Too Big to Fail [255]
Even before the black Suburban had come to a stop in his driveway on Saturday evening, Hank Paulson was stepping out the door, his RAZR at his ear. His Secret Service agent, Jim Langan, preferred that Paulson wait inside until Langan got out of the vehicle, but Paulson had long since abandoned such protocol.
Paulson raced inside to get on a call with Vice Premier Wang Qishan in China. For the past day, he had been trying to coordinate the call to press his case for China to pursue an investment in Morgan Stanley. Originally, he had wanted President Bush to call China’s president and had spoken with Josh Bolten, the president’s chief of staff, about it. But Bolten had concerns about whether it was appropriate for the president to be calling on behalf of a specific U.S. company. He suggested that, at best, the president might be able to call and speak broadly about the financial industry, finding a subtle way to be encouraging. But before such a call could be made, Paulson needed to size up China’s true interest.
Paulson had scheduled the call with Wang for 9:30 p.m. He knew Wang well from his trips to China as the CEO of Goldman, and they had a comfortable rapport. He also knew it was highly unusual to be orchestrating a private market deal with another country, in this case the largest holder of U.S. debt. Before placing the call, Paulson had reached out to Stephen Hadley, assistant to the president for national security affairs to get some guidance. The instructions: tread carefully.
When Paulson was finally connected to Wang, he moved quickly to the topic at hand, Morgan Stanley. “We’d welcome your investment,” Paulson told Wang. He also suggested that one of China’s biggest banks, like ICBC, should participate, making the investment a strategic one.
Wang, however, expressed his anxiety about CIC becoming involved with Morgan Stanley, given what had happened to Lehman Brothers. “Morgan Stanley is strategically important,” Paulson said, suggesting he would not let it fail.
Wang remained unimpressed, asking for a commitment that the U.S. government would guarantee any investment. Paulson, trying to avoid making an explicit promise but also trying to assuage him, said, “I can assure you that an investment in Morgan Stanley would be viewed positively.”
Only a few hours later, Sunday morning, Paulson was back in the Suburban, where Michele Davis, his communications chief, was waiting. “You’re not going to like this,” she said as she pulled out a copy of the cover of the new Newsweek, which would appear on newsstands on Monday. Under the headline “King Henry” was a photograph of Paulson.
They were headed to an early taping of NBC’s Meet the Press to sell his TARP proposal with his fishing buddy, Tom Brokaw, who had temporarily taken over hosting responsibilities for the political talk show after Tim Russert died. From there they would head to ABC’s This Week and then to CBS’s Face the Nation.
Paulson skimmed through the article. It was a flattering profile, with the exception of a quote from Governor Jon Corzine, his old nemesis from Goldman, questioning his consistency. But more important, the cover was a tacit acknowledgment of the enormous power that Paulson now wielded, not only in America, but on the world stage. President Bush had taken a backseat; Paulson had become the de facto leader of the country in this time of crisis.
The power pleased him, but he also knew that it cut both ways. He discovered just how far it cut within minutes of the red light’s going on for the Brokaw interview, when the host lit into him about the lack of details in the TARP plan, the same lack of details that Treasury staffers had privately worried about the day before.
“If you were in your old job as chairman of Goldman Sachs and you took this deal to the partners,” Brokaw said, “they’d send you out of the room and say, ‘Come back when you’ve got a lot more answers,’ wouldn’t they?”
Kenneth