Too Big to Fail [216]
After hearing his arguments, Bernanke told him to develop a plan. Once he came back to them with more details, they’d formally vote on how to proceed.
“Let me just make sure I’m characterizing the support of you and the board on this accurately….” Geithner then repeated what had just been said.
Michael Wiseman and Jamie Gamble passed through security at the Fed and went in search of Braunstein. They needed to understand what was happening with AIG, and if nothing was happening, they needed his team to help them plan for the bankruptcy.
Wiseman finally tracked him down in the confidential meeting that was still going on about how the Fed could backstop AIG. “Listen, we don’t have a lot of time and we could use your help with some of the numbers,” he told him angrily after pulling him out of the room. “But we need to know which hat you’re wearing. Are you working for us, the Fed, or JP Morgan?”
“I don’t think I can answer that question without talking to my lawyer,” Braunstein said after a pause. Signaling that he needed a second, he dashed back into the conference room.
When he emerged a few moments later, he said stiffly to Wiseman: “I can’t talk. You should contact Treasury directly.”
“Okay. Thanks,” Wiseman said, putting out his hand to shake it, but Braunstein only turned around and returned to his meeting.
Within seconds, an aide from the Federal Reserve appeared and informed Wiseman and Gamble that they had to leave the building.
“Did you just see that?” Wiseman asked Gamble as they were escorted to the door. “Doug wouldn’t even shake my hand. What the fuck is going on in there?”
However resistant Hank Paulson had been to the idea of a bailout, after getting off the phone at 10:30 a.m. with Geithner, who had walked him through the latest plan, he could see where the markets were headed, and it scared him. During his time at Goldman, he had educated himself about the insurance industry, and with that background he understood how an AIG bankruptcy could very well trigger a global panic. As a regular visitor to Asia, he also knew how much business AIG did there and how many foreign governments owned its debt. Foreign governments had already been calling Treasury to express their anxiety about AIG’s failing.
Jim Wilkinson asked incredulously, “Are we really going to rescue this insurance company?”
Paulson just stared at him as if to say that only a madman would just stand by and do nothing.
Ken Wilson, his special adviser, raised an issue they had yet to consider: “Hank, how the hell can we put $85 billion into this entity without new management?”—a euphemism for asking how the government could fund this amount of money without firing the current CEO and installing its own. Without a new CEO, it would seem as if the government was backing the same inept management that had created this mess.
“You’re right. You’ve got to find me a CEO. Drop every other thing you’re doing,” Paulson told him. “Get me a CEO.”
Wilson got back to his office and started scrolling though his computer’s address book. After years as a financial institutions banker at Goldman Sachs, he knew the top people in the industry. Before even getting to the B’s, a name popped into his brain: Ed Liddy, the former CEO of Allstate and a Goldman board member. He was a perfect candidate, currently “on the beach” without a job and someone who would welcome the challenge. Liddy also knew AIG: He was the Goldman board member to whom everyone turned for advice whenever they discussed whether the firm should acquire it.
But Wilson didn’t have his phone number. So he called Chris Cole at Goldman Sachs, who had been at AIG all weekend and had attended the meeting at the Fed on Monday, who gladly retrieved the number for him.
There was no time for small talk when Wilson reached Liddy, and he immediately explained why he was calling.
“Do you have time to take a call from Hank?” Wilson asked, and Liddy assented enthusiastically.
“You have to hang up,” Wilson told Paulson, who was on the phone when