Too Big to Fail [154]
Main told Black that the document had not yet been signed but that he would call that afternoon to check on its status. “Can we schedule my weekly beating at two p.m.?” he asked, only half-joking. His relationship with the AIG folks remained as frosty as ever.
When Main finally got through to Schreiber, he asked without any preamble, “So, where are you on the engagement letter?”
Schreiber had always believed that the terms of the engagement letter were excessive. Not only was JP Morgan asking for a $10 million fee, but the bank was also demanding that it be guaranteed work on any big AIG assignment over the next two years.
“Where are you on the repo commitment?” Schreiber retorted indignantly.
Main, who was already angry about rumors he’d heard that Schreiber had also been talking to Blackstone and Deutsche Bank, finally lost his temper. “Are you fucking kidding? You think we’re going to lend you money?” he barked. But he was just getting warmed up. “You’re running a shitty process. Your company is fucked! You’re working with other bankers that you’re not telling us about. You’re carving it all up.”
“Don’t scream at me,” Schreiber replied coldly. “I’m not going to take this from you. I’ve got to talk to Bob.”
Five minutes later Schreiber was angrily recounting the conversation to Willumstad, who in turn called Black to demand an explanation for Main’s behavior.
Instead of offering an apology, though, Black exploded at him as well. “There’s no sense of urgency down there; you guys don’t have anything close to the information that you need to be trying to make decisions,” Black said. “Every time we ask for something, you drag your feet. We sent an engagement letter three weeks ago, and Brian is still dickin’ around with signing it.
“We’ll do whatever you want us to do,” Black finally said wearily. “But if this is the way it’s going to go, then you might as well…we should probably resign. You should get somebody else. This has gotten to a poisonous point, and the people that work for you don’t get the position that you guys are in.”
“If you were that upset about it, why didn’t you just call me?” Willumstad asked.
When the call came in from Ken Lewis late Thursday afternoon, Paulson knew what he was about to hear.
“We’ve looked at it and we can’t do it—we can’t do it without government assistance,” Lewis said levelly. “We just can’t do it because we can’t get there.” Like many of Lehman’s critics at the time, including the anxious shareholders who were flooding the market with sell orders, Lewis said that the valuations that Lehman had placed on its assets were far too high. Buying them could expose Bank of America to huge risks.
Given that Bob Diamond of Barclays had already come to him, hat in hand, looking for a government assist in a Lehman deal, Paulson had fully expected Lewis would do the same.
But Paulson still wasn’t prepared to resort to drawing on federal money—at least not yet. It was politically unpalatable, especially with the Fannie and Freddie bailouts still making headlines. And if this was going to become a negotiation, Paulson didn’t want to show all his cards so early on.
He knew, however, that he needed to keep Bank of America in the hunt, so he offered, “Okay, if you need help on assets, you tell us what you need help on, and we will come up with a way to get there.”
Lewis, nonplussed, replied, “I thought you said there would be no public money.”
“I will work on this,” Paulson promised. “We will get the private sector to get involved.”
Private-sector involvement was a concept that Paulson and Geithner had been discussing all day—the assembly of a consortium of banks to help subsidize a sale of Lehman, if Bank of America or Barclays refused to do the deal on its own. But neither Paulson nor Geithner had completely fleshed out the idea yet, and even in the best of times, herding bankers was a feat far from easy.
Lewis paused, not at all pleased with what Paulson seemed