Too Big to Fail [286]
At 4:01 Wilkinson finally replied to Kaplan’s e-mail. “We are there except for one,” he wrote, referring to Wells Fargo. “This deal will get done.”
Outside in the hallway, a huge grin was on Pandit’s face. “We just got out. They’re going to give us $25 billion, and it comes with a guarantee,” he said into the cell phone, sounding as if he had just won the Powerball lottery.
Mack, having already signed the agreement, called Roy Bostock, one of Morgan Stanley’s board members, hoping he could help calm the waters with the other directors over his impetuous decision.
“I want to give you a heads-up,” he told him. “We’re going to be having a board call in about twenty minutes or so. It’s going to be to approve accepting $10 billion in TARP money,” he said, before pausing. “But I already have.”
Bostock knew what was being asked of him. “I understand. The board will not throw an ax in the wheel here.”
When the Morgan Stanley call finally began, Bostock started by saying, “John, we didn’t have any choice but for you to sign that. It was the right thing to do.” Bostock called for a vote before there could be much discussion. “I’m in favor,” he began.
In stark contrast, Dimon’s tone when he spoke to his own board was bleak. “This is asymmetrically bad for JP Morgan,” he said, whispering into his cell phone. In other words, the money would help the weaker banks catch up to them. “But we can’t be selfish. We shouldn’t stand in the way.”
At 5:38, Bob Hoyt, while collecting the signed papers, shot an e-mail to the team, “On my way—that’s 5 down, 4 to go.”
Paulson, Geithner, Bernanke, and Bair sat in Paulson’s office, waiting. With the exception of Kovacevich’s grumbling, the meeting had gone well, much better than they had anticipated. They had effectively just nationalized the nation’s financial system, and no one had had to be removed from the room on a stretcher. Paulson, running his fingers over his stomach, as he always did when he was deep in thought, still couldn’t believe he had pulled it off.
Paulson had just gotten off the phone with Barack Obama—then the presidential front-runner—who had just finished up a speech about the economy in Toledo, Ohio, to tell him the news. He then tried John McCain, but couldn’t get through.
At 6:23 p.m. Wilkinson wrote to the team, “8 out of 9 are in…. [S]tate [S]treet is just waiting on board…. [W]e are basically done.”
Two minutes later, at 6:25 p.m., Wilkinson triumphantly reported the final tally from his BlackBerry: “We now have 9 out of 9.”
Kaplan, at the White House, replied, “Awesome.”
David Nason carried the signed papers down the hallway to Paulson.
Standing in the doorway of the secretary’s office, Nason paused for a moment as Paulson and his half-dozen senior staffers took a minute to appreciate the significance of the moment.
“We just crossed the Rubicon,” he said.
EPILOGUE
In the span of just a few months, the shape of Wall Street and the global financial system changed almost beyond recognition. Each of the former Big Five investment banks failed, was sold, or was converted into a bank holding company. Two mortgage-lending giants and the world’s largest insurer were placed under government control. And in early October, with a stroke of the president’s pen, the Treasury—and, by extension, American taxpayers—became part-owners in what were once the nation’s proudest financial institutions, a rescue that would have seemed unthinkable only months earlier.
Wiring tens of billions of dollars from Washington to Wall Street, however, did not immediately bring an end to the chaos in the markets. Instead of restoring confidence, the bailout had, perversely, the opposite effect: Investors’ emotions and imaginations—the forces that John Maynard Keynes famously described as “animal spirits”—ran wild. Even after President Bush signed TARP into law, the Dow