Too Big to Fail [165]
Moynihan rushed downstairs, bolted without an umbrella through the revolving doors and into the pouring rain, and commandeered one of Sullivan & Cromwell’s Town Cars to take him down to the New York Federal Reserve.
Just as the car was making its way into Park Avenue traffic and he dried himself off, Moynihan’s cell phone rang again.
“There’s been some crossed wires, Mr. Moynihan,” one of Tim Geithner’s assistants told him. “I know we had invited your firm to this meeting—”
“Yes, I’m on my way down right now,” he assured her.
After a brief pause she said, “Given your bank’s role in the merger discussions, we believe it would be inappropriate for you to attend the meeting.”
Moynihan had gotten no farther than eight blocks before turning around and calling Lewis to tell him the news.
John Mack and Colm Kelleher, Morgan Stanley’s chief financial officer, were sitting in the backseat of Mack’s Audi, having hurried to the car just ten minutes earlier after Mack’s secretary had instructed them to get down to the Fed as soon as possible. “This must be Lehman,” Kelleher had said as they rushed out.
Not only was the rain pelting the roof furiously, but they were now sitting in bumper-to-bumper traffic on the West Side Highway, still miles away from their destination.
“We’re not fucking moving,” Mack said, repeatedly checking his watch.
“We’re never going to get there,” Kelleher agreed.
Mack’s driver, John, a former police officer, noticed the bicycle lane running alongside the highway—a project of the Bloomberg administration to encourage walking and cycling.
“Boss, that bike lane on the right, where does it go?” John asked, craning his neck back at them.
Mack’s face lit up. “It goes all the way down to the Battery.”
“Fuck it!” the driver said as he found a break in the street divider and inched the car onto the bike lane, speeding down it.
Hank Paulson’s Cessna Citation X touched down on runway 1-19 at New Jersey’s Teterboro Airport at 4:40 p.m. The pilot, navigating through a torrential downpour and fifty-mile-an-hour winds, threw the switch on the flaps and taxied to the main gate, where the Secret Service was waiting in two black Chevrolet Suburbans.
Now, as they inched their way through the Holland Tunnel toward Manhattan in rush-hour traffic, Paulson took a call from Greg Curl of Bank of America and Chris Flowers, the firm’s banker, who had completed their assessment of the Lehman numbers.
“We’re going to need the government to help to make this work,” Curl told Paulson bluntly and then launched into a series of proposed deal terms, conditions that would have to be met in order for this transaction to take place.
Paulson listened patiently, even if he had a hard time understanding why Curl felt he had the upper hand to the point that he could dictate the conditions. But, as Paulson himself liked to say, “You only need two girls at the dance to call it an auction,” and under the circumstances, he needed BofA to be one of them. If he could just keep Bank of America around long enough to close a deal with Barclays, he’d have succeeded. Paulson handed his cell phone over to Dan Jester (who had, ironically, worked for Flowers at Goldman in the financial services group in the 1990s), who took notes.
Curl told Jester that Bank of America would agree to the deal only if the government was willing to take $40 billion of losses on Lehman’s assets. “We’ve been through the books, and they’re a mess,” Curl explained, referring to Lehman’s bountiful toxic assets. Bank of America, he said, would be willing to split the first $1 billion of losses with the government, but after that, the next $40 billion, the government would have to guarantee. In exchange, Curl told him, the bank would give the government warrants (the option to buy shares at a later date) for Bank of America, with a strike price of $45 a share. (BofA shares closed that day at $33.74.) Jester mouthed the figures to Paulson as Curl relayed them. Both men shook their heads, knowing full well that under these terms a deal was never going to