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

At about 2:20 p.m., just as Lehman’s shares fell another 6 percent to $3.59, Hank Paulson, visibly frazzled, ran downstairs and out of the Treasury Building to head to the airport. Dan Jester, Jim Wilkinson, and Paulson’s assistant, Christal West, jumped in his Suburban with him. Christopher Cox was planning to meet them at the airplane.

On a call just hours earlier, he and Geithner had officially determined that something needed to be done about Lehman.

If they really were going to convene all the CEOs on Wall Street and try to urge them to come up with a private-market solution, now was the time to do it. Otherwise, by Monday, Lehman would be unsalvageable. “We have the weekend,” he reminded them.

They settled on setting up a meeting at 6:00 p.m. at the New York Fed. Geithner’s office wouldn’t start calling all the CEOs until just past 4:00 p.m., after the market had closed. The last thing they could afford was for news of the meeting to leak.

Paulson, who usually made the trip to New York on US Airways, which offered a government discount—Wendy had always given him grief about flying in a private jet—arranged to charter a plane to New York, using his NetJets account. He couldn’t afford to be delayed; the matter at hand was too important, and the weather was atrocious. If anything, he was worried the plane wouldn’t even be able to take off.

As they sped toward Dulles to catch the flight, Paulson, almost inaudibly, said, “God help us.”

CHAPTER FOURTEEN

Lloyd Blankfein was milling about the greenroom at the Hilton Hotel on Fifty-third Street at Sixth Avenue, waiting to make a speech at the Service Nation Summit, an annual conference coordinated by a coalition of nonprofits that promotes volunteerism in America. Dressed in his customary blue suit and pressed white shirt and blue tie, he had come to give one of the keynote addresses—following Governor Arnold Schwarzenegger and preceding Hillary Clinton—to discuss Goldman’s 10,000 Women nonprofit program, which fostered business and management education for women in developing and emerging economies.

Clinton, who had been at the other side of the greenroom returning phone calls, now strolled over to him and politely asked if she might speak before him; she had to get to a dinner, she explained. Blankfein was a big fan; he had given her some $4,600 in donations and had endorsed her in the Democratic primaries over Barack Obama. Since he had no pressing business himself, Blankfein gladly agreed to the switch.

Two minutes later, however, Blankfein’s cell phone rang. “We got a call from the Fed. There’s a meeting at six p.m. for all the bank CEOs,” his assistant told him, sounding simultaneously excited and nervous. “Paulson, Geithner, and Cox are supposed to be there.”

This is it, Blankfein thought. The big one. Paulson was going to have “the families” meet to try to save Lehman.

Blankfein looked at his watch. It was already getting close to 5:00 p.m., Schwarzenegger was still chattering away, and he had just given his spot away to Clinton.

He tried to reach Gary Cohn, Goldman’s co-president, to find out what was going on but didn’t get an answer—Cohn was likely still on the shuttle back from D.C. after testifying at a hearing for the Committee on Energy and Natural Resources.

Blankfein sheepishly walked over to Clinton. “Remember I told you that you could go ahead of me?” he asked. “Well, I have an emergency. I just got a call that I have to go to the Fed.”

Clinton looked at him as if she didn’t understand what he was saying.

Embarrassed, he tried to explain: “They usually don’t call me up when it’s something really pleasant, since they’ve done this a total of never.”

She half smiled sympathetically and let him speak first.

Jamie Dimon could hardly believe his bad luck. He was supposed to be home by 7:00 p.m. to have dinner with his daughter Julia’s boyfriend’s parents, whom he and his wife were meeting for the first time. Julia, his eldest daughter, had been begging her father all week to be on his best behavior and to make a good impression. And now the Fed was calling an all-hands-on-deck meeting of Wall Street’s top brass.

Dimon called his wife, Judy, who was well accustomed to receiving calls like this from her husband. “Geithner’s called us down to the Fed,” Dimon told her. “I don’t know how long it’ll go. I’ll try to get there as soon as I can.”

Dimon hung up the phone and hurried down the hallway to tell Steve Black the news. Black had just confirmed his plans to play in a tournament at the Golf Club of Purchase in Westchester, teeing off the next morning at 7:00.

“We’re going down to the Fed,” Dimon told him.

“You’ve got to be fucking kidding me,” he replied.

Black immediately called the Purchase club back. “Sorry,” he said with a weary sigh, “I was only kidding. Take me out.”

Brian Moynihan, Bank of America’s president of global corporate and investment banking, was reviewing some of Lehman’s asset valuations at Sullivan & Cromwell’s Midtown offices when Ken Lewis phoned from Charlotte.

“We got a call from Geithner’s office,” Lewis told him. “You have to go down to the Fed. They’re going to do a meeting to figure out what to do about this whole situation.”

Moynihan rushed downstairs, bolted without an umbrella through the revolving doors and into the pouring rain, and commandeered one of Sullivan & Cromwell’s Town Cars to take him down to the New York Federal Reserve.

Just as the car was making its way into Park Avenue traffic and he dried himself off, Moynihan’s cell phone rang again.

“There’s been some crossed wires, Mr. Moynihan,” one of Tim Geithner’s assistants told him. “I know we had invited your firm to this meeting—”

“Yes, I’m on my way down right now,” he assured her.

After a brief pause she said, “Given your bank’s role in the merger discussions, we believe it would be inappropriate for you to attend the meeting.”

Moynihan had gotten no farther than eight blocks before turning around and calling Lewis to tell him the news.

John Mack and Colm Kelleher, Morgan Stanley’s chief financial officer, were sitting in the backseat of Mack’s Audi, having hurried to the car just ten minutes earlier after Mack’s secretary had instructed them to get down to the Fed as soon as possible. “This must be Lehman,” Kelleher had said as they rushed out.

Not only was the rain pelting the roof furiously, but they were now sitting in bumper-to-bumper traffic on the West Side Highway, still miles away from their destination.

“We’re not fucking moving,” Mack said, repeatedly checking his watch.

“We’re never going to get there,” Kelleher agreed.

Mack’s driver, John, a former police officer, noticed the bicycle lane running alongside the highway—a project of the Bloomberg administration to encourage walking and cycling.