Too Big to Fail [220]
“Should I still be here?” Willumstad asked, confused about how to proceed.
“Yeah, we would appreciate whatever cooperation and help you can offer,” Paulson replied.
“Is it okay if I ask who it is?”
“It’s Ed Liddy,” Paulson said.
For a moment, Willumstad wracked his memory. “Who the hell is Ed Liddy?” Beattie whispered, but Cohen only shrugged his shoulders.
“Ed just retired recently as the CEO of Allstate,” Paulson interjected, realizing they had no idea who he was.
After the call, Willumstad slumped in his chair, sighed, and then looked over at Beattie and laughed.
“Well, you’re wrong,” he said. “I won’t be working for the federal government after all.”
The directors of AIG were already gathered in the boardroom when Willumstad and the advisers made their entrance. Willumstad wasted no time on preliminaries.
“We are faced with two bad choices,” he began. “File for bankruptcy tomorrow morning, or take the Fed’s deal tonight.” He explained the terms of the deal and told them that Blackstone would come in with bankruptcy advisers to discuss the merits of that route.
And then he told them his personal news.
“I’m going to be replaced,” he said quietly. “Ed Liddy is going to take my place.”
“Ed Liddy?” asked Virginia Rometty.
“Yeah, he’s Allstate,” Willumstad explained.
“I’ve known him for fifteen years,” she said. A top executive with IBM, Rometty had once headed the sales group for the computer company’s division that catered to the insurance and financial industries. “I wouldn’t have thought Ed would have been the guy.”
“I know Ed Liddy!” James Orr chimed in. Orr had been chief executive of Unum, a Maine insurer that had fought off an effort by Allstate to grab market share from the company in the long-term disability category it dominated. “If we were looking for a CEO of this company, not only wouldn’t he have been on the short list, he wouldn’t have been on the long list!”
“Well, that’s one of the decisions you’ll have to digest,” Willumstad said calmly, and turned the meeting over to Cohen.
Martin Feldstein, an AIG director and former economic adviser to President Ronald Reagan, couldn’t believe that the government—a Republican administration—was going to be effectively buying a stake in a private business.
Rodgin Cohen, reminding the board that they had a fiduciary duty not only to shareholders but to bondholders as well, pressed for a bankruptcy.
“You should consider all these things,” Beattie said. “Just because it’s the Fed doesn’t mean you have to accept this. You should listen to all the options.”
Willumstad’s assistant slipped into the room and handed him a note: Hank Greenberg is on the phone. He rolled his eyes, leaned over to John Studzinski, and passed him an instruction: “Would you please call Hank Greenberg back?”
Studzinski crept out of the boardroom, aware of just how awkward this call was going to be for him to make. To help smooth the way, Studzinski enlisted Pete Peterson, Blackstone’s co-founder and a longtime friend of Greenberg, to join the call. At Greenberg’s suggestion, AIG had invested $1.35 billion in Blackstone when the firm was flagging in the aftermath of the 1998 Russian debt crisis.
While Studzinski waited on the line, Peterson dialed Greenberg’s office on Park Avenue.
“He can’t talk right now,” Greenberg’s assistant said. “He’s going on Charlie Rose to talk about AIG.”
“You’ve got to be kidding me,” Peterson said.
When Studzinski returned to the board meeting, he passed a note to Willumstad and relayed the news. For a moment, Willumstad smiled.
The board quickly returned to the grim subject at hand. Cohen, offering the pros and cons of the government’s deal, explained the argument for a Chapter 11 bankruptcy filing, saying that the company might do better in an orderly unwinding in court rather than accept the government’s take-it-or-leave-it offer.
Each of the various advisers offered