Too Big to Fail [178]
Thain still hesitated, wanting to make certain that he wasn’t putting the company into play.
“I’ve set the meeting for two thirty p.m.,” Fleming pressed, and then carefully added, “But you have to call Ken first.”
“Why?” Thain asked, perplexed at the request.
“Because he wants to hear your voice,” Fleming answered.
“What do you mean?”
“I don’t know, just tell him the weather is nice in New York and you’re looking forward to seeing him.”
“I don’t understand why I need to make the call,” Thain persisted.
“John, you just have to call him.”
“You’re getting on my nerves,” Thain said, annoyance straining his voice.
“You know what? That’s probably going to happen again this weekend,” Fleming said, raising his own voice to his boss for the first time. “But call the guy. He’s not going to fly until you call him.”
“Okay,” Thain agreed. They decided that they’d both meet at Merrill’s Midtown office in thirty minutes to plan for the meeting.
Soon after Thain hung up with Fleming, John Mack walked over to him.
“We should talk,” Mack said quietly. He didn’t have to elaborate—the phrase was accepted code for, We should talk about doing a deal together.
“You’re right,” Thain said, and they agreed to organize a meeting later that day. It was becoming a busy day.
On the fourth floor of the Fed, Bob Diamond of Barclays was tapping his foot impatiently.
For most of the morning, it seemed to him that Lehman and the government were exclusively focused on Bank of America. He had come to suspect that he was being used, that he was the government’s stalking horse so that they could coax out a higher bid for Lehman from Bank of America.
But then, just past 2:00 p.m., Diamond had an indication that his bid might be taken seriously when someone at the Fed taped a piece of paper on Barclays’ conference room door that said “Bidder.” The Fed’s kitchen staff had also finally shown up with food. All small gestures, but encouraging signals, nonetheless.
Still, Diamond knew he had a big problem to deal with before a Lehman deal could take place—a problem that he had yet to share with Paulson or anyone in the U.S. government. His general counsel in London, Mark Harding, had informed him on an internal conference call that morning that if Barclays were to announce plans to acquire Lehman, the deal would require a shareholder vote—a vote that might take as long as thirty to sixty days to complete. That meant that it would be critical that Barclays find a way to guarantee Lehman’s trading from the time they signed the deal until it was approved by its shareholders—or the acquisition would be worthless. Without the guarantee, Lehman’s trading partners would stop doing business with it, swiftly draining its resources and destroying any value for Barclays. This was about confidence: Counterparties needed to know that there was someone standing behind Lehman in the same way that JP Morgan had stepped up to the plate for Bear Stearns and guaranteed all of its trades even before the deal closed. The problem was that legally Barclays could not guarantee any more than about $3.5 billion of Lehman’s trades without seeking permission from shareholders first, a process that could take as long as completing the deal.
Paulson and Geithner had repeatedly told Diamond in no uncertain terms that the U.S. government was not going to help, but he hadn’t been able to determine if that was just a negotiating stance. As for the British government, there was no mystery there to him: It was perfectly clear that it wouldn’t get involved.
What Barclays needed was a partner—a big, rich one—and it was a matter that Diamond knew he had to discuss with his brain trust, which was led by Archibald Cox Jr., Barclays Capital’s chairman (and the son of the Watergate prosecutor), Rich Ricci, the firm’s COO, and Jerry del Missier, Barclays Capital’s co-president. Diamond had also hired his own outside adviser, Michael Klein, a smart former senior banker at Citigroup. Klein had resigned from Citigroup months earlier rather than be marginalized