into a hedge fund with a boutique bank attached and trying to take the firm private, outside the glare of public investors. But he’d need to raise cash from someone even to do that.
Later that evening, Fuld called Cohen, finding his lawyer in the waiting room of a hospital, attending to a cousin who had become ill at the wedding. It was time to consider a different kind of deal, he told Cohen. “Can you reach out to Bank of America?”
Selling Lehman had always been anathema to Fuld—“As long as I am alive this firm will never be sold,” he had said proudly in 2007. “And if it is sold after I die, I will reach back from the grave and prevent it.” He had, however, longed to make a big acquisition. For a brief moment he came close to buying Lazard—so close that he had even settled on calling the firm Lehman Lazard—a purchase that might have been his crowning achievement, turning his scrappy bond-trading operation into a white-shoe firm with a global reputation. Fuld had held a meeting in his then-office at the World Financial Center on September 10, 2001, with William R. Loomis and Steve Golub of Lazard. They left the meeting with plans to continue their discussions. Then, of course, came 9/11.
Bruce Wasserstein, who later took over Lazard, tried to resurrect the discussions, but Fuld became so outraged by the price Wasserstein said he wanted—$6 billion to $7 billion—that their conversation quickly devolved.
“Clearly we don’t see value the same way,” Fuld derisively told him. To Fuld, Wasserstein, who had been branded “Bid-em up Bruce,” had just lived up to his name. “There’s just no way I could pay that.”
Still standing in the emergency waiting room of the hospital, Rodgin Cohen found Greg Curl, Bank of America’s top deal banker, on his cell phone in Charlotte, where the bank was based. Curl, a sixty-year-old former naval intelligence officer who drives a pickup truck, had always been a bit of an enigma to Wall Street. He had helped orchestrate nearly every deal Bank of America had made over the past decade, but even within the bank he kept to himself and was generally considered a tough read.
Cohen, who had dealt with Curl over the years but had never been able to take an accurate assessment of him, trod carefully, explaining that he was calling on behalf of Lehman Brothers.
“Do you have any interest in doing a deal? Of all the institutions we’ve been considering, you’d be the best fit,” Cohen said, promising that he could get Fuld on the phone if Curl was curious enough to have a conversation.
Curl, though intrigued to be getting a call on a Saturday night, was noncommittal; he could tell they must be desperate. “Hmm … let me talk to the boss,” he said. “I’ll call you right back.”
The boss was Ken Lewis, the silver-haired CEO of Bank of America, a hard-charging banker from Walnut Grove, Mississippi, who was on a mission to beat Wall Street at its own game. (When he was a child, two boys once ganged up on him; his mother, catching sight of the scrap, came out of the house and said, “Okay, you can fight him, but you’re going to have to do it one at a time.”)
A half hour later, Curl called back to say he’d hear them out, and Cohen set up a three-way call with Fuld through the switchboard at Sullivan & Cromwell.
After some brief introductions—the men had never met before—Fuld began with his pitch.
“We can be your investment banking arm,” Fuld explained, the idea being for Bank of America to take a minority position in Lehman Brothers and for the two to merge their investment banking groups. He invited Curl to meet with him in person to discuss the proposal further.
Curl, sufficiently intrigued, said he would fly up from Charlotte to New York on Sunday. While Fuld thought it odd that he wasn’t negotiating directly with Ken Lewis, there was a compelling reason for Curl to travel alone: Lewis could legitimately deny that he had ever spoken with Fuld, should the discussion leak.
Before signing off, Curl made certain to underscore his greatest anxiety: “We want to be absolutely sure this is confidential.”
At midmorning on Sunday, David Nason and Kevin Fromer were sitting on the couch in Nason’s office at Treasury, going over a draft of the proposal to petition Congress for the authority to inject money into Fannie and Freddie in the case of an emergency. The office was littered with sandwich wrappers and bags from nearby Corner Bakery Cafe. Most of the staff had been working since early Saturday morning and had gone home only to grab a few hours of sleep. The proposal had to be ready by 7:00 p.m.
Suddenly, Paulson walked into the office with a look of horror on his face and, holding up a page of the draft, bellowed, “What the fuck is
The draft provided for emergency authority for a period of eighteen months, the rationale for which Fromer, who was Treasury’s liaison to lawmakers, leaned forward and attempted to explain. “Look, you can’t ask Congress for permanent—”
Paulson rarely allowed himself to show his anger, but he now made no attempt to restrain it as he paced the room.
“First of all, this is my judgment to make, not yours,” he said. “Secondly, this is a half measure. I am not leaving my successor with the same shit that I’ve got. We are going to fix these problems. I am not pushing this crap down the road.”
Nason’s cell phone rang. “Tim!” he shouted, checking the caller ID, before realizing he was interrupting Paulson’s soliloquy. Tim Geithner had been calling for updates nearly every hour.
Nason and Fromer tried again to calm Paulson down. They reiterated that it would be much more palatable politically to say that they were asking for temporary powers rather than permanent ones. And, as Fromer told him, “It’s a distinction without a difference,” explaining that during the period they had the authority, they could still make decisions that would be permanent.
Paulson, starting to recognize the value of the political calculus, relented. He told them to keep working on it and walked out as abruptly as he’d walked in.
Greg Curl, dressed in a blazer and slacks, arrived at Sullivan & Cromwell’s Midtown offices in the Seagram Building on Sunday afternoon, having flown up to New York from Charlotte that morning on one of the firm’s five private jets.
Taking a seat in the empty reception area, he waited for Fuld and Cohen to appear, uncertain about how fruitful the meeting could possibly be. While “The Boss” may have wanted to conquer the commercial banking world, he had an aversion to the fast-money investment banking business. “No, we wouldn’t use our
