Too Big to Fail [166]
As the Suburban made its way through downtown Manhattan, Paulson called Geithner to strategize. It was already past 6:00 p.m., when the meeting was set to begin; they figured they would let the CEOs stir for a bit until Paulson arrived, just to let them know they meant business.
Thirty-three Liberty Street, the New York Federal Reserve Building, is an imposing, fortresslike sanctuary of old-fashioned, traditional finance. In 1927 Margaret Law, a critic for Architecture magazine, wrote that the three-year-old building had “a quality which, for lack of a better word, I can best describe as epic.” Deep below the limestone and sandstone building, which was modeled after the Strozzi Palace of Florence, lies a three-level vault built into the bedrock of Manhattan, fifty feet under sea level. It holds more than $60 billion of gold. Real hard assets, with real value.
If Lehman’s fate was going to be resolved—if Wall Street was going to be saved—the matter would be decided at 33 Liberty Street. While modern finance may have allowed investors to zip money across continents in milliseconds, the New York Federal Reserve stood as one of the last bastions of tangible values.
As John Thain’s black GMC Yukon pulled up to the building, he couldn’t help but recall the last time he had come there, as a partner at Goldman, in response to another such cataclysmic event, the rescue of Long-Term Capital Management in 1998. For three straight days, he had worked around the clock to come up with a solution.
And had they not saved Long-Term Capital, the next domino back in 1998 was clearly Lehman Brothers, which was suffering from a similar crisis of confidence.
The irony of the situation was rich. Ten years earlier, on a Saturday morning just past 7:30 a.m., Thain had run into Fuld in the Fed hallways and asked, “How’s it going?”
“Not so well,” Fuld had said. “People are spreading nasty rumors.”
“I can’t imagine that,” Thain had replied, trying to be polite, but knowing full well that the rumors were everywhere.
“When I find out who it is,” Fuld had said furiously, “I’m going to reach down his throat and tear out his heart.”
They were back to where they started.
The meeting of “the families” did not begin until 6:45 p.m., when Paulson, Geithner, and Cox finally emerged, briskly walking down a long hall on the first floor, almost as if they were marching in a formation, toward a conference room in the south corner of the building overlooking Liberty and Williams Streets.
The CEOs had all been milling about, tapping away on their BlackBerrys, and pouring themselves cups of ice water to cool themselves from the miasma of humidity that hung in the building. If there had been any question about the subject of this gathering, it was readily apparent before Paulson ever said a word: Conspicuous by his absence was the longest-running member of their tribe, Dick Fuld.
“Thanks for coming down here on such short notice,” Paulson began.
He explained that Lehman Brothers was in a “precarious position” and told the group, “We’re going to need to find a solution before the weekend is out.”
And then, to make it perfectly clear what the parameters of that solution were going be, he stated flatly: “It’s not going to be government money; you’re going to have to figure this out.”
“We’ve got two buyers that are each going to need help in my judgment,” he continued. He did not mention Bank of America or Barclays by name, but everyone knew who the players were—the names had crossed the tape twenty-four hours earlier. He revealed to the men arrayed around the table that each bidder had already indicated to him that it would not buy Lehman Brothers unless the government—or someone—consented to finance at least part of the deal.
“There’s no consensus for the government to get involved; there is no will to do this in Congress,” he said, stammering and stuttering at one point about how Nancy Pelosi had been all over him about bailouts. “You will need to come up with a private-market solution. You have a responsibility to the marketplace.
“I know