Too Big to Fail [329]
CIC already held a 9.9 percent stake in Morgan Stanley: When Morgan Stanley announced a loss of $3.59 billion at the end of 2007, the state-owned China Investment Corp. (CIC), invested five-billion-dollars in the company, giving it a 9.9 percent stake. “China fund grabs big stake in Morgan Stanley,” AFP, December 2007.
he’d be interested in buying up to 49 percent of the firm: Christine Harper, “Morgan Stanley Said to Be in Talks with China’s CIC,” Bloomberg, September 18, 2008.
CIC’s investment in Blackstone: When Blackstone went public in June 2007, CIC invested $3 billion—giving it a 9.9 percent stake in the company. Since then shares had fallen by nearly 45 percent, to $17.13 in late August, giving CIC a paper loss of more than $1.3 billion. Allen T. Cheng, “Inside the CIC,” Institutional Investor—America, September 10, 2008.
CHAPTER EIGHTEEN
“these illiquid assets”: “Text of Paulson’s News Conference Friday,” Associated Press, September 19, 2008.
Wachovia’s $120 million mortgage portfolio: As part of its 2006 purchase of Golden West Financial Corp., Wachovia inherited a $120 billion adjustable-rate home-loan portfolio, the bulk of which comes from California and Florida, two of the hardest-hit housing markets in the country. Dan Fitzpatrick, Alex Roth, and David Enrich, “With Wachovia Sale Looking Likely, A Makeover for Charlotte, U.S. Banking,” Wall Street Journal, September 29, 2008.
Bob Steel had estimated that figure at 12 percent: Speaking at the Lehman Brothers Financial Services Conference on Tuesday, September 9, Steel said Wachovia still expects losses equal to 12 percent, though he said, “it’s still early days.” See “Wachovia Keeps Mortgage Loss View,” stock downgraded, AFX Asia, September 9, 2008.
his firm would not be making any investments: “We won’t be investing in U.S. banks under current circumstances,” Ryosuke Tamakoshi said in Tokyo on Tuesday, September 16, 2008. Takahiko Hyuga, Shingo Kawamoto, and Komaki Ito, “Japan Banks, Insurers Have $2.4 Billion Lehman Risk,” Bloomberg, September 17, 2008.
Gao reiterated his interest in buying 49 percent of Morgan Stanley: Christine Harper, “Morgan Stanley Said to Be in Talks With China’s CIC, Bloomberg, September 18, 2008.
the sale of Lehman Brothers to Barclays: Ben White and Eric Dash, “Barclays Reaches $1.75 Billion Deal for a Lehman Unit,” New York Times, September 18, 2008.
“You may approach”: The dialogue between Judge Peck and Harvey Miller was taken from the official court transcript, dated September 19, 2008.
Merging the “Houses of Morgan”: Chernow, The House of Morgan, 591.
“URGENT and Confidential”: Author obtained copy of e-mail.
chose Roger Altman: Morgan Stanley’s independent board members chose to hire Roger Altman as their adviser, but he only narrowly won the assignment over Christopher Lawrence, a banker at Rothschild.
“Decisions by the Secretary pursuant to the authority”: “Text of Draft Proposal for Bailout Plan,” New York Times, September 20, 2008.
“You know, there’s a chance I could lose this firm”: Mack later recounted this story to Bloomberg: “I said to my wife, when things were really crazy, ‘You know, there’s a chance I will lose this firm. But I would rather be doing this than sitting on a beach reading a book.’” See Lisa Kassenaar and Christine Harper, “Mack Tells Wife He May Lose Firm Before Brokerage Bid,” Bloomberg, January 26, 2009.
the headline “King Henry”: Newsweek, September 29, 2008.
a quote from Governor Jon Corzine: “There hasn’t been a consistent pattern…. We save Bear Stearns but not Lehman. The market is going to have a hard time sorting through what the underlying principle is.” Daniel Gross, “The Captain of the Street; Treasury Secretary Hank Paulson Has a Radical Game Plan for Beating America’s Financial Crisis,” Newsweek, September 29, 2008.
“If you were in your old