Dimon dismissed his concerns. “The U.S. government is telling us to do this,” he repeated.
Braunstein persisted. “But—”
“Stop it,” Dimon insisted, annoyed that his top banker was challenging him. “This isn’t about us versus them,” he said. “We’ve been asked to help fix this situation.”
Once Braunstein got to the office, he, Dimon, and Black huddled to come up with a game plan about how to handle the Fed’s unusual request. They decided to enlist the help of James B. Lee Jr., the firm’s vice chairman.
Dimon hurried down the hall to give Jimmy Lee his marching orders. Lee, a classic suspender-wearing banker with a Golden Rolodex, had also arrived early to help manage the aftermath of Lehman’s collapse and had just gotten off the phone with one of his big clients, Rupert Murdoch. Sitting at a desk flanked by four computer screens, with a giant flat-screen television tuned to CNBC’s Squawk Box and his own private news ticker on the wall modeled after the Zipper in Times Square, Lee spun around in his chair.
“I have a job for you,” Dimon barked, standing in the doorway. “I want you to go down to the Fed.”
“To do what?” Lee asked in disbelief. After all, he had a busy day ahead of him, and he was expecting the market to be a disaster.
“I want you to run the AIG deal,” Dimon told him. “Geithner called. He wants us to find a private-market solution for AIG. It’s a big hole. This could be the mother of all loans.”
If there was one banker in the city who understood the world of debt and how to raise money in a pinch, it was Jimmy Lee. He was perhaps JP Morgan’s most senior deal maker, a mogul unto himself with his own banquette at the Four Seasons at lunch. His power derived, in part, from the fact that he was a virtual ATM for corporate America, writing massive checks to finance some of the biggest deals in history. Dimon told him he was hoping that Lee could structure a deal to loan AIG enough money to keep operating and sign up a dozen other big financial players to follow him.
With that tall order delivered, Dimon disappeared, and Steven Black followed him into Lee’s office to give him a five-minute briefing and a folder of AIG materials heavier than a phone book. Describing AIG as a “fucking nightmare client,” Black described how dire the situation was becoming. “You can carry the ball from here,” Black said with a wry smile, happy to have AIG in someone else’s lap.
Lee was informed that he was expected at AIG for a meeting immediately and then he had to get over to the Federal Reserve Building by 11:00 a.m.
Lee met Braunstein and Mark Feldman in front of JP Morgan’s headquarters on Park Avenue, where Lee’s driver, Dennis Sullivan, a retired police officer who had shuttled him from his home in Darien, Connecticut, to Manhattan every day for more than twenty years, was waiting with his black Range Rover. Braunstein and Lee jumped in the back so that Braunstein could continue briefing him.
“C’mon. We’ve got to get downtown,” Lee instructed Sullivan. “No bullshit. We have to be down there like yesterday.”
John Mack looked tired as he rose to a podium and began to address his top lieutenants. It had been a long weekend, he told the managers squeezed into Morgan Stanley’s main conference room. During two and a half days of meetings at the New York Fed, he said he subsisted on “nothing but wrap sandwiches” and fruit that had “been out a little too long.
“I am energized and you ought to be energized, too,” Mack said encouragingly. He acknowledged that the market had come under tremendous pressure after Lehman’s “lost weekend”——United States stock index futures and bank shares in Europe were already tumbling—but the good news for them was that Morgan Stanley had survived.
Mack proceeded to summarize the discussions about Lehman and Merrill that had taken place at the New York Fed over the weekend, calling Lehman’s demise “very unfortunate.”
“I mean, I wish I could come in here and say, you know, this is a great opportunity, kick back, we’re going to do great, all of the competitors have basically been eliminated. I’m not going to say that,” he allowed. “What I want to say is: Kick it up. Work harder. Think about what has happened this year. And what has happened is that all of a sudden, three of our competitors are no longer in business.”
Mack added: “I understand that all of you, and not just all of you here, but I think in the industry, are shaken. You should be shaken. But that doesn’t mean that we crawl back in and we shake… .
“We’re here to do business, to serve our clients, to take market share. Just think about this: Every 1 percent in equity market share we gain is a billion dollars in revenues… .
“I think that once this turmoil abates, and it will settle down, the opportunities going forward are unbelievable. Now I am a positive guy but I am not a Pollyanna, and I believe with all my heart that this firm and our competitor, Goldman, have unique opportunities now. And I am sorry that we got to these unique opportunities the way we did. I don’t want my competitors out of business, I just want to beat them.”
His chief financial officer, Colm Kelleher, chimed in to punctuate that point: “There is Darwinism here… . Weak people are being taken out. Strong people, I believe, are going to do very, very well.”
Over at Lehman Brothers, the thirty-second-floor conference center was a beehive of activity, with hundreds of dazed people streaming in and out—bankruptcy lawyers, restructuring experts, outside consultants. Fuld, who had been escorted upstairs by Lehman’s security detail for fear that employees might actually attack him, wandered in and out of the conference rooms in shock. He had already placed a call that morning to Geithner, pleading with him to undo the bankruptcy filing, as if it had all been just a bad dream.
Down on Lehman Brothers’ massive trading floor, the mood was grim. The staff wasn’t just devastated, they were angry. And while that anger was at first directed toward the government, it had quickly shifted to management. A Wall of Shame had been erected on the south side of the building containing, among other exhibits, photos of Fuld and Gregory with the caption, “Dumb and Dumber.”
With Lehman’s holding company now officially in bankruptcy, Barclays’ Bob Diamond arrived with a team to pick over the assets it wanted and leave the worst ones behind. To Diamond, it was the perfect opportunity to obtain only Lehman’s choicest parts at a bargain price and with the blessing of a judge. Barclays was mainly interested in Lehman’s U.S. broker-dealer and its buildings, and this time around both the FSA and the British government had given him their support. Another plus: There was no need for a shareholder vote.
Bart McDade had assembled a team to begin negotiations with Barclays. He believed there was a chance that he could save the ten thousand jobs that were likely to disappear, even if shareholders themselves had already been wiped out by the bankruptcy. Before that meeting began, however, Alex Kirk pulled McDade aside. Kirk, emotionally drained from the past week, was becoming increasingly suspicious that Barclays had dropped its bid twenty-four hours earlier only so that it could buy the business for even less today. He was outraged, as were many of the traders on the third floor.
“Either Barclays was duped or they were part of the charade,” he told McDade. “I have no interest in working for a company that’s either the dupe or is part of this charade. And I have no interest in working for a highly leveraged financial institution with regulators who behave like I just saw. So I’m out on this whole thing.”
McDade was disappointed but sympathetic. “I get it, I understand, you do whatever you want,” he told Kirk but asked if he would stay at least through the week to help manage the trading floor as they tried to arrange a deal. Kirk reluctantly agreed.