Too Big to Fail [221]
“Isn’t twenty percent of something better than one hundred percent of nothing?”
The room fell silent.
As the meeting wore on, Willumstad checked his watch, knowing that he owed Paulson and Geithner an answer quickly.
“Let’s go around the table and let everybody say what you think we should do,” Willumstad instructed. “To be honest with you, I urge you to vote in favor of the Fed proposal,” he told them, starting off. “We have three constituents. Shareholders, customers, employees. This is not something that’s friendly to the shareholders, but it will preserve the customers, keep the company afloat, and you have a better chance these people will keep their jobs.”
As they made their way around the table, all the board members voted in favor of the government deal with the exception of Stephen Bollenbach, the former chief executive of Hilton Hotels. Bollenbach, who was supported by Eli Broad and other major dissident AIG shareholders, had joined the board in January. He thought that a proper judge would give shareholders a fairer deal.
Before the vote was formally tallied, Bollenbach asked a question: Was there any room to renegotiate the terms of the deal?
Willumstad and the lawyers retreated to his office to call Geithner.
“Tim, Dick and Rodge are here,” Willumstad said. “It’s probably appropriate to let me have Dick explain to you the directors’ feelings.”
Leaning in toward the speakerphone, Beattie said, “Tim, the board wants to know whether the terms can be renegotiated. They think eighty percent is outrageous.”
“Terms cannot be negotiated,” Geithner said firmly. “These are the only terms you’re going to get.”
As the three men looked at each other resignedly, Beattie continued, “We have a second question. The board wants to know whether, if the company can come up with its own financing to take the Fed’s place, would that be acceptable?”
Geithner hesitated and then replied: “Nobody would be happier than I if the company, you know, would pay the Fed back.”
Beattie returned to the boardroom and relayed the conversation. The deal was done.
Paulson and Bernanke, after finishing with the president, ran over to the Hill to brief key congressmen, who were none too pleased with the AIG bailout news. Senate majority leader Harry Reid hosted the meeting in his second-floor conference room. The gathering had been hastily organized; some congressmen were invited only twenty minutes before it began. Senator Judd Gregg of New Hampshire, the ranking Republican on the Senate Banking Committee, was supposed to be at a black-tie dinner and showed up in his tuxedo, sans tie. Barney Frank arrived late in an untucked shirt.
Paulson and Bernanke explained why they thought their decision had been a necessary one. “If we don’t do this,” Paulson told them, the impact of an AIG bankruptcy would “be felt across America and around the world.”
Frank, concerned about the cost, looked at Bernanke. “Do you have $80 billion?”
With a barely concealed smile, Bernanke answered, “Well, we have $800 billion.”
Back at JP Morgan, Jamie Dimon and Jimmy Lee were sitting in Dimon’s office when the AIG press release came across the tape. “They’re never going to get their money back,” Lee told Dimon. “There’s no way.”
“I guarantee you they’ll get more than $50 billion of it back,” Dimon shot back, thinking that Washington had just cut itself a good deal, however bad it was from a public relations perspective. “AIG has a lot of good insurance businesses it can auction off. You’ll see.”
Dimon and Lee placed a $10 bet on who would turn out to be right.
Around 11:00 that night, Bob Willumstad’s driver pulled up to his building on Park Avenue, just across from Lenox Hill Hospital.