through its favorite reporter, Liesman.
The room turned sour, as even Curl acknowledged that Herlihy had a point.
“How serious do you think they are?” Curl asked.
Before heading back uptown for the second day of the BlackRock board meeting, John Thain decided to hold a conference call with his own board. With the markets gyrating and rumors flying, he wanted to make it clear publicly that Merrill was solid. Already there was a news report that morning quoting Malcolm Polley, chief investment officer at Stewart Capital Advisors, saying, “I think the market’s telling you that if Lehman is going to go away, Merrill is probably the next victim.”
Thain first briefed the board on recent market swings, which showed no sign of stopping. One look at the futures made it clear that stocks were likely to sink at the opening bell. With Merrill down 16 percent the previous day, things were only going to get worse.
The discussion quickly turned to Lehman. Thain told the board what he knew, which wasn’t too different from what had been reported in the papers, except that Thain was getting his information directly from Geithner: Bank of America and Barclays were both vying to buy Lehman.
John Finnegan, a chief executive of the insurer Chubb, sounded worried. “Lehman is going down, and the shorts are coming after us next,” he told Thain. “Tell me how this story is going to end differently.”
Thain, frustrated by the remark, had never liked being challenged. “We are not Lehman,” he said, his eyes flashing behind his glasses, and then repeated for emphasis, “
Regaining his usual composure, Thain calmly rehearsed the virtues of Merrill. “We have a wealth-management business that’s going to have value no matter what,” he told the board. “And we own half of BlackRock, which would also have value no matter what—so our stock’s not going to zero.”
Fuld was growing restless. It was 9:30 a.m., Lehman’s stock opened down 9 percent to $3.84, and he hadn’t heard from Diamond in over twelve hours.
“So where are we?” Fuld asked Diamond when he finally reached him.
“I’ve literally just gotten the okay from my board that we can pursue this,” said Diamond, who had arrived in New York from London after midnight the night before. “We’ve just begun doing diligence with your public filings.”
Before he continued, however, Diamond decided that he needed to be blunt with Fuld. “To be honest,” he said stiffly, “this is a horrible situation for you, because we’re only going to be interested if the price is quite distressed.”
Fuld, leaning back in his desk chair, looked at Russo, who had taken a seat across the desk for the call. He understood.
“You and I should talk, because you should know exactly what my ideas are, what my plans are,” Diamond said. He suggested meeting at noon at the Racquet and Tennis Club, a members-only establishment on Park Avenue and Fifty-second Street, where they would be able to get a private meeting room.
“No, no, no. You don’t understand. I can’t walk out of here,” Fuld insisted. “There’s photographers all over the place. Why don’t you come over here? We can sneak you in the back. I’ll send my car for you.”
“AIG Shares Fall 20 Percent on Mortgage Woes” proclaimed the Reuters headline at 10:14 a.m.
Catherine Seifert, a Standard & Poor’s analyst, had just released a research note saying that the stock was falling on “concerns about AIG’s ability to shed its troubled mortgage-related assets, and we expect the shares to remain volatile as investors await news from the company.”
As he followed these stories with increasing alarm, Bob Willumstad decided to call Jamie Dimon. He was increasingly frustrated with the JP Morgan team and needed assurances.
“Jamie, we’re going to get downgraded,” he told him. “You need to help me figure out how to get $18 billion. There’s no plan for the end of September anymore,” he added, referring to his plan to announce the results of his firmwide review and a new strategy at the end of the month. He stopped to let that sink in and then continued, “You know, if you guys can’t help us, tell me now, but we’ve got to do
“Look, we want to make this work,” Dimon said, sounding a contrite note. “Give me five minutes and I’ll call you back.”
When he phoned back he apologized on behalf of the firm and said that he would take Black off the case; his other lieutenant, Doug Braunstein, who ran the firm’s investment banking practice, would now be in charge. Braunstein, a no-nonsense deal maker, had been entrusted with some of the firm’s biggest transactions after working his way up the ranks, initially at First Boston in the 1980s, and then at Chase. He helped negotiate the firm’s acquisition of JP Morgan, its purchase of Bank One (bringing Dimon with it), and then the Bear Stearns deal. “We’re going to send Braunstein down with the team, and we’re going to see what we can do about raising capital for you over the weekend.” Dimon promised him that he’d keep “the trains on the tracks.”
As he ended the conversation with Dimon, another call came in—Tim Geithner, who was finally getting back to Willumstad.
“So, where are we?” Geithner asked.
“We’re working on a capital raise,” Willumstad explained. “And we’re talking to some bidders for assets that may come in this weekend. We expect to have some more information later in the day.”
“We’re going to send over some of our market guys this morning to help,” Geithner told him in a tone that made it clear that this was not an offer but an order. “Keep me posted,” Geithner said before hanging up.
The conversation had lasted no more than thirty seconds.
By now Hank Paulson had become so agitated by the problems at Lehman that he scarcely noticed his assistant, Christal West, trying to get his attention. Alistair Darling, the chancellor of the Exchequer of Britain, was
