Too Big to Fail [170]
“You said you’d be interested in assets. Anything in particular?” Willumstad asked, after greeting him and explaining the purpose of his call.
Buffett, reticent, offered, “Well, we could be interested in the auto business.”
“Would you be interested in taking all of the U.S. property and casualty business?” Willumstad suggested. That was a major piece of the company, representing $40 billion in annual revenue.
“What’s it worth?” Buffett asked.
“We’d say $25 billion; you’d probably say $20 billion,” Willumstad replied. “What information do you need to do that?”
When Buffett told him to send what he could, Willumstad said, “Okay. Give us an hour and we’ll get a package of material together. Where can we e-mail it?”
Buffett let out a loud laugh and informed him that he didn’t use e-mail.
“Can I fax it to you?” Willumstad asked.
“I don’t have a fax machine here,” Buffett said, still chuckling. “Why don’t you fax it to the office. I’ll go get in my car and drive back down to the office and pick it up.”
An hour later, Buffett was back on the phone, politely rejecting the proposal: “It’s too big a deal; $25 billion is too big.” Willumstad never thought he’d hear Buffett call any prospective deal too big.
“I’d have to use all my cash and can’t do anything to jeopardize Berkshire’s triple-A rating,” Buffett explained. For a moment, he alluded to the possibility of raising the money, but then acknowledged that he “didn’t want to have that kind of debt on my balance sheet.”
“Okay, thanks a lot,” Willumstad said. “But, by the way, if there’s anything else in the pool that you’re interested in, let us know.”
Merrill’s Greg Fleming was tossing and turning in bed that night, so much so that his wife, Melissa, finally insisted that he tell her what was bothering him. “It’s Friday night, and you’re not sleeping,” she mumbled. Wide awake, he turned to her. “This is a different kind of Friday night. The next week or so in this industry is going be epic.”
After nodding off briefly, Fleming finally rose at 4:30 a.m., his mind racing. He recalled his conversation of the night before with John Finnegan, his closest confidant on Merrill’s board. Finnegan was clearly as anxious as Fleming about the firm’s mounting problems, and they agreed they had to persuade Thain to seek a deal with Ken Lewis.
“You’ve got to push this, Greg,” Finnegan urged him. “There’s a way to get this done.”
Fleming had had essentially the same conversation with Peter Kelly. “You just need to get the imprimatur of John” to approach Bank of America, Kelly had told him. “We’ve got to start getting things going. If the meeting tomorrow morning doesn’t go right, we have thirty-six hours to put a trade together.”
It was coming up on 6:30 on Saturday morning when Fleming finally decided it was late enough to phone Thain’s home. Thain was just leaving and returned the call five minutes later from the backseat of his SUV.
“I’ve been thinking about this,” Fleming said resolutely. “We have to call Ken Lewis.”
Thain, taken aback, had spent much of the night thinking about whether such a deal made sense—and had come to the opposite conclusion, at least for the time being. Merrill might want to try to raise some money over the weekend by selling a small stake in the firm to raise market confidence, but there was no reason to sell the entire company immediately, he told Fleming. As he had always warned his troops before entering talks, “Once you initiate, you’re in motion.” Negotiations could quickly spiral beyond your control.
“They are our best partner,” he said dejectedly of Bank of America. “Where are we going to be if we lose them?”
As his SUV barreled down the FDR Drive, Thain promised to consider the issue further, but for now, he needed to focus on the meetings ahead of him.
Jamie Dimon’s black Lexus pulled away from the curb of his Park Avenue apartment to head down to the Fed just