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.”
She called the Secret Service to see if they would close down Hamilton Place, for with all the photographers expected to show up, the event could well turn into a zoo. She got a firm no.
At 9:19 a.m., she sent an e-mail to the assistants of all nine Wall Street CEOs, with instructions about what they should do after being dropped off at Fifteenth Street and Hamilton Place: “They should proceed on foot down Hamilton Place to the Gate to enter the building. They will need to show photo id (a driver’s license would be fine).” As she raced through what she needed to get done, West realized that she was missing one last thing. She had gotten the Social Security numbers and dates of birth of everyone but Ken Lewis, which she needed to get him cleared through Secret Service. She tried his office three times, but when no one picked up she decided to call his home. “I just spoke with Mr. Lewis’s wife and have his DOB and SSN,” she wrote moments later to Lewis’s assistant.
To almost no one’s surprise but everyone’s disappointment, news of the secret meeting started to leak. “I guess my invitation got lost in the mail,” Cam Fine, president of the Independent Community Bankers of America, wrote to Jeb Mason, the handsome Texan who was the Treasury Department’s liaison to the business community. “We do represent 5,000 banks with over one trillion in assets,” he wrote, adding a smiley emoticon. “A little financial humor Jeb—laugh a little.”
Despite West’s best efforts, confusion still reigned. “Do you have a list of market participants attending the 3pm meeting?” Calvin Mitchell, head of communications for Geithner, wrote Wilkinson. “Are you guys confirming yet who’s invited?”
Even an hour before the meeting the CEOs were still trying to sniff out what was really up. “Any ideas what the topics will be for the 3pm meeting with the CEOs?” Steven Berry, Merrill’s government relations person, e-mailed Wilkinson. “Thain was asking. Also room number? I will see Thain in about 15 min.”
A little after 2:00 p.m., Ben Bernanke, Tim Geithner, and Sheila Bair assembled in Paulson’s office, their last chance to get on the same page before the big meeting. Paulson, his sleeves rolled up, took up in his usual chair in the corner, slumping just enough to suggest that he was pining for an ottoman. Geithner took the seat next to him; Bair settled on the blue velvet sofa; and Bernanke found a chair across from him. They were about to do what Paulson had been describing as “the unthinkable,” and their tension in the face of it was evident. Paulson himself looked visibly pained.
“Okay,” he said, “has everyone seen the talking points?” Paulson waved the printed page with its half dozen bulleted items before them all, and continued, “Let’s run through this.”
First, he explained, he would introduce everyone. Then, he said, he’d highlight the three pieces of the program: commercial paper; FDIC; and TARP, the acronym that would soon become synonymous with the word “ bailout,” and one that he clearly had a hard time saying.
“Then I’ll hand it over to you guys,” Paulson said, nodding in the direction of Bernanke and Geithner, who then rehearsed their lines about the commercial paper program. “From there, Sheila will take it,” he instructed, still annoyed with her for all of her complaining the night before about the loan-guarantee program.
Finally, they got to the key provision: the equivalent of welfare checks, earmarked for the biggest banks in the nation.
Paulson read the talking point aloud: “To encourage wide participation, the program is designed to provide an attractive source of capital, on identical terms, to all qualifying financial institutions. We plan to announce the program tomorrow—and that you nine firms will be the initial participants. We will state clearly that you are healthy institutions, participating in order to support the U.S. economy.”
They all knew that line was wishful thinking. Bernanke and Geithner had talked earlier in the day about whether the sum would be sufficient to sustain even one troubled bank, Citigroup, the nation’s largest, let alone solve a full-fledged financial crisis. Geithner, for one, had been especially anxious that Citigroup, as he had been saying for weeks, “was next.”
Then they got to the question that Geithner and Paulson had been debating all day: How forceful could they be? Geithner had prevailed upon Paulson earlier to make accepting the TARP money as close to a requirement for the participants as possible. “The language needs to be stronger,” Geithner urged him. “We need to make clear that this is not optional,” Paulson agreed.
The new talking-point language reflected Geithner’s changes. “This is a combined program (bank liability guarantee and capital purchase). Your firms need to agree to both,” it stated. “We don’t believe it is tenable to opt out because doing so would leave you vulnerable and exposed.”
Just to drive home the point, one of the talking points warned, “If a capital infusion is not appealing, you should be aware that your regulator will require it in any circumstance.”