Too Big to Fail [253]
After much debate, Paulson’s team settled on the $700 billion figure that Kashkari had proposed the day before. If passed, it would be the largest one-time expenditure in the history of the federal government. Concerned about the potential for political interference, Hoyt had slipped several lines into the bill aimed at preventing it, as well as granting Paulson whatever powers he might need:
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency. The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act…without regard to any other provision of law regarding public contracts…. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.
It might have been too early to expect any feedback, but Treasury staffers were already excitedly forwarding copies to one another.
And the reaction was instant: Even inside the department there were worries that Paulson might look like he was overreaching. The three-page bill had no oversight plan and virtually no qualifiers. Its terse length alone was making people uneasy.
“So, have you seen the bill?” Dan Jester asked Jeremiah Norton, neither of whom had worked on the proposal.
“I’ve seen the talking points,” Norton replied.
“No,” said Jester, “That is the bill!”
Late Saturday afternoon, Colm Kelleher and Morgan Stanley’s deputy treasurer, Dave Russo, headed down to the NY Fed with their advisers, Ed Herlihy of Wachtell, and Promontory’s Gene Ludwig, to present their application for bank holding company status.
In the thirteenth-floor reception area, two staffers approached them and asked, “Which of you is the CFO?”
“I am,” Kelleher said.
“You need to come with us by yourself.”
Kelleher mockingly bade farewell to his colleagues as he was escorted to a conference room where the New York Fed’s top leadership—William Rutledge, Bill Dudley, Terry Checki, and Christine M. Cumming—were assembled.
“Look,” Rutledge said, “if all else fails this weekend, will you agree to become a bank holding company?”
“What does that mean?” Kelleher asked, still somewhat unsure of the technicalities.
The benefits of a bank holding company were explained to him: Short-term financing would be available through the Fed’s discount window, provided Morgan Stanley established a sufficient deposit base and submitted to various regulations.
“Will you get your board to agree?” they asked Kelleher.
Kelleher now understood what this meeting meant: The Federal Reserve might be offering to save his firm. The tank might not reach empty after all. “Of course,” he replied.
Lloyd Blankfein, wearing slacks and a button-down shirt, was waiting in the Westchester County Airport parking lot when Bob Steel arrived. Always perfectly coiffed, Steel nonetheless looked as if he could use some sleep as he walked out of the terminal. He had already been awake for fifteen hours and his day was hardly done.
“What a birthday present!” Blankfein said to Steel brightly when he saw him. Blankfein, who turned fifty-four that day, was still hoping to get to a birthday dinner later that evening at Porter House New York, a steak restaurant, with his wife, Laura.
As they drove into the city they delicately began discussing the outlines of a deal and discussing their history together. Neither of them knew what to make of the merger idea or, for that matter, each other.
When they reached 85 Broad Street, Steel went directly to the thirtieth floor, where he used to spend a lot of his time. As he stepped into the conference room, he saw Chris Cole, who had been his firm’s adviser for the past five months. Now Cole would be on the other side, trying to buy Wachovia. Meanwhile, Steel