Greenberg also had a reason to follow Lehman Brothers closely. Back in June 2008, when others were pulling away from Lehman, Greenberg took a chance on the firm, making a substantial investment. He’d called Lehman “a great franchise” and predicted the end of the real estate crisis. Now he was watching his investment turn to dust, and he wanted to be involved in a solution. Over the course of the weekend, Greenberg spoke with Dick Fuld several times. Fuld, hunkered down in his office across town, outlined the possibilities as he saw them but told Greenberg that he believed a deal would be struck with Bank of America. Greenberg noticed during those conversations with Fuld that Lehman’s chief had absolute confidence that Lehman Brothers would survive. He didn’t sound desperate or afraid.
As for AIG, Greenberg was deeply concerned but not surprised that it had reached a crisis point. I had interviewed him in June, right after Martin Sullivan was replaced by Bob Willumstad. It seemed that since Greenberg had been pushed out, AIG had suffered a crisis of leadership. The price of stock fell by half in one year, and the company was suffering $13 billion in losses and another $30 billion in write-downs. It was deeply upsetting to Greenberg. “Shareholders are disgusted,” he said, speaking for himself and others. “You can’t have a company as great as AIG was in market value—the highest of any insurance company in history—suddenly become a basket case.” He added pointedly, “You have to ask yourself, where was the board in all this period of time? The board elevated its fees by three times, literally, for all the, quote ‘hard work they were doing’ unquote. Well, you don’t have to be a rocket scientist to figure out things are going badly.”
I looked at him intently. I could feel the frustration radiating off his slender shoulders. “AIG operates in a hundred and thirty countries,” I said. “You built this company. Some people say there’s no one who can really control this behemoth other than you, given your intimate knowledge of the firm.”
He smiled thinly. “I’ve heard people say that, and I think it’s silly. There’s more than one person in the world that can run a company. You’ve got to have an individual who has the vision, the energy, who is willing to pay the price, which means working 24/7—and you don’t do it because you have to, you do it because you love to…”
This was a familiar theme of my conversations with Greenberg. He took it personally. Now, with his old company on the rocks, he desperately wished he were at the helm so he could steer the ship to safety. Instead, he was shut out and shut down, and he feared what each day’s news cycle would bring.
By Saturday afternoon the complexion of the crisis had changed. When I heard that Ken Lewis was talking to John Thain, I knew that Lehman was down to one suitor. It was all happening with dizzying speed. Obviously, Thain didn’t go into that weekend with the intention of selling his firm, but that’s what seemed to be happening. For his part, it was startling to me how quickly Ken Lewis was able to orchestrate a deal. He hadn’t gone into the weekend expecting to buy Merrill Lynch, either.
I reached out to a source at Lehman, wondering how Fuld was handling the news.
“Dick is amazing,” he told me. “He must be pissed as hell, but you’d never know it. He’s shifting all his attention to Barclays, and he thinks it will happen.”
The CEOs, hard at work at the Fed, were operating on that premise. Their task was to figure out how to plug the gap. Everything was on the table. Could Barclays put in a little more? “It looked like we could get something done,” UBS’s Robert Wolf told me. “If Barclays would take on more of the [bad] assets, then we’d put together a new company of the leftover assets and the Street would own it. We were very focused, and no one had time to sit back and say, ‘What does this next step mean, or worse, what will it mean if Lehman actually fails?’ We only had until Sunday.”
As it became clear that Bank of America was out of the running for Lehman, Bob Diamond of Barclays was still working the financials. By late afternoon he thought there might be a deal. Paulson burned up the lines with Barclays CEO John Varley in London. Barclays was the only potential buyer left, and there were problems. By law Barclays had to have a shareholder vote on such a major purchase, and that could take thirty to sixty days. Diamond and Varley were pressuring Paulson. Would the federal government guarantee a purchase until then? Paulson knew there was no way he could do that.
Paulson was concerned about the number of roadblocks the British were putting up. The regulators were brutal. “It’s like they don’t want to catch the American disease,” Paulson observed to an aide.
Yet at day’s end, Barclays was still in there. It was a last-minute reprieve. Everyone breathed a sigh of relief as the word spread that Barclays had agreed to buy Lehman—on the condition that the sale would not include bad real estate assets. But there was complete uncertainty about what would happen. Late Saturday evening, a Lehman executive walked into a conference room and saw several sheets of paper lined up on the table. They were press releases. One press release announced a sale to Bank of America. Another announced a sale to Barclays. Another announced that Lehman had found a halo investor in the Middle East. One announced a bank consortium had purchased Lehman’s real estate assets. He stared at the press releases and thought, “No one knows which one will be released—or, worse, if the press release that isn’t here, the one announcing bankruptcy, will be the
