Too Big to Fail [283]
“Then I’ll hand it over to you guys,” Paulson said, nodding in the direction of Bernanke and Geithner, who then rehearsed their lines about the commercial paper program. “From there, Sheila will take it,” he instructed, still annoyed with her for all of her complaining the night before about the loan-guarantee program.
Finally, they got to the key provision: the equivalent of welfare checks, earmarked for the biggest banks in the nation.
Paulson read the talking point aloud: “To encourage wide participation, the program is designed to provide an attractive source of capital, on identical terms, to all qualifying financial institutions. We plan to announce the program tomorrow—and—that you nine firms will be the initial participants. We will state clearly that you are healthy institutions, participating in order to support the U.S. economy.”
They all knew that line was wishful thinking. Bernanke and Geithner had talked earlier in the day about whether the sum would be sufficient to sustain even one troubled bank, Citigroup, the nation’s largest, let alone solve a full-fledged financial crisis. Geithner, for one, had been especially anxious that Citigroup, as he had been saying for weeks, “was next.”
Then they got to the question that Geithner and Paulson had been debating all day: How forceful could they be? Geithner had prevailed upon Paulson earlier to make accepting the TARP money as close to a requirement for the participants as possible. “The language needs to be stronger,” Geithner urged him. “We need to make clear that this is not optional.” Paulson agreed.
The new talking-point language reflected Geithner’s changes. “This is a combined program (bank liability guarantee and capital purchase). Your firms need to agree to both,” it stated. “We don’t believe it is tenable to opt out because doing so would leave you vulnerable and exposed.”
Just to drive home the point, one of the talking points warned, “If a capital infusion is not appealing, you should be aware that your regulator will require it in any circumstance.”
They had already tried to game out which of the CEOs would be resistant. Pandit might be tough, but he’d take it, Paulson thought. Dimon was in the bag. Blankfein might get snippy, but he wouldn’t get in the way. Mack needed the money, so that should be easy. Lewis might put up a fight. The biggest wild card was Dick Kovacevich of Wells Fargo: Would he be the one to derail it?
Paulson recounted how much trouble it had been just trying to get him to show up. “I could hardly get him on the airplane,” he told the group, who looked at him with a mixture of amusement and astonishment. “I just said, ‘Listen, the secretary of Treasury, the chairman of the Fed, the FDIC want you here! You better get here!” Everyone laughed, but got right back to business.
“David,” Paulson said, pointing to David Nason, “will walk through the numbers.” And Bob “will go over the comp issues,” meaning the delicate conversation about the industry’s famously extravagant way of compensating, or paying, its medium to big producers.
After that, Paulson explained, the plan was to sequester all the CEOs in separate rooms. “We let them think it over. They can talk to their boards. And we can answer their questions if they have them,” he said. “And then we’ll reconvene at 6:30 p.m.”
“Let’s hope this works,” Paulson said encouragingly, as the group got ready to march down the hallway to, if not the biggest meeting of their careers, certainly the most historic.
Outside the Treasury building every attempt that had been made to keep tight control over the meeting had become moot. Jamie Dimon had arrived at 2:15 p.m., some forty-five minutes early, and casually ambled down Hamilton as the group of camped-out photographers snapped picture after picture. “He caught us off guard!” Brookly McLaughlin, one of the press staffers, wrote to her colleague, who was trying to coordinate the logistics from her