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

Cohen, who had dealt with Curl over the years but had never been able to take an accurate assessment of him, trod carefully, explaining that he was calling on behalf of Lehman Brothers.

“Do you have any interest in doing a deal? Of all the institutions we’ve been considering, you’d be the best fit,” Cohen said, promising that he could get Fuld on the phone if Curl was curious enough to have a conversation.

Curl, though intrigued to be getting a call on a Saturday night, was noncommittal; he could tell they must be desperate. “Hmm … let me talk to the boss,” he said. “I’ll call you right back.”

The boss was Ken Lewis, the silver-haired CEO of Bank of America, a hard-charging banker from Walnut Grove, Mississippi, who was on a mission to beat Wall Street at its own game. (When he was a child, two boys once ganged up on him; his mother, catching sight of the scrap, came out of the house and said, “Okay, you can fight him, but you’re going to have to do it one at a time.”)

A half hour later, Curl called back to say he’d hear them out, and Cohen set up a three-way call with Fuld through the switchboard at Sullivan & Cromwell.

After some brief introductions—the men had never met before—Fuld began with his pitch.

“We can be your investment banking arm,” Fuld explained, the idea being for Bank of America to take a minority position in Lehman Brothers and for the two to merge their investment banking groups. He invited Curl to meet with him in person to discuss the proposal further.

Curl, sufficiently intrigued, said he would fly up from Charlotte to New York on Sunday. While Fuld thought it odd that he wasn’t negotiating directly with Ken Lewis, there was a compelling reason for Curl to travel alone: Lewis could legitimately deny that he had ever spoken with Fuld, should the discussion leak.

Before signing off, Curl made certain to underscore his greatest anxiety: “We want to be absolutely sure this is confidential.”

At midmorning on Sunday, David Nason and Kevin Fromer were sitting on the couch in Nason’s office at Treasury, going over a draft of the proposal to petition Congress for the authority to inject money into Fannie and Freddie in the case of an emergency. The office was littered with sandwich wrappers and bags from nearby Corner Bakery Café. Most of the staff had been working since early Saturday morning and had gone home only to grab a few hours of sleep. The proposal had to be ready by 7:00 p.m.

Suddenly, Paulson walked into the office with a look of horror on his face and, holding up a page of the draft, bellowed, “What the fuck is this ? ‘Emergency authority on a temporary basis?’ Temporary? ” he said, almost shouting. “We are not going to ask for temporary authority!”

The draft provided for emergency authority for a period of eighteen months, the rationale for which Fromer, who was Treasury’s liaison to lawmakers, leaned forward and attempted to explain. “Look, you can’t ask Congress for permanent—”

Paulson rarely allowed himself to show his anger, but he now made no attempt to restrain it as he paced the room.

“First of all, this is my judgment to make, not yours,” he said. “Secondly, this is a half measure. I am not leaving my successor with the same shit that I’ve got. We are going to fix these problems. I am not pushing this crap down the road.”

Nason’s cell phone rang. “Tim!” he shouted, checking the caller ID, before realizing he was interrupting Paulson’s soliloquy. Tim Geithner had been calling for updates nearly every hour.

Nason and Fromer tried again to calm Paulson down. They reiterated that it would be much more palatable politically to say that they were asking for temporary powers rather than permanent ones. And, as Fromer told him, “It’s a distinction without a difference,” explaining that during the period they had the authority, they could still make decisions that would be permanent.

Paulson, starting to recognize the value of the political calculus, relented. He told them to keep working on it and walked out as abruptly as he’d walked in.

Greg Curl, dressed in a blazer and slacks, arrived at Sullivan & Cromwell’s Midtown offices in the Seagram Building on Sunday afternoon, having flown up to New York from Charlotte that morning on one of the firm’s five private jets.

Taking a seat in the empty reception area, he waited for Fuld and Cohen to appear, uncertain about how fruitful the meeting could possibly be. While “The Boss” may have wanted to conquer the commercial banking world, he had an aversion to the fast-money investment banking business. “No, we wouldn’t use our petty cash to buy an investment bank,” he’d dryly said just a month earlier. Almost a year before, his own investment banking business, long considered an also-ran, showed a stunning 93 percent plunge in profit in its third quarter. At the time, Lewis had remarked that he “had had about all the fun he could stand in investment banking right now.”

Curl was soon escorted to a conference room, where he paid careful attention as Fuld walked him through his idea in greater detail. He wanted to sell a stake of up to a third of Lehman Brothers to Bank of America and merge their investment banking operations under the Lehman umbrella.

As Curl listened, he was dumbfounded, though characteristically gave no sign of what he was thinking. Far from the plea for help he had been expecting, the pitch he was hearing struck him as a reverse takeover: Bank of America would be paying Fuld to run its investment banking franchise for it.

Fuld also suggested that any investment would “ boost our stock price” overnight, creating even more value for Bank of America. He rationalized that buying a stake in Lehman—as opposed to buying the entire firm—would provide incentive for the firm’s savvy bankers to stay in their jobs. “You’re not going to be able to keep these people if they can’t see a financial upside,” he argued, making a relevant point about most full-bank mergers—namely, that the talent usually cashes out and leaves.

Curl nodded appreciatively throughout the presentation, before finally stating that the boss—Lewis—would be interested in entertaining the prospect of a deal only if he had a clear path to taking control of the firm in a reasonable amount of time.

Cohen, interjecting on behalf of Fuld, suggested that they should think about a time frame of two to three years, depending on how successful the investment was.

That was more along the lines of what Curl wanted to hear. He told them he was intrigued, but that he and Lewis had often disagreed about whether they should acquire an investment bank or continue buying up other commercial banks. “I don’t like the retail business,” Curl confided, “because of the susceptibility of litigation and attorneys general and regulators.

“I’d prefer a deal with you,” he continued, “but to be honest, Ken would probably prefer to buy Merrill or Morgan.”

Fuld was confused. What was Curl signaling?

“So do you think we have something here?” Fuld asked.

“I don’t know,” Curl said. “I need to talk to the boss. It’s obviously his decision.”