Too Big to Fail [238]
Before wrapping up the meeting, Paulson raised one last problem: Wachovia, he said, might falter. He was getting back-channel messages from Kevin Warsh that the bank’s finances were in much worse shape than they believed. Everyone understood the significance of his statement. After all, Bob Steel, their former colleague, was its CEO.
“If Wachovia fails, I’m going to be trotting up to Congress again. So I’m hoping it happens after January!” he said to a roomful of laughs.
“Listen, Jamie just called me fishing around for something,” Colm Kelleher told John Mack midday Thursday as he marched into his office. “He said he was calling to see if he could be of help,” Kelleher added. “It was strange.”
James Gorman, the firm’s co-president, had just reported receiving a similar call, Mack replied, and Geithner had phoned earlier to suggest that he talk to Dimon as a possible merger partner too.
“It’s clear that for him to be calling us, he wants to do a deal,” Kelleher said. “Jamie is always hanging around the hoop. You know Jamie’s saying, ‘Let’s make friends with these guys before I eat them.’”
Mack was irritated by these suggestions; he didn’t particularly want to do a deal with Dimon, as he believed it would involve far too much overlap. But he decided to stop guessing what Dimon might be up to and ask him directly.
“Jamie, Geithner says I should call you,” Mack said abruptly when he reached Dimon on the phone a few minutes later. “Let’s get this out in the open: Do you want to do a deal?”
“No, I don’t want to do a deal,” Dimon said flatly, frusterated that this was the second call he had gotten that day from a competitor that was annoyed with him.
“Well, that’s interesting,” Mack retorted. “You’re calling my CFO and you’re calling my president, why would you do that?”
“I was trying to be helpful,” Dimon repeated.
“If you want to be helpful, then talk to me. I don’t want you calling my guys,” Mack said, hanging up the phone.
The fiftieth floor of Goldman’s fixed-income trading unit was in near-meltdown by lunchtime on Thursday. No trading was taking place, and the traders themselves were glued to their terminals, staring at the GS ticker as the market continued its swoon. Goldman’s stock dropped to $85.88, its lowest level in nearly six years; the Dow had fallen 150 points. “The market is trading under the assumption that every financial institution is going under,” Michael Petroff, portfolio manager for Heartland Advisors, told Agence France-Presse that morning. “It’s now emotional.”
John Winkelried, Goldman’s co-president, had been walking the floors, trying to calm everyone’s nerves. “We could raise $5 billion in an hour if we wanted to,” he told a group of traders as if to suggest nothing was amiss.
But just then, at 1:00 p.m., the market—and Goldman’s stock—suddenly turned around, with Goldman rising to $87 a share, and then $89. Traders raced through their screens trying to determine what had been responsible for the lift and discovered that the Financial Services Authority in the U.K. had announced a thirty-day ban on short selling twenty-nine financial stocks, including Goldman Sachs. It was exactly what Blankfein and Mack had tried to persuade the SEC’s Christopher Cox to do.
The squawk boxes on Goldman’s trading floor soon crackled to attention. A young trader found a copy of “The Star-Spangled Banner” on the Internet and broadcast it over the speakers to commemorate the moment. About three dozen traders stood up from their desks, placed their hands over their hearts, and sang aloud, accompanied by rounds of high-fives and cheers. The market was turning around, and our flag was still there.
Nine minutes later word began to spread that Paulson, too, was working on something big. “Treasury, Fed Weighing Wider Plan to Ease Crisis, Schumer Says” a Bloomberg headline read, buoying the market further.
At exactly 3:01 p.m. the market took off. Traders all over Wall Street turned up the volume when Charlie Gasparino of CNBC reported what he was