Too Big to Fail [193]
“I understand it’s not going through,” Bart McDade told Bob Diamond when he reached him at his desk at Barclays’ headquarters.
“What do you mean?” Diamond replied, completely taken aback. “I haven’t heard that.”
“It’s off. The government says it’s not happening,” McDade told him, and recounted Paulson’s discussion with the British regulators.
Diamond immediately got off the phone and called Tim Geithner’s office.
“I just heard,” Diamond said, exasperated. “What happened?”
“You should talk to Hank,” Geithner told him.
When he finally managed to reach Paulson, he said, somewhat curtly, “I want to tell you that it was really difficult for me to get a call from someone else well after you did this.” He paused, trying to keep his voice level. “And what I’ve been told you said is very much against what I think the facts are, and I think I deserve an explanation.”
When he hung up after hearing Paulson’s account of the communications, Diamond was in turn deflated, furious, and embarrassed. He was livid with Paulson and dismayed by the British government. How could they have led him so far only to quash the plan at the last moment?
At 12:23 p.m., Diamond tapped out a message on his BlackBerry to Bob Steel, who had been trying to set the deal up for six months:
Couldn’t have gone more poorly, very frustrating. Little England.
Bart McDade, Alex Kirk, and Mark Shafir walked in silence through the underground garage at the NY Fed and piled into McDade’s black Audi A8 to drive back to Lehman headquarters. For at least five minutes nobody said a word as they all just tried to comprehend what had just happened. They had all come to accept that they were out of options.
As they drove up the West Side Highway, McDade dialed Fuld on the speakerphone.
“Dick, you’ve got to sit down,” he began.
“I’ve bad news. Horrible news, actually,” he said. “Supposedly the FSA turned the deal down. It’s not happening.”
“What do you mean ‘not happening’?” Fuld bellowed into the phone.
“Paulson said it’s over. The U.K. government won’t allow Barclays to do the deal. Nobody’s saving us.”
Fuld, too, was speechless.
Across town, Greg Fleming of Merrill Lynch and Greg Curl of Bank of America were getting closer to formulating their own agreement, as lawyers began to draft the outlines of a deal document. The combined company would be based in Charlotte but would have a major presence in New York; the brokerage business would continue to use the iconic Merrill Lynch name and its familiar bull logo.
Fleming was working through some of the details when he took a call from Peter Kraus, who was on his way back to Goldman Sachs. He told Fleming that he needed part of the diligence team sent over to meet him there.
“I’m not sending anybody anywhere,” Fleming replied. “We’ve got a good deal in hand and we’re going to finish it.”
Fleming was worried that Kraus, who he felt had been unhelpful from the day he had arrived at Merrill just over a week earlier, was trying to undermine the agreement with Bank of America and that he was more interested in a deal with his old pals at Goldman. Fleming was also concerned that if Bank of America officials discovered that Merrill was talking to Goldman, they would simply walk.
“We need as many options as we can get,” Kraus told him. “You’re the president of the company, it’s your call, but you’re making a big mistake.”
“Well, it is my call,” Fleming agreed, “and I just made it.”
“John, we have to talk,” said Dick Fuld, almost begging, when he reached John Mack on his cell phone at the New York Fed. “There’s a way to make a deal work. Let’s set something up.” Mack was clearly devastated for his friend, but there was no way to do what he was asking. “I’m sorry, Dick,” he said sympathetically. “I’m really sorry.”
When he got off the phone, he strolled over to a group of bankers that included Jamie Dimon and recounted the conversation, lamenting Lehman’s fate.
Dimon furrowed his brow.
“I just had