Too Big to Fail [153]
Miller was about to assure him that he appreciated the urgency of the matter when Russo asked anxiously, “How many people do you have working on it?”
“Ah, maybe four,” Miller told him. “It’s ah, preliminary at this point.”
“Yes, preliminary,” Russo insisted. “Don’t add any more people. We’ve got to keep it contained.”
Russo ended the call, leaving a baffled Miller to wonder precisely what was going on.
With his team over at Sullivan & Cromwell working with Bank of America, Dick Fuld decided to call Ken Lewis in Charlotte. After all, if they were going to do a deal, he figured that they should start talking CEO to CEO.
When Fuld reached Lewis. he launched into a heartfelt soliloquy about working together and how excited he was about the merger, marrying Lehman Brothers’ top-flight investment banking franchise with Bank of America’s massive commercial bank. The resources of the combined entity, he suggested, could match those of JP Morgan and Citigroup, finally making Bank of America a true financial supermarket.
Lewis listened patiently, not exactly certain how to respond. In his mind he wasn’t negotiating with Fuld; he was negotiating with the government. Whatever Fuld had to say was, frankly, irrelevant.
Before ending the call, Fuld, feeling confident, said: “You and I both know we’re doing this deal. Glad we’re partners.”
BlackRock was in the middle of a two-day board meeting at its headquarters on Fiftieth Street, just off Madison Avenue, when the markets closed for the day. As a part owner of BlackRock, Merrill has two seats on Black-Rock’s board, and John Thain and Greg Fleming, who were attending that day, quickly consulted their BlackBerrys to check the closing prices. Merrill’s shares had fallen 16.6 percent to $19.43, the most of any investment bank that day besides Lehman, whose shares had tumbled 42 percent, to $4.22. If Lehman was in this much trouble, the general thinking seemed to be going, Merrill could well be next.
During a break in the meeting, Fleming stepped outside to make a phone call. He had been thinking all day about the conversation he had had with Herlihy about the possibility of a deal with Bank of America. He had yet to approach Thain about it, waiting for just the right opportunity to present itself.
He had, however, spoken privately with John Finnegan, a Merrill board member with whom he was close. Finnegan, who like Fleming tended to be nervous by nature, had worried that Thain would have little interest in selling the firm; he had, after all, only been named CEO ten months earlier.
The person Fleming needed to contact now was Rodgin Cohen, also a close friend and, he knew, Lehman’s lawyer. Fleming was eager to get a reading on how the talks with Bank of America were going and how desperate the situation had become for Lehman—and, consequently, for Merrill.
When Cohen, who had been in a conference room with the Lehman team meeting with Bank of America, stepped out to take the call, Fleming greeted him casually, as if this were merely a social communication. After the obligatory pleasantries, he off handedly remarked on Merrill’s stock price decline, and then told Cohen, “We’re thinking about our options. I don’t know how much runway we have.”
But Cohen was quickly onto Fleming; he knew Merrill was in no position to buy Lehman. And, being a student of the M&A business, he knew Fleming probably wanted to do a deal with Bank of America, thwarting Lehman’s own efforts.
“There’s not much I can say,” Cohen told him.
Abandoning any attempt to conceal his motives, Fleming confided in Cohen, “We’ve got to do a deal. The numbers are looking too risky. If Lehman goes, we’ll be next.”
Cohen didn’t know how to respond, other than to excuse himself as quickly as possible. For now, at least, he would keep the conversation confidential.
When Steve Black got back to his office at JP Morgan from AIG, he described the meeting to Dimon as “a fucking nightmare.” He asked Tim Main to call Brian Schreiber to get an update on AIG’s latest forecast, and to see if Schreiber had