Too Big to Fail - Andrew Ross Sorkin [261]
Not everyone at the Fed was in agreement with Geithner’s insta-merger strategy, however. So unpopular was Geithner’s single-mindedness about merging banks that afternoon that some CEOs began referring to him as “eHarmony,” after the online dating service. “If we sell one more of these guys for a dollar,” Kevin Warsh complained, “this whole freakin’ thing is going to come undone
At about 3:30 p.m., John Mack’s assistant, Stacie Kruk, announced that Secretary Paulson was on the line. Mack took the call on the phone next to his couch. The New York Giants versus the Cincinnati Bengals game was playing on the TV behind him.
“Hi, John. I’m on with Ben Bernanke and Tim Geithner, we want to talk to you,” Paulson said.
“Well,” Mack said, “since you’re all on the line, can I put my general counsel on?”
Paulson agreed, and Mack hit the speakerphone button after the television was muted.
“Markets can’t open Monday without a resolution of Morgan Stanley,” he said in the sternest way he knew. “You need to find a solution, we want you to do a deal.”
Mack just listened, dumbstruck.
Bernanke, who was usually remote and silent in such situations, cleared his throat and added, “You don’t see what we see. We’re trying to keep the system safe. We really need you to do a deal.”
“We’ve spent a lot of time working on this and we think you need to call Jamie,” Geithner insisted.
“Tim, I called Jamie,” Mack replied, clearly exasperated. “He doesn’t want the bank.”
“No, he’ll buy it,” Geithner said.
“Yes. For a dollar!” Mack exclaimed. “That makes no sense.”
“We want you to do this,” Geithner persisted.
“Let me ask you a question: Do you think this is good public policy?” Mack asked, clearly furious. “There are thirty-five thousand jobs that have been lost in this city between AIG, Lehman, Bear Stearns, and just layoffs. And you’re telling me that the right thing to do is to take forty-five thousand to fifty thousand people, put them in play, and have twenty thousand jobs disappear? I don’t see how that’s good public policy.”
For a moment, there was silence on the phone.
“It’s about soundness,” Geithner said impassively.
“Well, look, I have the utmost respect for the three of you and what you’re doing,” Mack said. “You are patriots, and no one in our country can thank you enough for that. But I won’t do it. I just won’t do it. I won’t do it to the forty-five thousand people that work here.”
With that, he hung up the phone.
At Goldman Sachs the mood was slightly less tense. “We’re getting bank holding company,” Blankfein, having just spoken with Geithner, announced as Cohn walked into his office. “It’s going to happen.” When the Federal Reserve faxed over the draft of the press release, he could see that one other institution, which was purposely left blank, would be granted the same status. That must be Morgan Stanley, he thought. His Friday morning call to Mack must have worked.
Cohn, sitting down on Blankfein’s couch, picked at an omelet, having not touched food all day. He could finally smile. They were finally out of the woods. Now all they needed to do was have the directors sign off on the execution of the application. They had set up a conference call with the entire board to start in five minutes.
When everyone was assembled on the line, Blankfein began, “I’ve finally got good news…”
When Gao returned to Morgan Stanley late that afternoon, he learned that the firm was engaged in merger talks with Mitsubishi. He had thought something was amiss earlier, because Mack had slowed down the negotiations, but he couldn’t believe Mack was about to do a deal with the Japanese! He thought the U.S. government had already blessed an agreement with CIC, based on Paulson’s conversation with Vice Premier Wang Qishan the night before. Furious, he pulled his entire team from the conference room and marched out of the building without even saying good-bye.