Too Big to Fail [54]
Everyone in Paulson’s inner circle at Treasury had heard about when Kashkari barged into his office late one evening in March, finding the secretary in an unusually good mood, chatting with his chief of staff, Jim Wilkinson.
“Hank, I want to talk about bailouts,” Kashkari interrupted.
“What are you talking about? Get out of here,” Paulson said, annoyed.
“Look, we keep talking about how do we get the political will to get the authority we need to really take action, right? Well, we have to have some record that shows we tried. The next president is going to come in and say, ‘Here are the steps that should have been taken, but the previous administration was unwilling or unable to take them, blah, blah, blah’ You know what that means? The next president is going to bring the hostages home. Obama! Obama is going to bring the hostages home!”
Paulson erupted in laughter at the notion that Obama would somehow ride this crisis the way Ronald Reagan rode the Iranian hostage standoff in the late 1970s. He pointed at Kashkari.
“Ha, ha. Obama is going to bring the hostages home,” Paulson said. “Oh, yeah? Get the fuck out of here.”
A London sky of gray-pink clouds was just beginning to darken on an evening in April when the phone rang for Bob Diamond, the chief executive of Barclays Capital. Diamond had been contentedly honing his putting skills in his office in the bank’s corporate enclave in Canary Wharf, the booming financial district in East London known as the Square Mile, and a dozen golf balls were strewn about the hole he had cut into the carpet. The office’s walls were lined with Boston Red Sox mementos, which had been hung there not merely to torture visitors from New York City—of which there were many—but because Diamond, a native New Englander, was also a die-hard Sox fan.
He disliked having his precious few minutes of downtime interrupted, but in this instance he was happy to put down his putter and take the call. It was his friend Bob Steel, whom he had just seen briefly on his recent trip to Washington for the dinner party at the Treasury Building.
The two had become close after they joined the board of Barclays at the same time in 2005. They came from different parts of the country and different parts of the business—Steel, from Durham, North Carolina, was in Goldman equities; Diamond, from Springfield, Massachusetts, was a former bond trading executive for Morgan Stanley and Credit Suisse. But they recognized similar qualities in each other: Each came from middle-class families and had worked his way through college.
The arc of their careers more recently had been nearly identical: Both Steel and Diamond, as Yankees in Queen Elizabeth’s court, had made quite a splash in London. For Steel, success had come with starting Goldman’s European equities trading operation, a feat Hank Paulson, his former boss, always remembered. For his part, Diamond had transformed a small investment bank with some 3,000 employees into a major London powerhouse that currently had a payroll of 15,000. Barclays Capital now accounted for about a quarter of the bank’s profits.
The two had remained friends after Steel quit the Barclays board to follow Paulson to Treasury, to the point that each had always been able to count on the other to pick up the phone if he called, whatever the reason.
“Listen, one of my jobs here is to brainstorm,” Steel said somewhat stiffly after greeting Diamond, “and, ah, sort of sketch out various scenario plans. In that capacity, I have a question for you.”
Steel’s uncharacteristically distant tone surprised Diamond, who asked, “Is this official business, Bob?”
“No, no. Look, I’m not calling on behalf of anyone,” he assured him. “The markets have calmed down a bit now, but I am trying to figure out that if things do get worse, and we get to a certain level, if, ah, things can happen.”
“All right, shoot.”
Steel took a deep breath and then asked his question: “Is there a price at which you