Too Big to Fail - Andrew Ross Sorkin [155]
Private-sector involvement was a concept that Paulson and Geithner had been discussing all day—the assembly of a consortium of banks to help subsidize a sale of Lehman, if Bank of America or Barclays refused to do the deal on its own. But neither Paulson nor Geithner had completely fleshed out the idea yet, and even in the best of times, herding bankers was a feat far from easy.
Lewis paused, not at all pleased with what Paulson seemed to be suggesting. He didn’t want to get involved in a quasi-public-private rescue; he wanted a “Jamie Deal.” And he knew full well that his rivals were unlikely to want to foot the bill so he could buy Lehman for a song.
Lewis nonetheless agreed that he would keep examining Lehman with an eye toward making a bid. With so much at stake, he assumed he would ultimately get some sort of assistance—whatever form it might take.
On Thursday afternoon, David Boies, Hank Greenberg’s lawyer, arrived at the offices of Simpson Thacher to meet with AIG’s lawyers: Dick Beattie, the chairman of the firm; and Jamie Gamble. Only a small circle knew about the meeting or what it was intended to accomplish. After four years of public battles, AIG was about to reach a settlement with Greenberg, one that would bring him back into the company fold. Willumstad had instructed Beattie and Gamble to get in a room with Boies and hammer out a deal once and for all.
Given the tumult in the market, Willumstad was eager to announce that Greenberg was returning to AIG as its chairman emeritus. The news would certainly come as a shock, but Willumstad was hoping the settlement might buy them some time and good will from investors, many of whom were still Greenberg loyalists.
Willumstad also knew that Greenberg was fervent about helping AIG raise capital, and given Greenberg’s deep relationships with wealthy investors in Asia and the Middle East, he could prove to be an asset.
They still had to work out the details, but they had come to an agreement in principle that would resolve the dispute. AIG would turn over $15 million worth of artwork, papers, and property that Greenberg believed was his and AIG would pay for Greenberg to defend himself in the dozens of shareholder lawsuits that had been brought against him. In return, Greenberg would turn over somewhere between 25 to 50 million AIG shares that had been held by Starr International in a trust, and had been at the center of the dispute. In total, the settlement would cost Greenberg as much as $860 million based on AIG’s share price that day, but it would end AIG’s $4.3 billion lawsuit against him, and would reinstall him within the company that he loved so dearly.
With the basics of the settlement agreed, Boies, wearing a blue blazer and casual black Merrill shoes, thanked the other men and suggested that they try to memorialize the arrangement by getting Willumstad and Greenberg in the same room to wrap it up the following week.
“Call me this weekend,” Boies said to them as he turned to leave.
Paolo Tonucci, Lehman’s global treasurer, looked horror-stricken as he set down his cell phone. “I’ve got to talk to you right now!” he said quietly to Bart McDade and Rodgin Cohen. “We’ve got a real problem.”
Everything had been going smoothly at Sullivan & Cromwell’s Midtown offices, where they had been helping Bank of America with its due diligence, but now, as Tonucci revealed, “JP Morgan is pulling another $5 billion in collateral from us! I just got off the phone with Jane Byers Russo [head of JP Morgan’s broker-dealer unit]. She says that we need to wire it by tomorrow. And she might pull another $10 billion by the weekend.”
“What?” Cohen asked, clearly dismayed by the demands. “This sounds unbelievable. I don’t understand this. I know everyone’s in panic mode, but this is too much.”
Tonucci shared the news with his boss, Ian Lowitt, Lehman’s CFO, and the rest of the room.
“This is bullshit,” McGee yelled out, breaking an awkward silence.
Tonucci and Lowitt called Fuld to tell him the news and to set up a conference call with Jamie