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

“Jamie, we’re going to get downgraded,” he told him. “You need to help me figure out how to get $18 billion. There’s no plan for the end of September anymore,” he added, referring to his plan to announce the results of his firmwide review and a new strategy at the end of the month. He stopped to let that sink in and then continued, “You know, if you guys can’t help us, tell me now, but we’ve got to do something this weekend. We hired you guys to do this,” he said, his voice rising ever so slightly. “Listen, just tell me if you can’t, just tell me now.”

“Look, we want to make this work,” Dimon said, sounding a contrite note. “Give me five minutes and I’ll call you back.”

When he phoned back he apologized on behalf of the firm and said that he would take Black off the case; his other lieutenant, Doug Braunstein, who ran the firm’s investment banking practice, would now be in charge. Braunstein, a no-nonsense deal maker, had been entrusted with some of the firm’s biggest transactions after working his way up the ranks, initially at First Boston in the 1980s, and then at Chase. He helped negotiate the firm’s acquisition of JP Morgan, its purchase of Bank One (bringing Dimon with it), and then the Bear Stearns deal. “We’re going to send Braunstein down with the team, and we’re going to see what we can do about raising capital for you over the weekend.” Dimon promised him that he’d keep “the trains on the tracks.”

As he ended the conversation with Dimon, another call came in—Tim Geithner, who was finally getting back to Willumstad.

“So, where are we?” Geithner asked.

“We’re working on a capital raise,” Willumstad explained. “And we’re talking to some bidders for assets that may come in this weekend. We expect to have some more information later in the day.”

“We’re going to send over some of our market guys this morning to help,” Geithner told him in a tone that made it clear that this was not an offer but an order. “Keep me posted,” Geithner said before hanging up.

The conversation had lasted no more than thirty seconds.

By now Hank Paulson had become so agitated by the problems at Lehman that he scarcely noticed his assistant, Christal West, trying to get his attention. Alistair Darling, the chancellor of the Exchequer of Britain, was on the line.

Paulson had gotten to know Darling over the past two years, and though they had visited each other on both sides of the Atlantic, they had not grown close. Paulson considered Darling more a politician than a businessman, and he had nothing like the experience that Paulson himself had had in financial markets. But he respected Darling’s judgment and admired the quick and decisive action he had taken a year earlier when Northern Rock, one of Britain’s biggest mortgage lenders, was on the brink of failing. Darling has prevented a run on the bank by authorizing the Bank of England to lend Northern Rock billions of dollars to guarantee its deposits. That incident had been an early wake-up call for Paulson.

Darling, who had just ended a daylong meeting in Nice with other European finance ministers, made a bit of chitchat and, after an awkward pause, said that he was calling about Barclays. “You should know that we have serious concerns about this deal,” he told Paulson sternly.

Paulson tried to assuage him, explaining that there was another bidder, Bank of America, involved in the matter as well. He also spoke about the systemic importance of Lehman Brothers to the global economy and stressed how a deal between Barclays and Lehman would turn Barclays into an international giant with the might of Wall Street behind it. Paulson explained that he was trying to put together an industry consortium to aid a bid by either Barclays or Bank of America.

Nonetheless, with characteristic British understatement, Darling continued to express apprehension about any potential purchase and said adamantly, “Barclays shouldn’t take on any more risk than they could possibly manage.”

Paulson, confidently dismissing his concerns, promised him he’d keep him updated throughout the weekend.

Bob Diamond arrived at Lehman’s headquarters in Fuld’s Mercedes and was taken through the back entrance, avoiding the battalion of cameras stationed out front. Hoping to keep any of Lehman’s staff from seeing the visitor, the firm’s security team shuttled him up in the building’s freight elevator and hurriedly led him to Fuld’s office.

Fuld offered him a cup of coffee, and between Fuld’s anxiety and Diamond’s not having slept, they both looked like hell.

Diamond was clearly in a rush to get to Simpson Thacher, where his team of bankers had just begun diligence, and he wanted to dig into the numbers himself. He walked Fuld through the day’s plan and then discussed the various synergies and overlaps between the two firms.

In the middle of Diamond’s presentation, Fuld interrupted him and told him there was something he wanted to get off his chest. An almost frightening intensity came over him as he began to speak.

“Look into the whites of my eyes,” he said. “There isn’t enough room for both of us at the top here. We both know that.” He paused and stared at Diamond intently. “I’m willing to step aside to make this work for the firm.”

For Fuld, it was the biggest concession he could offer: to give up the firm he loved.

For Diamond, the moment was somewhat baffling. He had never imagined Fuld would stay; he didn’t want him to.

“If there’s a way for me to help with a transition, help with clients, you know, I will do that,” Fuld offered.

“I’ve always heard you were a good man,” Diamond told Fuld consolingly. “Now you’ve proven that.”

After a twenty-minute crawl through traffic on the FDR Drive, Chris Flowers finally arrived at AIG’s offices just before noon. He was led to a meeting room where Willumstad, Schreiber, Steven J. Bensinger (the firm’s CFO), and a team of others were waiting. Schreiber immediately passed around a one-page summary of the firm’s cash outflows that was set up like a calendar: Each day from Friday through the next Wednesday was marked with various scenarios, depending on the outcome of Moody’s decision about its credit rating. If the executives hadn’t yet come to appreciate the full extent of the conundrum in which they now found themselves, Schreiber’s document put it into stark relief. By next Wednesday, the calendar indicated, the parent company would be negative $5 billion, with the shortfall each successive day only growing worse.

Flowers’s eyes widened as he studied the numbers. “You guys have a real problem here.”

“Yes. But we should be okay if we can make the capital raise work,” Willumstad said.

“Have you guys thought about Chapter 11?” Flowers blurted out. It was as if he had touched the third rail.

“Why are you using words like that?” Bensinger asked, clearly upset.

“Um, I can assure you,” Flowers told him, “that if you don’t pay people $5 billion on Wednesday, they’re going to be really, really upset, so you can call it whatever you want, but they are not going to be happy if you don’t pay them on Wednesday.”