Too Big to Fail [182]
But, Willumstad said, the bigger news—the good news—was that he had persuaded Eric R. Dinallo, superintendent of the New York State Insurance Department, to release some $20 billion in collateral from AIG’s regulated insurance entities, which would help it meet its capital requirement. Dinallo had made the agreement contingent on AIG’s raising another $20 billion to fill the hole. Willumstad intimated that he thought he had another $5 billion loan commitment coming from Ajit Jain, who ran Berkshire Hathaway’s reinsurance business. That left him with a $15 billion gap, but he told the regulators that the company had assets up for sale that were worth more than $25 billion.
With that, Paulson and Geithner rose and abruptly left the meeting. They had heard all they needed to; progress was being made.
The doorman opened the cast-iron and glass doors to allow Thain, Kraus, and their colleague Tom Montag into the lobby of Walid Chammah’s apartment building. It was the second secret-merger meeting to take place there in one week. Thain was a little worried about being spotted: Among others, Larry Fink of BlackRock lived at the same address.
Mack, Chammah, and Gorman were waiting for them in Chammah’s living room.
Gorman, who had run Merrill Lynch’s private client business for five years before joining Morgan Stanley, was immediately struck by the fact that no one in the group representing Merrill had been with the company for more than ten months. The firm Gorman helped to build, and where his brother, Nick, still worked, was going to be sold out from under it by bankers with no sense of the firm’s heritage.
Thain opened the discussion by indicating that he was looking to do a deal. “With what’s going on with Lehman,” he said, “we recognize this is the right time to look at our options.”
Kraus began to go over the numbers, flipping through the pages of a book he had brought along with him. For someone who had only a few days on the job, Chammah and Gorman thought, he seemed to know his stuff. (Kraus had, in fact, stayed up till 3:00 a.m. earlier that week poring over the firm’s balance sheet.)
But the gaps in his knowledge soon became apparent. When Gorman started asking him about Merrill’s retail business—the part of the company in which Morgan Stanley was most interested—neither Thain, Kraus, nor Montag knew the numbers.
Still, Mack said he was interested and asked what the next step was. “We have a board meeting scheduled for Monday night,” he explained, “and Tuesday we could probably start diligence and take a look then. It’s obviously intriguing but this is complicated.”
Thain gave Kraus an anxious glance and then turned to Mack: “No, no. You don’t understand. We would need to have a decision before Asia opens.”
Gorman was confused: “What do you mean by ‘decision’?”
“We’re looking to have a signed deal by then,” Thain said calmly.
“We can keep talking,” Mack answered, shocked by the request, “but I don’t know that that’s physically possible.”
After seeing themselves out of the apartment, Thain looked at Kraus and said, “Well, it’s pretty clear that they don’t have the same sense of urgency that we do.”
Greg Curl of Bank of America was already at Wachtell, Lipton when Greg Fleming of Merrill Lynch arrived. While he waited, Curl had been on the telephone trying to undo his decision from four hours earlier: He had sent more than a hundred bankers back to Charlotte, assuming they were no longer needed, because as far as he had been concerned, the Lehman deal was dead. Now, with the possibility of a deal with Merrill, he needed them on the next plane back to New York. He recognized that the situation was almost comical and had assigned several people to coordinate looking into chartering flights, because the three remaining direct US Airways flights to New York that night were already full.
Curl invited Fleming into one of the law firm’s conference rooms that he had commandeered, grabbing a handful of cookies from the catering cart that was parked there. He quickly asked him for his assessment of where he thought