Too Big to Fail [284]
At 2:59 Christal West sent an e-mail to the group: “They’re all in.”
The centerpiece of the secretary’s imposing conference room is a twenty-four-foot-long mahogany table buffed to a high shine, with a Gilbert Stuart portrait of George Washington looming over it from one side of the room and a portrait of Salmon P. Chase, the secretary of the Treasury during Lincoln’s administration and the man responsible for putting the words “In God We Trust” on U.S. currency, from the other. Five chandeliers, lit by gas, hang from the vaulted rose-and-green ceiling. On the backs of each of the twenty leather and mahogany chairs positioned around the table is the U.S. insignia in the configuration of the sign for the dollar.
The nine CEOs had already taken their seats, arranged alphabetically behind placards with their names, when Paulson, Geithner, Bernanke, and Bair entered. It was the first time—perhaps the only time—that the nine most powerful CEOs in American finance and their regulators would be in the same room at the same time.
“I would like to thank all of you for coming down to Washington on such short notice,” Paulson began, in perhaps the most serious tone he had yet taken with them individually during the dramatic events of the previous weeks. “Ben, Sheila, Tim, and I have asked you here this afternoon because we are of the view that the United States needs to take strong decisive action to arrest the stress in our financial system.”
Blankfein, who was sitting directly across from Paulson, quickly turned solemn, while Lewis leaned forward to hear better.
“Over the recent days we have worked hard to come up with a three-part plan to address the turmoil,” Paulson explained.
Just as they had rehearsed, Geithner and Bernanke now took the group through the new commercial paper facility, followed by Bair’s explanation of the FDIC’s plan to guarantee bank debt. Paulson saved the key announcement for himself.
“Through our new TARP authority, Treasury will purchase up to $250 billion of preferred stock of banks and thrifts prior to year-end,” he said, with the gravity due the unprecedented measure. “The system needs more money, and all of you will be better off if there’s more capital in the system. That’s why we’re planning to announce that all nine of you will participate in the program.”
Paulson explained that the money would be invested on identical terms for each bank, with the strongest banks in the country taking the money to provide cover to the weaker banks that would follow suit. “This is about getting confidence back into the system. You’re the key to that confidence.”
“We regret having to take these actions,” he reiterated, and in case there was any confusion, he underscored the fact that he expected them to accept the money whether they wished to or not. “But let me be clear: If you don’t take it and you aren’t able to raise the capital that they say you need in the market, then I’m going give you a second helping and you’re not going to like the terms on that.”
The bankers sat stunned. If Paulson’s aim had been to shock and awe them, the tactic had worked spectacularly well.
“This is the right thing to do for the country,” he said in closing.
Geithner now read off the amounts that each bank would receive, in alphabetical order. Bank of America: $25 billion; Citigroup: $25 billion; Goldman Sachs: $10 billion; JP Morgan: $25 billion; Morgan Stanley: $10 billion; State Street: $10 billion; Wells Fargo: $25 billion.
“So where do I sign?” Dimon said to some laughter, trying to relieve the tension, which had not dissipated now that the bankers had learned why they had been summoned.
At 3:19 p.m. Wilkinson, who was sitting in the back of the room after inviting himself to the meeting,