Miller hopped into a cab to his apartment on Fifth Avenue. As he opened the door, his cell phone rang. James Bromley, a lawyer with Cleary Gottlieb Steen & Hamilton, which was advising the New York Fed, asked almost matter-of-factly, “Harvey, are there any plans for a bankruptcy?”
Miller was taken aback. “It’s not the objective; it’s not in the forecast,” he replied decisively. “There certainly isn’t any intensive work being done on it. I’m at home. I can tell you that right now the company really believes it’s going to get a deal.”
“Are you sure?” Bromley persisted.
Miller related how the New York Fed had not seemed very worried during a presentation by one of his associates earlier that day.
Bromley, uncertain what to make of this news, muttered, “Err, maybe we should meet again tomorrow morning,” and hung up.
As Miller headed into the living room, he said to his wife, Ruth, bewilderedly, “I just got the strangest call …”
Back at AIG, Willumstad was still searching for a quick fix. He and Braunstein decided to try Warren Buffett one last time. Perhaps they could sell him some assets—anything, really—that he might want in his portfolio. Buffett had already left the office, but his assistant patched the call through to his home, the same home he had purchased in 1958 for $31,500.
“You said you’d be interested in assets. Anything in particular?” Willumstad asked, after greeting him and explaining the purpose of his call.
Buffett, reticent, offered, “Well, we could be interested in the auto business.”
“Would you be interested in taking all of the U.S. property and casualty business?” Willumstad suggested. That was a major piece of the company, representing $40 billion in annual revenue.
“What’s it worth?” Buffett asked.
“We’d say $25 billion; you’d probably say $20 billion,” Willumstad replied. “What information do you need to do that?”
When Buffett told him to send what he could, Willumstad said, “Okay. Give us an hour and we’ll get a package of material together. Where can we e-mail it?”
Buffett let out a loud laugh and informed him that he didn’t use e-mail.
“Can I fax it to you?” Willumstad asked.
“I don’t have a fax machine here,” Buffett said, still chuckling. “Why don’t you fax it to the office. I’ll go get in my car and drive back down to the office and pick it up.”
An hour later, Buffett was back on the phone, politely rejecting the proposaclass="underline" “It’s too big a deal; $25 billion is too big.” Willumstad never thought he’d hear Buffett call any prospective deal too big.
“I’d have to use all my cash and can’t do anything to jeopardize Berkshire’s triple-A rating,” Buffett explained. For a moment, he alluded to the possibility of raising the money, but then acknowledged that he “didn’t want to have that kind of debt on my balance sheet.”
“Okay, thanks a lot,” Willumstad said. “But, by the way, if there’s anything else in the pool that you’re interested in, let us know.”
Merrill’s Greg Fleming was tossing and turning in bed that night, so much so that his wife, Melissa, finally insisted that he tell her what was bothering him. “It’s Friday night, and you’re not sleeping,” she mumbled. Wide awake, he turned to her. “This is a different kind of Friday night. The next week or so in this industry is going be epic.”
After nodding off briefly, Fleming finally rose at 4:30 a.m., his mind racing. He recalled his conversation of the night before with John Finnegan, his closest confidant on Merrill’s board. Finnegan was clearly as anxious as Fleming about the firm’s mounting problems, and they agreed they had to persuade Thain to seek a deal with Ken Lewis.
“You’ve got to push this, Greg,” Finnegan urged him. “There’s a way to get this done.”
Fleming had had essentially the same conversation with Peter Kelly. “You just need to get the imprimatur of John” to approach Bank of America, Kelly had told him. “We’ve got to start getting things going. If the meeting tomorrow morning doesn’t go right, we have thirty-six hours to put a trade together.”
It was coming up on 6:30 on Saturday morning when Fleming finally decided it was late enough to phone Thain’s home. Thain was just leaving and returned the call five minutes later from the backseat of his SUV.
“I’ve been thinking about this,” Fleming said resolutely. “We have to call Ken Lewis.”
Thain, taken aback, had spent much of the night thinking about whether such a deal made sense—and had come to the opposite conclusion, at least for the time being. Merrill might want to try to raise some money over the weekend by selling a small stake in the firm to raise market confidence, but there was no reason to sell the entire company immediately, he told Fleming. As he had always warned his troops before entering talks, “Once you initiate, you’re in motion.” Negotiations could quickly spiral beyond your control.
“They are our best partner,” he said dejectedly of Bank of America. “Where are we going to be if we lose them?”
As his SUV barreled down the FDR Drive, Thain promised to consider the issue further, but for now, he needed to focus on the meetings ahead of him.
Jamie Dimon’s black Lexus pulled away from the curb of his Park Avenue apartment to head down to the Fed just before 8:00 a.m. Dimon, who sat in the backseat returning e-mails on his BlackBerry, had just gotten off a conference call with his management team. He had dropped a bombshell on them, telling them to prepare for the bankruptcies of Lehman Brothers, Merrill Lynch, AIG, Morgan Stanley, and even Goldman Sachs. He knew he might have been overstating the case, but he figured they needed to be prepared. Dimon was anxious—fearful, really. He was the Man Who Knew Too Much. As the “clearing bank” for both Lehman and Merrill—all trades for those firms passed through JP Morgan—he could see how quickly their businesses were crumbling. And as the adviser to AIG, well, that had been a nightmare for weeks. He probably knew more than Paulson.
He just hoped he was wrong.
Pacing in his kitchen, Fleming decided to try one last time to impress upon Thain that talking to Bank of America wasn’t just a good plan, it was perhaps the only way to save Merrill Lynch. If Bank of America bought Lehman instead, Merrill faced an onslaught of unimaginable proportions. The math was clear: If Lehman was swallowed up, there would be a run on the next biggest broker-dealer—and that was his firm. Merrill Lynch, perhaps the most iconic investment bank in the nation, was on the brink of ruin.
Thain picked up Fleming’s call just as his SUV was winding down Maiden Lane and about to enter the underground parking lot at the Fed Building. A half dozen photographers had already camped out and were snapping away.
“This is our time to move,” Fleming insisted. “We don’t even necessarily have to do the deal, but we should at least examine it now, and we should see if we can put it together.
“We should use the weekend to do that,” Fleming pressed on, before Thain could interrupt him. “We shouldn’t try to do this potentially under duress next week.”
As a longtime deal maker, Fleming certainly knew how valuable even a weekend could be. The biggest deals on Wall Street had always been finalized when the markets were closed on Saturday and Sunday, so that the details could be refined without worrying that a leak could quickly affect stock prices and potentially scuttle an agreement.
Thain still counseled patience. “If Lehman doesn’t make it, if they file for Chapter 11, Bank of America will still be there,” he told Fleming. But he assured him: “I hear you loud and clear. I’m keeping an open mind, and if we need to make the call, we’ll make the call.”