Too Big to Fail - Andrew Ross Sorkin [252]
Kelleher had just finished giving a presentation on the firm’s finances, and it was not good. Charles Noski, a director and former chief financial officer of AT&T, asked him point-blank: “When do we run out of money?”
Kelleher paused, and then said somberly, “Well, depending on what happens Monday and Tuesday, it could be as early as middle of the week.”
It was a shot across the bow. If this weekend didn’t go well, they’d all end up the targets of shareholder lawsuits. The independent board members, led by the lead director, C. Robert Kidder, decided they needed to hire an independent adviser and, after a short conversation, chose Roger Altman, the former deputy Treasury secretary and founder of the boutique bank Evercore Partners (and Dick Fuld’s former carpool-mate). He would advise the board on whatever transactions they would be presented with and provide a modicum of cover; in the event that whatever happened over the weekend led to legal battles, at least they would look like they were trying to be responsible.
After Mack came downstairs again Gene Ludwig, Mack’s outside consultant, explained the bank holding concept that they were pursuing. Ludwig said that he believed that Paulson would be motivated to protect them.
“If we go, Goldman goes,” he said, stating the obvious, at least internally, by that point. But then he added a new insight that the board hadn’t considered.
“And then GE will go.”
At Goldman Sachs, two of its top bankers, David Solomon and John Weinberg, had just returned from a morning meeting in Fairfield, Connecticut. They had just met with Jeffrey Immelt, General Electric’s CEO, and Keith Sharon, its CFO.
Seated on Cohn’s couch, Solomon recounted the meeting to him. It was a complicated, and almost comical, situation: Solomon and Weinberg had traveled to Fairfield to advise its client on coping with the financial crisis, beginning with a plan to raise capital. One of Immelt’s primary concerns, however, was what would happen if its adviser, Goldman Sachs, went out of business.
General Electric was more about manufacturing than financial engineering, but roughly half of its profits in recent years had come from a finance company unit called GE Capital. Like most Wall Street firms, GE Capital relied on the short-term paper market and the confidence of investors worldwide, and Immelt was worried how the fate of Goldman and Morgan Stanley might affect it. The meeting ended without much clarity, apart from some preliminary plans to raise capital—and an assurance to Immelt that Goldman was staying in business.
But Cohn was already thinking about Goldman’s talks with Wachovia. Cohn, speaking to Kevin Warsh of the Fed, had agreed to entertain the idea, but only on the condition the Fed would provide assistance; Warsh had said they’d strongly consider it. Cohn believed him: Paulson had spoken with Blankfein and told him to take the talks seriously. “If you go into this looking for all the problems and how much help you’re going to get, it’s never going to happen,” he said, adding, “You’re in trouble and I can’t help you.” In the meantime, Warsh instructed Cohn to make sure they could work out the personal dynamics.
In the meantime, Warsh instructed Cohn to make sure they could work out the personal dynamics.
“Let’s not waste our time on economics if you guys are never going to solve the social issues,” he said. “If you aren’t willing to accommodate them, if Bob’s not willing to do whatever, this isn’t going to happen.”
Steel was scheduled to land at Westchester County Airport in White Plains, a suburb of the city, in only a few hours, and Cohn walked into Blankfein’s office and made a suggestion.
“Lloyd, you should go pick Steel up at the airport,” Cohn said, believing it would be a gracious gesture to kick off the merger talks.
Blankfein