Too Big to Fail [152]
No more than fifteen minutes into the meeting, the Moody’s analyst made it clear that the agency would downgrade AIG by at least one notch and possibly two. By Willumstad’s calculations, if they did so on Monday, the company would have at least three days before it would have to post the collateral. That meant he had until Wednesday, or at the latest, Thursday, to come up with an astronomical amount of money.
JP Morgan’s Black feared they had even less time; by his count, Tuesday morning would be their deadline. After the meeting, he pulled Willumstad aside and warned him, “You guys are going to get downgraded so you better start figuring out now what to do.”
Willumstad nodded. “We need to prepare for that. I totally agree with that.”
Black left the building even more down on the company than when he had arrived. Nobody, he thought, was moving nearly as fast as he needed to.
In the General Motors Building, which occupies an entire block on Fifth Avenue and Fifty-ninth Street, Harvey Miller, the legendary bankruptcy lawyer at Weil, Gotshal & Manges, got up from his desk and began pacing. As he made a circuit of his office, he gazed at the miniature Texaco trucks and Eastern Airlines jets that dotted his bookshelves, mementoes of two of his most famous cases.
At seventy-five, Miller was considered the dean of bankruptcy law, and he billed clients nearly $1,000 an hour for his services. Besides Texaco and Eastern, he had been involved in the bankruptcies of Sunbeam, Drexel Burnham Lambert, and Enron, and was also among the lawyers who represented the city of New York during its financial crisis in the 1970s.
Always reassuringly calm, he was also known for his deftly tailored suits, his love of opera, and his ability to speak in long, eloquent paragraphs. He had grown up in the Gravesend neighborhood of Brooklyn, the son of a wood-flooring salesman, and was the first in his family to receive an education beyond high school, attending Brooklyn College. After a stint in the army, he went to Columbia Law.
At that time, bankruptcy was one of the few areas of corporate finance that smaller, predominantly Jewish law firms dominated in the still-WASP-infected industry. In 1963 Miller joined the small bankruptcy shop Seligson & Morris; six years later, Ira Millstein, the governance guru, recruited Miller to start a bankruptcy and restructuring practice at Weil Gotshal.
Earlier that afternoon, the firm’s chairman, Stephen J. Dannhauser, had phoned him and posed a startling question: Would the firm be available to do some preliminary work on Lehman—just in case? Miller said he understood; he had been reading the financial press. Lehman was a very important client—the firm’s biggest, in fact, and the source of more than $40 million in fees annually. He knew the company very well.
Dannhauser had received a call from Steven Berkenfeld, a Lehman managing director, who told him they should get their ducks in order if things didn’t go well in the next seventy-two hours. Before Berkenfeld ended the call, he insisted that Dannhauser keep their conversation confidential—Berkenfeld hadn’t even told Fuld that he was contacting Weil Gotshal.
As a bankruptcy lawyer, Miller was well accustomed to engaging in these delicate pas de deux with clients. “Bankruptcy,” he once said, “is like dancing with an eight-hundred-pound gorilla. You dance as long as the gorilla wants to dance.”
Just a few hours later, however, Miller received another call from the embattled bank.
“I’m Tom Russo, the chief legal officer of Lehman Brothers,” the voice on the other end of the line bellowed. “Are you working on Lehman?”
Miller, who did not know Russo, was taken aback. “Well, yes, as it happens.”
Russo had no interest in discussing any details but wanted to deliver a message: “You know you can’t talk about this to anybody. It’s a very tense situation. We can’t have any rumors