Andrew Sorkin - Too Big to Fail - The Inside Story of How Wall Street and Washington Fought to Save the FinancialSystem--and Themselves

“Even if you gave it to me, I couldn’t do it,” Dimon continued, explaining that he thought the deal would cost the bank $50 billion and countless job losses.

“I don’t want to do it, and John doesn’t want to do it,” Dimon told him.

“Well, I might need you to do it,” Paulson persisted.

A few moments of silence passed until Dimon relented, but only slightly. “We’ll consider it, but it’s going to be tough,” he said.

The tension inside Morgan Stanley’s board meeting was becoming untenable. Roger Altman, the banker from Evercore who had been hired just twenty-four hours earlier to advise them, was telling them that they needed to think hard about selling the entire firm. He had painted a doomsday scenario, and it wasn’t sitting well with several directors in the room, who had become convinced that Altman was trying to get them to do a deal simply so that he could collect a big fee.

During a break, Roy Bostock spoke with C. Robert Kidder, the firm’s lead director: “We ought to fire that guy right now. Get him out of here. He is not helping.” Others were concerned that given his close ties to the government—he was the former deputy Treasury secretary and was still considered very well connected—that he might leak information about the firm’s health back to them. That, they thought, would explain why Geithner was putting so much pressure on Mack to do a deal. Though they did not know it, Altman had sent an e-mail to Geithner the night before telling him that he had gotten the assignment to work for Morgan, but he had not disclosed any of the details of the meeting.

Whether it was paranoia or just a lack of sleep, the discussion was becoming heated. Mack, who hadn’t been consulted when Altman was hired, was even more upset about his being there than some of the board members. “I don’t trust him,” Mack announced after he kicked Altman out of the board meeting temporarily. He said he thought they should be using Morgan Stanley’s own bankers to advise them if they really were going to sell the firm. He also told them he was worried about revealing the details of Morgan Stanley’s negotiations with Mitsubishi in front of Altman, reminding the directors that Evercore had a partnership with Mizuho Financial Group of Japan, one of Mitsubishi’s rivals.

“I don’t know what this guy is up to,” he said.

Geithner, still holding court from his office downtown, had become convinced that Morgan Stanley would fail if it didn’t complete a deal by the time the markets opened on Monday. He had threatened Mack earlier in the day that he would deny his request to become a bank holding company unless he found a sizable investment or merged. “Being a naked bank holding company won’t do it,” he warned. Like Paulson, Geithner thought Mack was misguided in his belief that Mitsubishi would come through for them in time. “What’s your Plan B? You need a Plan B,” he had nearly screamed into the phone.

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.