Too Big to Fail [273]
“Sheila, we’re not waiting until the morning,” Steel said resolutely. “We’ve done this; we’ve approved it. I think we have to call him now. I don’t want him hearing this when he wakes up from someone else.”
“You should do it,” she said equally firmly.
“I think you should be on the phone, since you married us,” he replied.
With Bair on the line, Steel conferenced in Jane Sherburne, and then he called Pandit, not surprisingly waking him.
“Bob, what’s going on?” he asked groggily
“Well, there’s been an important development,” Steel said carefully. “I’m on the phone with Sheila and Jane. Do you need a moment?”
“No, I’m fine,” Pandit said, collecting himself. “What is it?’
“We received an unsolicited proposal from Wells Fargo for the entire company of Wachovia, $7 a share, no assistance, and a Wells Fargo board–approved doc that we’ve accepted. We think this is the right thing to do.”
“Well, that’s interesting,” Pandit answered, a bit taken aback. “A better bid? Let me call Ned. Let’s work with you, and let’s see what we can do and get this thing resolved.”
“No, no. You don’t understand,” Steel interrupted, pausing for a moment. “I’ve signed it already.”
There was silence on the other end of the line. If Pandit hadn’t been completely awake before, he was now. When he resumed speaking he was irate, the full force of Steel’s news having registered with him.
“We have a deal! You know you can’t do this, because we actually have an exclusive arrangement with you. You are not allowed to sign.” Pandit, frustrated, appealed to Bair. “Madame Chairwoman?”
“Well, I can’t get in the way of this,” Bair replied, in her most official tones.
“This isn’t just about Citi,” Pandit explained to her. “There are other issues we need to consider. I need to speak to you privately.”
Steel agreed to leave the conversation, and as soon as he hung up Pandit began pleading with Bair. “This is not right. It’s not right for the country, it’s just not right!”
But the decision, she made it abundantly clear, was final.
Stock prices were surging before the House began voting on the bailout bill for a second time on the afternoon of Friday, October 3. Its passage was eased after the Senate version of the legislation added a number of tax breaks that were otherwise due to expire. Another popular addition increased the amount in individual bank accounts insured by the FDIC to $250,000 from $100,000. What had begun as a three-page draft was now more than 450 pages of legislative legalese, which the Senate had approved after sundown on Wednesday.
Many of the House Democrats and Republicans who had opposed the measure on Monday had since been persuaded to switch their votes—some by appeals from the two presidential candidates or from the president, some by the added provisions in the bill, and others by the mounting signs that the financial crisis was dragging the economy down into a deep recession. A recent report indicated that 159,000 jobs had been lost in September, the fastest pace of monthly job cuts in more than five years. Stocks had slid sharply that week, and both the takeover of Washington Mutual and the desperate jockeying to secure a partner for Wachovia revealed that not only Wall Street was in trouble.
In the final House tally, thirty-three Democrats and twenty-four Republicans who had voted against the bill on Monday now approved it. That afternoon, President Bush signed the Emergency Economic Stabilization Act of 2008, which created the $700 billion Troubled Assets Relief Program, or TARP. “We have shown the world that the United States will stabilize our financial markets and maintain a leading role in the global economy,” the president declared.
Of course, what none of the congressmembers nor the public knew was that TARP was being completely rethought within Treasury, as Jester, Norton, and Nason began developing plans to use a big chunk of the $700 billion to invest directly into individual banks.
Jester had flown back to his home in Austin for a brief respite, but he was constantly on his BlackBerry with Norton going over