Too Big to Fail [252]
After Mack came downstairs again Gene Ludwig, Mack’s outside consultant, explained the bank holding concept that they were pursuing. Ludwig said that he believed that Paulson would be motivated to protect them.
“If we go, Goldman goes,” he said, stating the obvious, at least internally, by that point. But then he added a new insight that the board hadn’t considered.
“And then GE will go.”
At Goldman Sachs, two of its top bankers, David Solomon and John Weinberg, had just returned from a morning meeting in Fairfield, Connecticut. They had just met with Jeffrey Immelt, General Electric’s CEO, and Keith Sharon, its CFO.
Seated on Cohn’s couch, Solomon recounted the meeting to him. It was a complicated, and almost comical, situation: Solomon and Weinberg had traveled to Fairfield to advise its client on coping with the financial crisis, beginning with a plan to raise capital. One of Immelt’s primary concerns, however, was what would happen if its adviser, Goldman Sachs, went out of business.
General Electric was more about manufacturing than financial engineering, but roughly half of its profits in recent years had come from a finance company unit called GE Capital. Like most Wall Street firms, GE Capital relied on the short-term paper market and the confidence of investors worldwide, and Immelt was worried how the fate of Goldman and Morgan Stanley might affect it. The meeting ended without much clarity, apart from some preliminary plans to raise capital—and an assurance to Immelt that Goldman was staying in business.
But Cohn was already thinking about Goldman’s talks with Wachovia. Cohn, speaking to Kevin Warsh of the Fed, had agreed to entertain the idea, but only on the condition the Fed would provide assistance; Warsh had said they’d strongly consider it. Cohn believed him: Paulson had spoken with Blankfein and told him to take the talks seriously. “If you go into this looking for all the problems and how much help you’re going to get, it’s never going to happen,” he said, adding, “You’re in trouble and I can’t help you.” In the meantime, Warsh instructed Cohn to make sure they could work out the personal dynamics.
In the meantime, Warsh instructed Cohn to make sure they could work out the personal dynamics.
“Let’s not waste our time on economics if you guys are never going to solve the social issues,” he said. “If you aren’t willing to accommodate them, if Bob’s not willing to do whatever, this isn’t going to happen.”
Steel was scheduled to land at Westchester County Airport in White Plains, a suburb of the city, in only a few hours, and Cohn walked into Blankfein’s office and made a suggestion.
“Lloyd, you should go pick Steel up at the airport,” Cohn said, believing it would be a gracious gesture to kick off the merger talks.
Blankfein looked seriously annoyed, having never felt that he got along with Steel particularly well ever since Paulson had made them co-heads of the equities division years earlier. “Do I have to?”
“Yes,” Cohn said firmly. “I would go with you but it would be awkward. You should go pick him up.”
Blankfein was still resistant. “Can you go by yourself?”
“No,” said Cohn, who considered Steel a friend. “I already have a very good relationship with him.”
Blankfein relented. He’d head to the airport.
For a moment Paulson felt he could breathe a sigh of relief. His team had finished the first draft of the TARP legislation and gotten a quick sign-off from the Office of Management and Budget to begin distributing it on the Hill.
Given that he had promised the congressional leadership on Thursday night that he could get them something to work on “in hours,” he figured he’d make it succinct. Paulson;