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

Nason and Paulson had been debating the guarantee issue all week. To Nason, it represented the “biggest policy shift in our history.” He told Paulson, “This is an enormous decision. It must be debated in front of everyone so that everyone’s nodding their heads in agreement.”

At one of the meetings that weekend, Geithner, who supported the guarantee, debated the issue with Nason, who played devil’s advocate but also had his own misgivings about the larger implications of the government’s effectively providing an unlimited backstop for an entire industry.

Still, Geithner finally prevailed, and Bair agreed to the plan.

The final piece of business would be to coordinate how they could invite the banks to Washington and what would be the best way to encourage them to accept the TARP money. There was agreement that if they could assemble all the CEOs in one room, the peer pressure would be so great that they’d be inclined to go along with the proposal.

After deciding on a list of prospective banks, it fell to Paulson to call them. (He had gotten out of making the calls for the Lehman weekend, so it was his turn.)

At 6:25 p.m. he returned to his office and began reaching out. His message was simple. He would tell the CEOs to come to Washington, but he would do everything he could to avoid providing any specific details about the reason for the invitation.

Lloyd Blankfein, at a client dinner Sunday night at the Ritz-Carlton in Washington for the International Monetary Fund weekend, made eye contact with Gary Cohn, and they both walked to the corner of the room.

“Hank just called,” Blankfein said in a hushed tone, “and told me I have to be at Treasury tomorrow at three p.m.”

“For what?” Cohn asked.

“I don’t know.”

“What did he tell you?” Cohn said, confused.

“I pushed him, trust me, I pushed him,” Blankfein replied. “The only thing he told me is I’d be ‘happy.’ ”

“That scares me,” Cohn said.

“I knew it would really warm the cockles of your heart,” Blankfein said with a laugh.

Ken Lewis was in his kitchen at his home in Charlotte on Sunday night, getting ready for dinner, when Paulson called.

“Ken,” Paulson said with no introduction. “I need you to come to Washington tomorrow for a meeting at three p.m.”

“Okay,” Lewis said. “I’ll be there. What’s this about?”

“I think you’re going to like it,” Paulson said, so vaguely that Lewis knew not to follow up.

At 7:30 a.m. on Monday, October 13, 2008, Rob Kindler was sitting in a conference room at Wachtell Lipton. He looked like hell, unshaven and still in his vacation khakis and flip-flops. He hadn’t slept in at least a day. He had come to Wachtell to personally pick up the check that he understood Mitsubishi would be delivering. With John Mack in Washington, it was left to him to complete the deal. He was somewhat anxious, for even though Mitsubishi had agreed to all the terms of the deal, he had never seen a physical check with nine zeros on it. He didn’t even know if it was possible. Maybe it would come as several checks?

Kindler was expecting a low-level employee from Mitsubishi to deliver the final payment when he learned from Wachtell’s receptionist that a contingent of senior Mitsubishi executives, dressed in impeccable dark suits, had just arrived in the building’s lobby and was on its way upstairs.

Kindler was embarrassed; he looked like a beach bum. He ran down the hall and quickly borrowed a suit jacket from a lawyer—but as he was buttoning the front he heard a loud tear. The seam on the back of the jacket had ripped in half. The Wachtell lawyers could only laugh.

Takaaki Nakajima, general manager for the Bank of Tokyo-Mitsubishi UFJ, along with a half dozen Japanese colleagues, arrived for what they thought was going to be a deal-closing ceremony.

“I didn’t know you were coming,” Kindler said apologetically to the bemused Japanese. “If I did, I would have had John Mack here.”

Nakajima opened an envelope and presented Kindler with a check. There it was: “Pay Against this Check to the Order of Morgan Stanley. $9,000,000,000.00.” Kindler held it in his hands, somewhat in disbelief, clutching what had to be the largest amount of money a single individual had ever physically touched. Morgan Stanley, he knew, had just been saved.

Some of the Japanese started snapping pictures, trying their best to capture the eye-popping amount on the check.

“This is an honor and a great sign of your faith and confidence in America and Morgan Stanley,” Kindler said, trying to play the role of statesman in his disheveled state. “It’s going to be a great investment.”

As the Japanese group turned to leave, Kindler, grinning from ear to ear, tapped out a BlackBerry message to the entire Morgan Stanley management team at exactly 7:53 a.m.

The subject line: “We Have The Check!!!!!!”

The body of the message was two words:

“It’s Closed !!!!!!!!”

CHAPTER TWENTY

“Secretary Paulson’s office. Please hold, ” Christal West said into her phone from outside Hank Paulson’s office.

It was only 8:00 a.m., but she was already overwhelmed with calls. Paulson’s decision to invite the “Big 9” Wall Street firms to Washington, without giving them any hint of what the agenda might be, wasn’t going over particularly well.

“Nick Calio just called me,” she typed in an e-mail to Paulson’s inner circle of advisers, referring to Citigroup’s top lobbyist. “I told him what I told Thain’s office—that he should come and that no other information would be given out ahead of time … and that everyone had confirmed their attendance with HMP last night.”

Heather Wingate, another Citigroup lobbyist, was on the phone, likewise trying to determine the purpose of the meeting. She had just received an e-mail from her boss, Lewis B. Kaden, a vice chairman at Citigroup, asking her to “find out as soon as possible what Paulson’s invite to VP [Vikram Pandit] for meeting at Treasury this afternoon is about? If this is a briefing of industry group, I don’t think VP can go back to DC. If it is something else we need to know.”

Ah, Pandit! Paulson’s assistant knew just how her boss felt about him: He could be a difficult one.

Jeffrey Stoltzfoos, a senior adviser at Treasury, took Wingate’s call, and immediately followed up with another e-mail to the team, complaining, “Apparently Vikram is trying to decide whether to come to DC or send someone in his place. I did not offer additional information to Heather, but I did let her know that we would call her or someone else within Citi to discuss.”

Wall Street executives weren’t the only ones who were confused invitees; the White House, too, was left out of the loop about the details of Paulson’s summons. “Is it one meeting or nine meetings?” Joel Kaplan, White House deputy chief of staff for policy, asked Jim Wilkinson by e-mail.

The gathering “will be a large meeting but also expecting smaller break-out meetings to make the case,” Wilkinson replied minutes later from his BlackBerry.

It fell on West to see to it that all went smoothly. This was perhaps the most important meeting in history that had ever been held at the Treasury Building, and she was the coordinator. She shot an e-mail message down to Stafford Via, a senior adviser at Treasury: “We do need to figure out logistics. I think we need someone down outside the gate and just inside the door to direct them up to the 3rd Floor. Also, we can use the small conference rooms and diplomatic reception room for hold rooms if needed.”