Too Big to Fail [217]
AIG’s stock had fallen below $2 a share when Willumstad’s assistant stepped into his office and handed him a fax from Hank Greenberg. Willumstad had heard earlier that Greenberg was out telling the press that he planned to mount a proxy contest or a takeover of the company.
“Do I have to read it?” he asked warily, and was not surprised at what he saw:
Dear Bob,
We have been discussing for several weeks my offer to assist the company, in any way that you and the Board desired. Throughout those discussions, you have told me and David Boies that you believed my assistance was important to the company. The only concern that you have expressed to me is the fear that if I were to become an advisor to the company that I would overshadow you. I respectfully suggest to you, and to the Board, that the continuing refusal to work together to save this great company is far more important than any concern over personal positions or perceptions.
I do not know whether or not it is now too late to save AIG. However, we owe it to AIG’s shareholders, creditors and our country to try.
Since you became Chairman of AIG, you and the Board have presided over the virtual destruction of shareholder value built up over 35 years. It is not my intention to try to point fingers or be critical. My only point is that under the circumstance, I am truly bewildered at the unwillingness of you and the Board to accept my help.
Geithner began to prepare in his office for a conference call with Bernanke. They were going to do this, he thought. They were really going to do this.
Jester and Norton were poring over all the terms. They had just learned that Ed Liddy had tentatively accepted the job of AIG’s CEO and was planning to fly to New York from Chicago that night.
To draft a rescue deal on such short notice, the government needed help, preferably from someone who already understood AIG and its extraordinary circumstances. Jester knew just the man: Marshall Huebner, the co-head of insolvency and restructuring at Davis Polk & Wardwell, who was already working on AIG for JP Morgan and who happened to be just downstairs.
Meanwhile, Bob Scully of Morgan Stanley, whom Geithner had hired to advise the Fed, wanted to make sure he was aware of all the risks ahead of the call. As Scully continued to study the rapid deterioration in the markets, he became increasingly anxious about whether AIG would be able to maintain its payments on a government loan. What had looked like a steal before might still be a tough sell.
“I want to be clear that there’s a real risk you may not be made whole on this loan,” he warned as Geithner dialed into the conference call.
While Bernanke said that he had decided to back the deal, he nevertheless wanted to take a straw poll among the participants in the call. He was clearly anxious, asking, “Are you sure we’re doing the right thing?”
But with his implicit support—and Geithner’s insistence that this was the only way to avert a financial Armageddon—the vote was 5–0. There was no longer any discussion of moral hazard, and no talk of Lehman Brothers.
Before Wiseman and Gamble had gotten far after being escorted by security guards from the NY Fed, they were surprised to suddenly find themselves being invited back in. There had been a mix-up, they were told, and they were taken to a table in the dining room.
“This isn’t the cool kids’ table,” Gamble remarked, looking over at another table at the other end of the enormous space, where JP Morgan and Goldman bankers were waiting.
“One thing is for certain,” Wiseman said, “they are not doing a private deal. They’d never look this relaxed.”
While they waited, Gamble took a call about two new issues: Insurance regulators in Texas, where AIG had a major life insurance business, were starting to panic. Even worse, JP Morgan had just pulled a line of collateral in Japan, which was AIG’s largest market outside the United States. Gamble couldn’t believe it: JP Morgan, AIG’s adviser just twenty-four hours earlier, was now only