Lehman,” said David Trone, an analyst at Fox-Pitt Kelton.
The Wall Street Journal noted the differences between what had taken place during the final days of Bear Stearns and what was now occurring at Lehman. For one thing, Lehman could borrow from the Federal Reserve.
It wasn’t just the stock investors who were nervous; Fuld and McDade had already begun receiving reports from the trading floor that morning indicating that more