Too Big to Fail [186]
“We’re not trying to solve for $40 billion anymore,” Braunstein shouted. “We need $60 billion!”
AIG was such a sprawling mess, and its computer systems so bizarrely antiquated, that no one conducting diligence had until that moment discovered that its securities lending business had been losing money at a rapid clip for the past two weeks. As the JP Morgan bankers dug deeper, they found that AIG had been engaged in a dubious practice: They had been issuing long-term mortgages and financing them with short-term paper. As a result, every time the underlying asset, the mortgages, lost value—which has happened every day of the previous week—they needed to pony up more promissory notes.
“This is unbelievable,” Mark Feldman, one of the JP Morgan bankers, said as he stormed out of the room in search of Brian Schreiber of AIG.
When he finally tracked Schreiber down, he told him, “We need you to sign the engagement letter. This is getting ridiculous. We’ve been here all weekend.”
Dimon and Steve Black had ordered Feldman to get the engagement letter signed or leave and take everyone with him. After all, as Black reminded him, JP Morgan had no indemnification if they didn’t have a signed engagement letter, leaving them with exposure to lawsuits; and perhaps more important, they wanted to make sure they got paid for their time and efforts. Black told him to blame his boss in the event of any complaints.
Schreiber, who’d been given signing authority by Willumstad, was nevertheless annoyed. His unit at AIG had taken to calling the junior JP Morgan team “The Hitler Youth,” but how could Feldman actually pressure him to sign such a document at a time like this? The entire firm was teetering, and his banker was asking for his fee?
At first, Schreiber tried to suggest that the firm’s counsel might have to be responsible for any signature, but Feldman was having none of it.
Schreiber finally erupted. “I can’t sign this! My board won’t sign this letter. This is disgusting. It’s offensive. It’s vulgar. I just can’t justify signing this!” he shouted.
Feldman, who had called Schreiber “a fucking imbecile” to his face at least once, had now also reached his limit. “If you don’t sign this letter this minute, I’m going to have every fucking JP Morgan banker pack up and leave right this second!”
At that Schreiber relented and, irately pulling out his pen, signed it.
At 3:00 on Sunday morning, more than two hundred bankers and lawyers from Bank of America and Merrill Lynch were on their second round of pizza delivery at Wachtell, Lipton, and they were still sprinting to complete their diligence.
Greg Fleming, who had been awake for almost twenty-four hours, had booked a room at the Mandarin Oriental, so that he wouldn’t have to drive back to Rye.
He was gathering his belongings and about to call it a night when Peter Kelly, Merrill’s deal lawyer, entered the conference room.
“I’ve got news,” Fleming told him. He enthusiastically explained that he had already broached the issue of price with Curl and had reason to believe that Bank of America might be willing to pay as much as $30 a share.
For a moment Kelly thought Fleming had to be joking.
“I can’t believe they’re going pay us $30,” Kelly told him. “Greg, this trade is never going to happen. It doesn’t make any sense. We’re on our knees here.”
“I’m telling you,” Fleming insisted. “I think they’re going to get there.”
“You’re getting gamed right now and you don’t know it!” Kelly snapped, trying to talk some sense into his friend at this late hour. “You need to wake up and figure out how you’re getting gamed, because there’s no way they’re doing a $30 trade! They’re going to lead us to the altar and they’re going to renegotiate it at $3, or they’re just going to let us go.”
“Don’t doubt me, Pete,” Fleming insisted. “The trade is going to happen.”
CHAPTER FIFTEEN
At around 8:00 the next morning, Sunday,