Too Big to Fail - Andrew Ross Sorkin [283]
A little after 2:00 p.m., Ben Bernanke, Tim Geithner, and Sheila Bair assembled in Paulson’s office, their last chance to get on the same page before the big meeting. Paulson, his sleeves rolled up, took up in his usual chair in the corner, slumping just enough to suggest that he was pining for an ottoman: Geithner took the seat next to him; Bair settled on the blue velvet sofa; and Bernanke found a chair across from him. They were about to do what Paulson had been describing as “the unthinkable,” and their tension in the face of it was evident. Paulson himself looked visibly pained.
“Okay,” he said, “has everyone seen the talking points?” Paulson waved the printed page with its half-dozen bulleted items before them all, and continued, “Let’s run through this.”
First up, he explained, he would introduce everyone. Then, he said, he’d highlight the three pieces of the program: commercial paper; FDIC; and TARP, the acronym that would soon become synonymous with the word “bailout,” and one that he clearly had a hard time saying.
“Then I’ll hand it over to you guys,” Paulson said, nodding in the direction of Bernanke and Geithner, who then rehearsed their lines about the commercial paper program. “From there, Sheila will take it,” he instructed, still annoyed with her for all of her complaining the night before about the loan-guarantee program.
Finally, they got to the key provision: the equivalent of welfare checks, earmarked for the biggest banks in the nation.
Paulson read the talking point aloud: “To encourage wide participation, the program is designed to provide an attractive source of capital, on identical terms, to all qualifying financial institutions. We plan to announce the program tomorrow—and—that you nine firms will be the initial participants. We will state clearly that you are healthy institutions, participating in order to support the U.S. economy.”
They all knew that line was wishful thinking. Bernanke and Geithner had talked earlier in the day about whether the sum would be sufficient to sustain even one troubled bank, Citigroup, the nation’s largest, let alone solve a full-fledged financial crisis. Geithner, for one, had been especially anxious that Citigroup, as he had been saying for weeks, “was next.”
Then they got to the question that Geithner and Paulson had been debating all day: How forceful could they be? Geithner had prevailed upon Paulson earlier to make accepting the TARP money as close to a requirement for the participants as possible. “The language needs to be stronger,” Geithner urged him. “We need to make clear that this is not optional.” Paulson agreed.
The new talking-point language reflected Geithner’s changes. “This is a combined program (bank liability guarantee and capital purchase). Your firms need to agree to both,” it stated. “We don’t believe it is tenable to opt out because doing so would leave you vulnerable and exposed.”
Just to drive home the point, one of the talking points warned, “If a capital infusion is not appealing, you should be aware that your regulator will require it in any circumstance.”
They had already tried to game out which of the CEOs would be resistant. Pandit might be tough, but he’d take it, Paulson thought. Dimon was in the bag. Blankfein might get snippy, but he wouldn’t get in the way. Mack needed the money, so that should be easy. Lewis might put up a fight. The biggest wild card was Dick Kovacevich of Wells Fargo: Would he be the one to derail it?
Paulson recounted how much trouble it had been just trying to get him to show up. “I could hardly get him on the airplane,” he told the group, who looked at him with a mixture of amusement and astonishment. “I just said, ‘Listen, the secretary of Treasury, the chairman of the Fed, the FDIC want you here! You better get here!” Everyone laughed, but got right back to business.
“David,” Paulson said, pointing to David Nason, “will walk through the numbers.” And Bob “will go over the comp issues,” meaning the delicate conversation