Too Big to Fail [7]
At its core Too Big to Fail is a chronicle of failure—a failure that brought the world to its knees and raised questions about the very nature of capitalism. It is an intimate portrait of the dedicated and often baffled individuals who struggled—often at great personal sacrifice but just as often for self-preservation—to spare the world and themselves an even more calamitous outcome. It would be comforting to say that all the characters depicted in this book were able to cast aside their own concerns, whether petty or monumental, and join together to prevent the worst from happening. In some cases, they did. But as you’ll see, in making their decisions, they were not immune to the fierce rivalries and power grabs that are part of the long-established cultures on Wall Street and in Washington.
In the end, this drama is a human one, a tale about the fallibility of people who thought they themselves were too big to fail.
CHAPTER ONE
The morning air was frigid in Greenwich, Connecticut. At 5:00 a.m. on March 17, 2008, it was still dark, save for the headlights of the black Mercedes idling in the driveway, the beams illuminating patches of slush that were scattered across the lawns of the twelve-acre estate. The driver heard the stones of the walkway crackle as Richard S. Fuld Jr. shuffled out the front door and into the backseat of the car.
The Mercedes took a right onto North Street toward the winding and narrow Merritt Parkway, headed for Manhattan. Fuld stared out the window in a fog at the rows of mansions owned by Wall Street executives and hedge fund impresarios. Most of the homes had been bought for eight-figure sums and lavishly renovated during the second Gilded Age, which, unbeknownst to any of them, least of all Fuld, was about to come to a crashing halt.
Fuld caught a glimpse of his own haggard reflection in the window. The deep creases under his tired eyes formed dark half-moons, a testament to the four meager hours of sleep he had managed after his plane had landed at Westchester County Airport just before midnight. It had been a hellish seventy-two hours. Fuld, the CEO of Lehman Brothers, the fourth-largest firm on Wall Street, and his wife, Kathy, were still supposed to be in India, regaling his billionaire clients with huge plates of thali, piles of naan, and palm wine. They had planned the trip for months. To his jet-lagged body, it was 2:00 in the afternoon.
Two days earlier he had been napping in the back of his Gulfstream, parked at a military airport near New Delhi, when Kathy woke him. Henry M. Paulson, the Treasury secretary, was on the plane’s phone. From his office in Washington, D.C., some seventy-eight hundred miles away, Paulson told him that Bear Stearns, the giant investment bank, would either be sold or go bankrupt by Monday. Lehman was surely going to feel the reverberations. “You’d better get back here,” he told Fuld. Hoping to return as quickly as possible, Fuld asked Paulson if he could help him get clearance from the government to fly his plane over Russia, shaving the flight time by at least five hours. Paulson chuckled. “I can’t even get that for me,” Paulson told him.
Twenty-six hours later, with stops in Istanbul and Oslo to refuel, Fuld was back home in Greenwich.
Fuld replayed the events of the past weekend over and over again in his mind: Bear Stearns, the smallest but scrappiest of Wall Street’s Big Five investment houses, had agreed to be sold—for $2 a fucking share! And to no less than Jamie Dimon of JP Morgan Chase. On top of that, the Federal Reserve had agreed to take on up to $30 billion of losses from Bear’s worst assets to make the deal palatable to Dimon. When Fuld first heard the $2 number from his staff in New York, he thought the airplane’s phone had cut out, clipping off part of the sum.
Suddenly people were talking about a run on the bank as if it were 1929. When Fuld left for India on Thursday, there were rumors that panicky investors were