Too Big to Fail [262]
Upstairs Mack was on the phone with Mitsubishi’s chief executive, Nobuo Kuroyanagi, and a translator, trying to nail down the letter of intent.
His assistant interrupted him, whispering, “Tim Geithner is on the phone; he has to talk to you.”
Cupping the receiver, he said, “Tell him I can’t speak now, I’ll call him back.”
Five minutes later, Paulson called. “I can’t. I’m on with the Japanese, I’ll call him when I’m off,” he told his assistant.
Two minutes later, Geithner was back on the line. “He says he has to talk to you and it’s important,” Mack’s assistant reported helplessly.
Mack was minutes away from reaching an agreement.
He looked at Ji-Yeun Lee, a banker who was standing in his office helping with the deal, and told her, “Cover your ears.”
“Tell him to get fucked,” Mack said of Geithner. “I’m trying to save my firm.”
“Thank God. We’re out!” Jamie Dimon exclaimed as he ran across JP Morgan’s executive floor into Jimmy Lee’s office, where the management team had camped out, waiting for their next orders as they bided their time watching the Ryder Cup and the New York Giants game, chowing down on steaks from the Palm.
“Mack just called,” Dimon said, breathing a sigh of relief. “They got $9 billion from the Japanese!”
At 9:30 p.m., the news hit the wires. Goldman Sachs and Morgan Stanley would become bank holding companies. It was a watershed event: The two biggest investment banks in the nation had essentially declared their business model dead to save themselves. The New York Times described it as “a move that fundamentally reshapes an era of high finance that defined the modern Gilded Age” and “a blunt acknowledgment that their model of finance and investing had become too risky.”
CHAPTER NINETEEN
On Monday, September 22, the day after Goldman Sachs became a bank holding company, Lloyd Blankfein, his face puffy with exhaustion, sat staring at a framed cartoon from Gary Larson’s The Far Side on his office end table. The drawing features a father and son standing in their suburban front yard and gazing over a fence at their neighbor’s house, where a line of wolves is in the process of entering the front door. “I know you miss the Wainwrights, Bobby,” the caption reads, “but they were weak and stupid people—and that’s why we have wolves and other large predators.”
To Blankfein that pretty much summed up what had just happened to Wall Street: Had things worked out slightly different, Morgan Stanley, and perhaps even Goldman Sachs, could have ended up just like the Wainwrights.
Of the Big Five investment banks, his own and Morgan Stanley were the last ones standing, but Goldman’s footing seemed increasingly unsteady. As the day wore on, Goldman’s stock price, unlike Morgan Stanley’s, was not stabilizing but continuing to plunge, falling 6.9 percent. Despite its having been designated a bank holding company—giving it virtually unlimited access to liquidity from the Federal Reserve—investors had suddenly become worried about whether Goldman would need more capital.
After rising for two days the week before on hopes that TARP would save the economy, the broader market also was now moving again in the wrong direction. As investors had begun digesting the plan, they had come to realize that Paulson was going to have to do a better job of selling it if it was, as he intended, to renew confidence in the economy. To many Americans who had suffered substantial losses in their 401(k) plans, Wall Street simply didn’t deserve to be saved. “It would be a grave mistake to say that we’re going to buy up a bad debt that resulted from the bad decisions of these people and then allow them to get millions of dollars on the way out,” Barney Frank bellowed the day before. “The American people don’t want that to happen, and it shouldn’t happen.”
But the politics of the bailout was hardly a subject that was at the top of Blankfein’s mind, given the more pressing concern