Too Big to Fail [285]
He didn’t know how to reply, as the outcome was not at all certain.
Dick Kovacevich, for one, was obviously not pleased to have been given this ultimatum. He had had to get on a flight—a commercial flight, no less—to Washington, a place he had always found contemptible, only to be told he would have to take money he thought he didn’t need from the government, in some godforsaken effort to save all these other cowboys?
“I’m not one of you New York guys with your fancy products. Why am I in this room, talking about bailing you out?” he asked derisively.
For a moment no one said a word, and then the room suddenly broke out in pandemonium, with everyone talking over one another until Paulson finally broke in.
Staring sternly at Kovacevich, Paulson told him, “Your regulator is sitting right there.” John Dugan, comptroller of the currency, and FDIC chairwoman Sheila Bair were directly across the table from him. “And you’re going to get a call tomorrow telling you you’re undercapitalized and that you won’t be able to raise money in the private markets.”
Thain jumped in with his own question: “What kind of protections can you give us on changes in compensation policy?”
Although his new boss, Lewis, couldn’t believe Thain’s nerve in posing the question, it was nonetheless the one that everyone present wanted to ask. Would the government retroactively change compensation plans? Could they? What would happen if there was a populist outcry? After all, the government would now own stakes in their companies.
Bob Hoyt, Treasury’s general counsel, took the question. “We are going to be producing some rules so that the administration will not unilaterally change its view,” he said. “But you have no insulation if Congress wants to change the law.”
Lewis, increasingly frustrated, could see the conversation needed to move along, and stated, “I have three things to say. There’s obviously a lot to like and dislike about the program. I think given what’s happening, if we don’t have a healthy fear of the unknown, then we’re crazy.”
Second, “if we spend another second talking about compensation issues, we’ve lost our minds!”
And finally, he said adamantly, “I don’t think we need to be talking about this a whole lot more,” adding, “We all know that we are going to sign.”
Still, Kovacevich kept stirring in his seat. This is practically socialism!
As Bernanke cleared his throat, the room fell silent again.
“I don’t really understand why there needs to be so much tension about this,” he said in his professorial way. He explained how the country was facing the worst economy since the Great Depression and pleaded with them to think about “the collective good. Look, we’re not trying to be intimidating or pushy….”
Paulson gave him a look as if to suggest, Yes, in fact, I am being pushy!
John Mack, who had been sitting silently for most of the meeting, turned to Geithner and said, “Give me the paper.” Taking a pen from his breast pocket he signed the document and, with a flick of his finger, sent it sliding back across the table. “Done,” he exclaimed, thus unceremoniously certifying what Paulson hated calling a bailout.
“But you didn’t write your name in,” Geithner pointed out. “You write it in,” Mack instructed, and Geithner penned the words “MORGAN STANLEY” in block letters at the top. “And you didn’t put the amount in,” Geithner protested.
“It’s $10 billion,” Mack replied nonchalantly.
Thain, looking at Mack in dismay, said, “You can’t sign that without your board.”
“No?” Mack replied. “My board’s on twenty-four-hour notice. They’ll go along with it. And if they don’t, they’ll fire me!”
Blankfein indicated that he, too, needed to speak with his board. “I don’t feel authorized to do that on my own,” he said, with everyone else agreeing that they, too, would need to go through proper channels.
Dimon stood up, walked to the corner of the room near the window, and decided that he was