Too Big to Fail [150]
Geithner promised he’d reach out to Diamond and urged Fuld to try him one last time.
On his final attempt, Diamond was suddenly willing to talk.
“We’re going to be flying over tonight,” Diamond said. “I’ll have a team ready to go by Friday morning.”
With that sentence, it was official: Barclays and Bank of America were now in competition.
What Fuld hadn’t been aware of was that for the entire morning, Diamond and his team had already been in contact with Geithner and Paulson and had come to an agreement that Barclays would examine Lehman’s books as soon as possible. Fuld’s role in any rescue effort was becoming a polite formality.
Before he left for New York that night, Diamond had hoped to receive some assurances that his trip would be worthwhile. On his call with Paulson, Diamond had specifically asked if Barclays could be the exclusive bidder for Lehman. He had read the news about Bank of America’s interest, and he knew firsthand that it could be a formidable rival—and a potential spoiler.
A year earlier, Bank of America had jumped into the takeover battle for the Dutch bank ABN AMRO, a duel that pitted Barclays against a group that included the Royal Bank of Scotland. By agreeing to buy Chicago’s LaSalle Bank from ABN for $21 billion, Bank of America had effectively snatched the crown jewel of the deal, which the RBS group was particularly coveting and whose absence from the portfolio made it more difficult to outbid Barclays. In the end, Barclays lost the bidding war for ABN, but Bank of America still got LaSalle. The failed deal was a blow for Diamond and his expansionist dreams, and he had always believed that Bank of America had hugely overpaid for the property.
“If BofA is going to be there, don’t embarrass us,” Diamond told Paulson. “Don’t get us to do a deal and have BofA top us.”
“You can’t have an exclusive,” Paulson responded. “But let me tell you, you’re in a strong position, and I’ll make sure you’re not embarrassed.”
Before the call ended, Diamond wanted to make another thing clear: He was looking for a “Jamie Deal”—in other words, he might come looking for some form of government help.
Paulson stated firmly that no assistance from the government would be forthcoming, but added, “We’ll figure out how to get you help.”
As Tom Russo burst into Dick Fuld’s office, the glum look on his face got Fuld’s immediate attention, which was fairly remarkable, considering the general somberness on the thirty-first floor.
“What?” Fuld barked.
“I just got off the phone with Tom Baxter,” Russo said, referring to the general counsel of the Federal Reserve of New York. “He said that Geithner wants you to resign from the board of the NY Fed.” Russo paused to allow Fuld to take that news in before adding, “That given our position, it’s too complicated, too many conflicts.”
Geithner’s request should not have come as a shock, for if there was even the possibility that the government was going to have to put up money as part of a deal to find Lehman a buyer, the last thing he would have wanted was to be seen as helping a member of his own board, an insider. The slightest appearance of favoritism could prove disastrous.
Fuld, even so, took the message as a personal slight and stared morosely down at the table. For a moment it looked as if he might cry, but he steadied himself and whispered, “I can’t believe this.”
Together Fuld and Russo dictated a resignation letter addressed to Stephen Friedman, chairman of the board of directors:
Dear Steve,
It is with deep regret that I hereby tender my resignation as a member of the Board of Directors of the Federal Reserve Bank of New York. In light of my current business situation at Lehman Brothers, I unfortunately do not have the time to devote to Board matters and, therefore, feel it is in the best interests of the Board that I resign, effective immediately. I have very much enjoyed my time on the Board and have enormous respect for