Most of the bankers in the room rolled their eyes at the sentiment, as they regarded Cox as a lightweight and would later describe him as “cryogenically frozen.”
The conversation quickly turned to both the philosophical and the practical as the bankers talked over one another.
“I assume we are going to talk about AIG?” Vikram Pandit of Citigroup asked, as the room grew quiet.
Geithner shot him a harsh look. “Let’s focus on Lehman,” he said firmly, trying to avoid losing control of the meeting.
“You can’t deal with Lehman in isolation,” Pandit persisted. “We can’t find ourselves back here next weekend.”
Dimon jumped in. “We’re there at AIG, our team is there,” he said, explaining that JP Morgan was advising the insurer, and suggesting that they were working to find a solution.
“You know, Jamie,” Pandit replied brusquely, “we’ve got a team there, too, and I don’t think it’s as under control as you think.”
Pandit and Dimon continued to trade barbs, and the mounting tension began to remind many in the room of a conference call that Geithner had coordinated among the big-bank CEOs the night that JP Morgan acquired Bear Stearns. “Stop being such a jerk,” Dimon had yelled at Pandit then when he questioned him about Citi’s exposure to Bear, now that he had bought the firm.
Geithner insisted that the Fed had AIG under control and again attempted to move the conversation along. What remained unacknowledged was that JP Morgan and Citigroup, as advisers to AIG, were the only parties in the room that had any true appreciation for the depth of the problems that the firm faced.
Thain, whose bank was likely the next to fall, as everyone in the room understood all too well, remained notably silent during the exchanges.
Before ordering the roomful of bankers to get their teams together and be back at the Fed by 9:00 the next morning, Paulson made one last pitch that to many in the room sounded more like a threat: “This is about our capital markets, our country. We will remember anyone who is not seen as helpful.”
The room emptied as the bankers left, expressionless and mute, dumbstruck at the magnitude of the work that lay before them.
John Mack pulled out his cell phone the moment he left the New York Fed Building to report back to the office.
“Guys, it’s going to be a long night,” he told his lieutenants, James Gorman, Walid Chammah, and Paul Taubman, and ordered them to prepare for Lehman to go under. “We’re going to need lots of bodies this weekend.” The Morgan Stanley bankers had two related tasks: self-preservation and helping the Fed. They’d once again have to review the extent of their exposure to Lehman, looking through their derivatives book and also examining their clients’ exposures to Lehman. Investment banking, meanwhile, should start looking through Lehman’s client list to see whom they could pick off. A board call would have to be arranged to keep everyone updated. Another team would have to run numbers on Lehman’s asset values. They would finally get a chance to see Lehman’s finances; if nothing else, it could prove to be an interesting education.
Mack directed his driver to his favorite Italian restaurant, San Pietro, to pick up some food for the team, who would need to be fortified for the sleepless night they all faced. Everyone would have to start acting like a first-year analyst.
Upon leaving the meeting, John Thain, who had been joined at the meeting by his colleague Peter Kraus, immediately phoned Peter Kelly, the firm’s deal lawyer, and told him to be at the Fed on Saturday. He followed up with a call to Greg Fleming as his Yukon made its way up the Merritt Parkway; he had planned to have dinner with his wife and two friends and was already an hour late. “It’s a food fight down here,” Thain told Fleming. “It looks like Lehman isn’t getting saved.”
As he related, with surprise, how Paulson had refused to offer any government help, he knew how Fleming was going to respond.
“We have to start thinking about ourselves. We have to think about our options,” Fleming said. “Really, John. We’re going to run out of time.”
Thain, still noncommittal, said only, “Let’s go get some sleep, and we’ll talk in the morning.”
When Thain finally arrived for his dinner engagement at Rebecca’s restaurant in Greenwich, he saw Steve Black of JP Morgan, who had been on his cell phone for the past half hour with the firm’s management team, standing out front, still talking. As it happened, he was in the middle of a conversation speculating about what might happen to Merrill Lynch.
Black, who was aghast to see Thain—His company is next! What’s he doing here?—nonchalantly greeted him with, “Great minds think alike.”
“Yeah, but I was supposed to meet another couple and my wife, and they’ve been sitting here for the last two hours,” Thain replied.
“At least I called,” Black said with a laugh.
As Thain went inside, Black returned to the conference call. “You’re never going to believe who I just ran into …”
At Lehman’s headquarters, a stunned and livid Dick Fuld had just gotten off the phone with Bart McDade, who had the unenviable task of informing the CEO that a meeting had been held down at the Fed about his company, and that he hadn’t been invited.
Rodgin Cohen had been notified by the Fed to instruct McDade to bring a team down to the Fed on Saturday morning—and had explicitly warned him not to bring Fuld, explaining, “The Fed doesn’t want him down there.”
Trying to soften the blow, McDade prevaricated: He told Fuld that there would be a lot of grunt work to do downtown, and that his time would be better spent manning the office so that he could remain in constant contact with the regulators and his CEO brethren. What he didn’t relay to Fuld, of course, was that they would all be together at the Fed in person.
As he ended the call with McDade, Fuld had another reason to be furious when he realized that he hadn’t heard back from Ken Lewis all day, and it was already past 9:00 p.m. Bank of America’s diligence teams over at Sullivan & Cromwell had left hours earlier, and from what he had heard, their body language suggested they weren’t leaving just for the night.
“I can’t believe that goddamn son of a bitch won’t return my call,” Fuld complained to Russo. Fuld had phoned him at least a half dozen times, sometimes not leaving a voice mail for fear of seeming desperate. He thought Lewis had practically shook his hand over the phone just twenty-four hours earlier; where the hell had he gone?
Enough was enough. Fuld swallowed his pride and dialed Lewis’s home in Charlotte.
Lewis’s wife, Donna, picked up in the kitchen.
“Is Ken there?” Fuld asked.
“Who is it?”
“Dick Fuld.”
There was a long pause as Donna looked over at her husband, who was sitting in the living room. When she mouthed Fuld is on the line, Lewis shook his finger, signaling to her to duck the call.
Donna felt uncomfortable, but she had had plenty of experience in dodging unwanted callers for her husband.
“You really have to stop calling,” she said sympathetically to Fuld. “Ken isn’t coming to the phone.”
Crestfallen, Fuld replied, “I’m really sorry to have bothered you.”
Fuld placed the phone down and put both hands on his head.
“So, I’m the schmuck,” he shouted at nobody in particular.
Harvey Miller, Lehman’s bankruptcy lawyer, walked into Weil Gotshal’s conference room just down the hall from his office and told the associates to go home and have dinner. It was getting late, and he hadn’t heard anything new from anyone at Lehman. This is just a fire drill, he thought. Lehman Brothers isn’t going to have to file.