McDade then assigned Skip McGee and Mark Shafir to find a way to execute a deal with Barclays.
In the corner conference room, meanwhile, Harvey Miller was holding court with Barclays’ management arrayed around the table. Jay Clayton of Sullivan & Cromwell, who had previously been Lehman’s lawyer with his colleague Rodgin Cohen, had been hired by Barclays that morning. “I think I’m switching from shirts to skins,” he said awkwardly as he sat down next to the Barclays team.
Miller was trying to sort out how quickly they could sell the company, aware that in a business based on the confidence and trust of its trading partners, every second the firm remained on its own, it was losing value.
Michael Klein, Barclays’ adviser, announced, “We are only doing this deal if we’re not bringing any liabilities with us.”
“What do you mean by that?” Miller asked.
“Well, we’re not going to buy any of these assets unless it is an absolutely ‘clean deal,’” he explained.
Barclays’ Archie Cox jumped in and added, “And we have to close tomorrow.”
Miller shot a black stare at him. “Well, if that’s the case, we should just discontinue this right now. Generally, a sale of even perishable assets takes twenty-one to thirty days.”
“We can’t wait that long,” Cox insisted. “By that time the business will be gone.”
“The only thing I can think of right now is you get the court to accelerate the time lines,” Miller offered. “We get an agreement in principle with the Securities Investor Protection Corporation, and it will commence a separate proceeding to coincide with this sale. But that’s never been done before.”
“Can you do that?” Cox asked.
“Until we try, we won’t know,” Miller replied.
Timothy Geithner was sitting at his desk at the NY Fed with Jamie Dimon on the speakerphone, waiting to be conferenced in with Lloyd Blankfein, who was just returning from the firm’s Monday-morning internal meeting.
It had been Geithner who had decided the night before, after consulting briefly with Paulson, to pair JP Morgan and Goldman to help AIG. By his logic, JP Morgan knew AIG inside out as a result of having worked for it for the past six months and could get everyone up to speed quickly on the depth of its problems. Goldman, he thought, could help value the assets and syndicate the loans. “They’re freak in’ smart!” he liked to tell his staff. He knew that Goldman had advised AIG in the past and had spent the weekend looking to buy assets themselves, so they were aware of what was going on.
“Lloyd, I’m on with Jamie,” Geithner said when Blank fein finally came to the phone. He explained that he was hoping to find a private-market solution for AIG and wanted Goldman to help them.
“JP Morgan’s coming down here,” Geithner told him. “Can you get a team together and come over here?”
“Okay,” Blankfein said. “What time?”
“Can you be here by eleven a.m.?”
“We’ll be there,” Blankfein replied, even though it was already past 10:15.
Blankfein immediately went to work organizing a small army of the firm’s top bankers: Jon “Winks” Winkelried, the co-president; David Solomon, the co-head of investment banking; Richard Friedman, who ran the principal investment area; and Chris Cole, who had spent the weekend over at AIG. They all met downstairs to walk over to the Fed.
Chris Flowers, after the relatively uneventful press conference of Bank of America and Merrill Lynch that morning, headed down to Goldman Sachs with Paul Achleitner of Allianz. They had made an appointment to see Chris Cole as something of a postmortem and a discussion to determine if they could team up to make another run at some AIG assets. After waiting in a conference room for Cole for nearly a half hour, Flowers and Achleitner, both frustrated, went downstairs to get some food.
Standing at the back side of 85 Broad Street, they saw Blankfein and Cole at least thirty yards ahead of them intently marching down William Street toward the Fed with Goldman’s entire senior team.
“They’re fucking standing us up!” Flowers said.
When the JP Morgan bankers Lee, Braunstein, and Feldman arrived at AIG, they found the building practically empty, which struck the men as odd, given that the firm was squarely in the middle of a life-or-death crisis.
To Willumstad, who came to greet them, their arrival meant that his already frosty relationship with JP Morgan had just taken another turn for the worse: Were they still his adviser? Or were they now working for the government? Or were they working for themselves?
Before beginning the meeting, Braunstein had a private conversation with Willumstad. “The government asked us to do this. Are you okay with that?”
“Of course,” Willumstad replied.
When they returned to the conference room, Lee, in a hurry to get over to the Fed, fired off a half dozen questions in rapid succession. “How firm a grip do you have on your cash? Where are the ratings agencies on this? What kind of credit lines do you have?”
Willumstad was tentative with his answers. The numbers kept getting worse, he said. And with Lehman’s failure, and the markets likely to swoon, the value of AIG’s assets was likely to tumble further, giving them even less collateral to post.
To Lee, it was abundantly clear that the company—and Willumstad—didn’t have a firm grip on its finances, exactly as Black had told him.
Just before the bankers left for the Fed, Willumstad, trying to maintain an air of calm, said encouragingly, “I think we still have some time.”
As the JP Morgan contingent began briskly walking over to the Fed, Lee said, shaking his head: “Whenever someone says they have time, there’s never enough. And when they say they need money, the number is always too low.” He paused before declaring, “They won’t last the week.”
After spending an arduous weekend in the NY Fed’s lobby, many of the same members of the band of bankers and lawyers now disconcertingly found themselves reassembled there.
One of the key new figures in attendance was Eric R. Dinallo, the superintendent of the New York State Insurance Department. Earlier that morning, he had formally agreed to allow AIG to use some of its regulated insurance company assets—up to $20 billion—as collateral to help stabilize the company. Dinallo had been driving up to Governor Paterson’s office—he had been slated to stand behind the governor during a press conference to announce the plan—when Geithner called and told him he should be at this meeting instead.
As they milled about waiting for the meeting to begin, Blankfein poured a cup of coffee for Dinallo. “I hope you represent the bookends of this financial crisis,” he said, “because the last time I saw you was at the mono-lines, and I hope we’re done with AIG.” Dinallo had convened a meeting of Wall Street chiefs back in January to discuss the fate of the insurers Ambac and MBIA, which were faltering amid the credit crisis.
When Lee, Braunstein, and Feldman finally arrived, they immediately felt outgunned, as it appeared as if Goldman’s entire executive thirtieth floor had cleared out and set up shop at the Fed. Bob Scully and Ruth Porat from Morgan Stanley, who had now been officially hired by the Fed to represent its interests, were also stunned by the depth of Goldman’s presence. “Why is Lloyd here?” Scully whispered to Porat.
What went unspoken was the fact that all three banks, and virtually all of Wall Street, were huge counterparties to AIG. If the company were to fail, they would all face serious consequences. Therefore, there was a huge incentive to keep the insurer alive for everyone at the table.