Too Big to Fail [236]
“You can do whatever you want,” Cohn said in carefully measured tones. But, he added, “this will change our relationship for a long time.”
Half an hour before David Carroll and the Wachovia team were due to arrive at Morgan Stanley, Kindler called down to Scully. Kindler was in his office, peering out his window down at the camera crews camped outside the building.
“Why are we having him meet us here, of all places?” Kindler asked. “There’s reporters outside.”
“Don’t worry. It’ll be fine,” Scully, who took the precaution of sneaking Carroll in via the employee entrance on Forty-eighth Street, assured him.
Kindler’s sole objective was to get his hands on Wachovia’s mortgage book so that he could crack the tape—Wall Street–speak for examining the mortgages individually. That was the only way he could really understand Wachovia’s real value. This was no small undertaking: The tape contained $125 billion of loans, including all manner of bespoke adjustable rates, like “pick a pay,” which gave borrowers a variety of choices each month on how—and even how much—to pay. Among the options was a payment that covered only the interest on the loan.
Morgan Stanley also insisted on seeing Wachovia’s business plan, but Carroll balked at that request. “Our general counsel says it’s a real problem,” he said.
Kindler, convinced that Wachovia was trying to hide something, called Morgan’s general counsel, Gary Lynch, in a rage and told him to put the screws to his counterpart at Wachovia, Jane Sherburne.
“It’s a big legal issue,” she explained. “We can’t give over the data without disclosing it in the merger agreement if we do the deal.”
Lynch, too, was starting to suspect a problem. Were Wachovia’s numbers worse than anyone knew? he wondered to himself. “Well, we can’t do the deal without seeing the data,” he told her.
Sherburne relented.
Lloyd Blankfein, his top shirt button undone and tie slightly askew, looked at his computer screen and saw in dismay that his stock price had dropped 22 percent to $89.29. Blankfein, who up until now had resisted pushing back against short-sellers, was becoming convinced that the pressure his stock was under was not an accident. He had just ended a call with Christopher Cox in which he had told the SEC chairman, “This is getting to be intentional. You know, you may need to do something here.”
In his e-mail in-box was another message from one of his traders saying that JP Morgan was trying to steal his hedge fund clients by telling everyone that Goldman was going under. It was becoming a vicious circle.
Blankfein had been hearing these rumors for the past twenty-four hours, but he had finally had enough. He was furious. The rumormongering, he felt, had gotten out of control. And he couldn’t believe JP Morgan was trashing his firm to his own clients. He could feel himself becoming as anxious as Mack had sounded when they spoke the day before.
He called Dimon. “We’ve got to talk,” Blankfein began as he tried to calmly explain his problem. “I’m not saying you’re doing it, but there are a lot of footprints here.”
“Well, people may be doing something that I don’t know about,” Dimon replied. “But they know what I’ve said, which is that we’re not going after our competitors in the middle of all this.”
Blankfein, however, wasn’t buying his explanation. “But, Jamie, if they’re still doing it, you can’t be telling them not to!” Trying to get his point across, Blankfein, a movie buff, started doing his own rendition of A Few Good Men: “Did you order the Code Red? Did you say your guys would never do anything?” Dimon just listened patiently, eager not to get Blankfein even more wound up.
“Jamie, the point is, I don’t think you’re telling them to do this, but if you wanted to stop them in your organization, you could scare them into not doing it,” Blankfein