As soon as he got off the phone with Mack, Dimon called Geithner. “I talked to John,” he said. “We’re talking about getting him a credit line.”
“I don’t know if that’ll be enough,” Geithner said, frustrated at the news. His order had not been explicit, but he hinted heavily that the Federal Reserve very much wanted the two firms to form a union and wasn’t the slightest bit interested in any temporary measures.
Dimon immediately sent an e-mail to his operating committee, summoning them to the office, and within an hour, dressed in golf shirts and khakis, they had assembled in a conference room on the forty-eighth floor.
Dimon had a grimace on his face as he related the call he’d received from Geithner. Merging the “Houses of Morgan” was not a new idea but hadn’t come up in any serious fashion since June 20, 1973, when Morgan Stanley, JP Morgan, Morgan Guaranty, and the British Morgan Grenfell held a top secret meeting in Bermuda, code-named “Triangle,” at the Grotto Bay Hotel.
On a whiteboard Dimon used a black marker to sketch out what he had been thinking. “We can either buy them, buy part of them, or give them some type of financing.”
For the next two hours they went around in circles, considering their options. What parts of Morgan Stanley could be spun off? What parts could be warehoused (the term for buying a property, keeping it relatively intact if not in fact making it healthier, and then selling it later, when the market recovered)? Maybe they could buy Morgan Stanley, Dimon suggested aloud, and then create a new tracking stock for it?
But all these scenarios wound up circling back to the same problem: What, exactly, would they be buying? The overlap between the firms was enormous. And what were Morgan Stanley’s toxic assets really worth? These were all but unanswerable questions at that time.
John Hogan, JP Morgan’s chief risk officer, who had attended the meeting with Lehman Brothers the previous week, stepped out of the operating committee conference room and called Colm Kelleher and Ken deRegt at Morgan Stanley.
“I don’t know exactly what you guys have in mind, but under any scenario where we ‘help you,’ we’re going to need a bunch of information,” he said. “Could you go back and talk to Mack and find out exactly what it is that you’re expecting, that you’d like from us in terms of this ‘help’?” There was more than a little condescension in Hogan’s voice, and Kelleher and deRegt picked up on it immediately.
A half hour later Kelleher got back to Hogan with an outline for a request for a $50 billion line of credit. Kelleher was hoping that if JP Morgan did come through with an offer, Dimon would not be as punitive as CIC had been.
Hogan sent an e-mail to JP Morgan’s senior team with the subject line “URGENT and Confidential.” In it he spelled out the plan:
Pls plan to meet at Morgan Stanley’s offices at 750 7th Ave tomorrow at 9:30am. We don’t have the floor or room as yet—MS contact person is David Wong. The purpose of the meeting is for us to consider entering into a secured financing against a variety of different unencumbered assets at MS.
Geithner was by now seriously miffed. He had been trying to reach Pandit since eight in the morning and had just heard back from Blankfein, who had somehow actually managed to get through to Pandit again. The only problem was that Pandit had turned Goldman down, and Geithner hadn’t even had a chance to speak with him.
Finally, he got through to him.
“I haven’t been able to reach you for four hours,” Geithner barked into the phone. “That’s unacceptable on a day like today!”
Apologizing, Pandit explained that he had been talking to his team about the Goldman proposal, which they had ultimately rejected. “We’re concerned about taking on Goldman,” Pandit said, trying to explain his rationale for turning them down. “I don’t need another trillion dollars on my balance sheet.”
Geithner could only laugh to himself. “This is a bank,” Pandit said. “And a bank takes deposits and a bank has a prudency culture. I cannot envision a bank taking its deposits and investing them all in hedge funds. I know that’s not what Goldman is, but the perception is that they’d be taking deposits and putting them to work against a proprietary trade. That can’t be right philosophically!”
Having dispensed with pushing Goldman and Citigroup together, Geithner moved on to his next idea: merging Morgan Stanley and Citigroup.
Pandit had been considering that option, too, and while he was more predisposed to merging with Morgan Stanley, he still was reluctant. “It’s still not our choice to do this deal, but we could think about it,” he told Geithner.
By 2:00 p.m., John Mack was growing concerned that the talks with CIC were going nowhere. Gao hadn’t budged on what Mack was calling an “offensive” offer. He had no idea what Jamie Dimon would come up with, and he hadn’t heard anything from Mitsubishi.
Downstairs, Paul Taubman, the firm’s head of investment banking, was experiencing much the same panic as Mack. A disarmingly young-looking forty-eight-year-old, Taubman had worked his entire career at Morgan Stanley, rising to become one of the most trusted merger advisers in the nation, and could now only wonder if it was all going to come to an end this weekend.
Taubman and his colleague Ji-Yeun Lee were on the phone to Tokyo, where it was past midnight, with Kohei Yuki, his Morgan Stanley counterpart who was trying to coordinate talks with Mitsubishi.
“I think they’ve gone to bed for the night, we’ll pick it up in the morning,” Yuki said.
“That’s not going to work,” Taubman answered. “You need to call them at home and wake them up.”
There was a long pause; this was certainly a breach of Japanese protocol.
“O … kay,” he said.
“Listen, if you’re a senior executive, you’re not going to say, ‘You know what, I’m not going to wake my boss and I’ll just keep it to myself and then if it turns out that I missed the opportunity of a lifetime, how am I going to explain it to him if he wasn’t awakened?’”
Twenty minutes later, Yuki was back on the phone with Taubman. “I got him.” Mitsubishi was going to wake up its entire deal team and get working. In a conference room just two floors down, Morgan Stanley’s board had arrived, and things had grown tense quickly. Some had flown across the country to get there; others, like Sir
