Too Big to Fail [156]
Cohen, who had had the most experience of any of them with Fed matters, wasn’t so sure. “I’m quite sure Jamie has been there before us,” he told them. “Jamie’s tough. He wouldn’t have done this without the tacit approval of the Fed.”
For the next ten minutes the room was a cacophony of different conversations taking place simultaneously, all on the common theme of, They’re trying to put us out of business! Finally they decided that the best step to take was to call Tim Geithner.
When Cohen reached Geithner and put him on speakerphone, he quickly explained the situation to him, Geithner appeared unconcerned, as if he had been expecting their call. McGee shot a nervous glance at McDade, as if to say, We’re fucked. “I cannot advise a bank not to protect itself,” Geithner said unperturbedly.
Cohen, politely hoping to get Geithner to realize that he believed JP Morgan was doing this to undermine its rival, asked, “Do they need that protection?”
“I’m not in a position to judge that,” Geithner answered.
At 6:00 p.m. Paulson joined a strategy call with Geithner, Bernanke, and Cox. He felt they were about to go into crisis mode and feared another Bear Stearns–like weekend. This time, however, he was determined that it end differently. He believed they needed to prepare what he called a “LTCM-like solution”—in other words, he was committed to the idea of encouraging firms in the private sector to band together and put their own money up to somehow save Lehman Brothers. Geithner was supporting the concept, and apparently some Wall Street chiefs were as well. Geithner had received calls from both John Thain of Merrill Lynch and Vikram Pandit of Citigroup earlier in the day suggesting just such a solution.
Paulson was also deeply concerned about the apparent lack of resolve of both Bank of America and Barclays to “cross the finish line.” He had come to feel that Bank of America was merely going through the motions and was anxious that Barclays wasn’t especially serious about coming to an agreement either. “Listen, the thing about these Brits is that they always talk and they never close,” he told them. He also had a particular instinct about Barclays’ chairman, John Varley, whom he remembered from his Goldman days as a waffler. “Let me tell you,” Paulson said, “Varley is a weak man.”
Perhaps most important, Paulson stressed, was that they couldn’t afford the political liability of putting up government money for Lehman as they had for Bear Stearns. “I can’t be Mr. Bailout,” he insisted, and given that everyone on the conference call had already lived through the backlash of that experience, they hardly needed convincing about not wanting to repeat it.
Still, Geithner was a bit hesitant about taking such a severe stance in public, but only because, as he explained, “we don’t want to scare people away. We need as many bidders in this as possible.”
Nonetheless, he quickly fell in line, and the four men made a pact: Unless something miraculous happened, they would plan to place calls to the CEOs of the major Wall Street houses late on Friday and have them all come down to the NY Fed, where they’d press them to come up with a private solution.
In the meantime, Paulson instructed them, the message should be clear: No bailouts.
Brian Schreiber, removing his thick-framed glassed to rub his eyes, could see from his examination of AIG’s daily cash tally that the firm could soon be out of money if it didn’t start selling assets quickly. He nervously began working through the list of people whom he could call whose companies would be capable of providing assistance almost immediately.
The first name that occurred to him was Chris Flowers. His fund had several billion dollars available to buy financial-services assets, and as a former financial-services banker he understood the insurance business well enough that he could move instantly if he was interested. They had also worked together before;