Too Big to Fail - Andrew Ross Sorkin [250]
“I spoke to Kevin, and he said to give you a call,” Steel began when he got through to Blankfein.
This call, unlike the Citibank fiasco, had been prewired. “Yes, I know,” Blankfein said. “We’d be interested in putting a deal together.”
Steel told Blankfein he was about to step onto Wachovia’s corporate jet and could be in New York by late that afternoon.
As his plane headed for the East Coast, Steel mused how a deal with Goldman would be something of a homecoming, even if it had come as a direct order from the government. Perhaps he could even wangle the chairman title.
Jamie Dimon had been hoping to be able to take his first day off in two weeks. That was until Geithner called him early Saturday morning and instructed him—the president of the New York Federal Reserve seldom suggested anything—to start thinking about whether he’d like to buy Morgan Stanley.
“You’ve got to be kidding me,” Dimon replied.
No, Geithner said, he was quite serious.
“I did Bear,” Dimon objected, referring to buying Bear Stearns. “I can’t do this.”
Geithner ignored his answer. “You’ll be getting a call from John Mack,” he said and hung up the phone.
Mack, who had had a similar peremptory call from Geithner, phoned Dimon five minutes later. Dimon reiterated that he didn’t want to buy Morgan Stanley, which he had already told Mack earlier in the week. But Dimon was under orders to try to help Mack, so the two rivals talked about whether JP Morgan could offer Morgan Stanley a credit line that might give it some breathing room. Dimon said he’d think about it and get back to him with a decision.
As soon as he got off the phone with Mack, Dimon called Geithner. “I talked to John,” he said. “We’re talking about getting him a credit line.”
“I don’t know if that’ll be enough,” Geithner said, frustrated at the news. His order had not been explicit, but he hinted heavily that the Federal Reserve very much wanted the two firms to form a union and wasn’t the slightest bit interested in any temporary measures.
Dimon immediately sent an e-mail to his operating committee, summoning them to the office, and within an hour, dressed in golf shirts and khakis, they had assembled in a conference room on the forty-eighth floor.
Dimon had a grimace on his face as he related the call he’d received from Geithner. Merging the “Houses of Morgan” was not a new idea but hadn’t come up in any serious fashion since June 20, 1973, when Morgan Stanley, JP Morgan, Morgan Guaranty, and the British Morgan Grenfell held a top secret meeting in Bermuda, code-named “Triangle,” at the Grotto Bay Hotel.
On a whiteboard Dimon used a black marker to sketch out what he had been thinking. “We can either buy them, buy part of them, or give them some type of financing.”
For the next two hours they went around in circles, considering their options. What parts of Morgan Stanley could be spun off? What parts could be warehoused (the term for buying a property, keeping it relatively intact if not in fact making it healthier, and then selling it later, when the market recovered)? Maybe they could buy Morgan Stanley, Dimon suggested aloud, and then create a new tracking stock for it?
But all these scenarios wound up circling back to the same problem: What, exactly, would they be buying? The overlap between the firms was enormous. And what were Morgan Stanley’s toxic assets really worth? These were all but unanswerable questions at that time.
John Hogan, JP Morgan’s chief risk officer, who had attended the meeting with Lehman Brothers the previous week, stepped out of the operating committee conference room and called Colm Kelleher and Ken deRegt at Morgan Stanley.
“I don’t know exactly what you guys have in mind, but under any scenario where we ‘help you,’ we’re going to need a bunch of information,