248 Ken Lewis: Shawn Tully, “Meanwhile, Down in Charlotte … ,” Fortune, October 13, 2008.
CHAPTER THIRTEEN
253 The lead of the New York Times: Jenny Anderson and Ben White, “Wall Street’s Fears on Lehman Bros. Batter Markets,” New York Times, September 10, 2008.
253 “Some may worry that Treasury”: Ibid.
253 Wall Street Journal noted: “The firm’s situation differs markedly from that of Bear Stearns, which was taken over earlier this year after it ran into a liquidity crisis. Unlike Bear Stearns, Lehman has access to new Federal Reserve facilities that can provide short-term funding when the markets won’t, in addition to the ability to exchange illiquid assets for safer securities such as Treasurys.” Susanne Craig, Randall Smith, Serena Ng, and Matthew Karnitschnig, Wall Street Journal, September 10, 2008.
253 reduced the amount of business: On September 16, 2008, GLG Partners issued the following statement regarding Lehman Brothers: “With respect to Lehman, GLG last week transferred substantially all of the remaining positions of the GLG Funds to other prime brokers. The majority of these transfers have already settled and we expect the remainder to settle shortly. We believe the residual exposure of the GLG Funds to Lehman will not be material. Lehman is also a shareholder in GLG, owning approximately 33.7 million shares, through Lehman (Cayman Islands), a Cayman Islands company, about 13.7 per cent of the total GLG stock outstanding.”
255 “That’s it? That’s fucking it?”: McDonald and Robinson, A Colossal Failure of Common Sense, 314.
255 “The firm remains committed”: From a press release issued by Lehman that morning. “Lehman Brothers Announces Preliminary Third Quarter Results and Strategic Restructuring,” September 10, 2008.
256 Herlihy had worked on nearly every deal Bank of America had orchestrated: “Bailout Lawyer Optimistic Worst Is Over,” WSJ Blog/Deal Journal, October 16, 2008.
257 forecast a third-quarter loss of $3.9 billion: Ben White, “With Big Loss Forecast, Lehman to Spin Off Assets,” New York Times, September 11, 2008.
257 “In light of these last two days”: Lehman Brothers preliminary F3Q08 Earnings Call Transcript, September 10, 2008.
258 “The real estate held-for-sale portfolio”: Ibid.
259 “To the extent you might need $7 billion”: Ibid.
260 “The Bungalow”: “HSBC’s Canary Wharf headquarters towers over that of Barclays. So much so that HSBC workers have christened their neighbour’s building ‘the bungalow.’ A spokesman for Barclays retorts: ‘Size is not our objective—growth is.’ Touche.” Dominic Walsh, “Barclays Bungalow; City Diary,” Times (London), July 8, 2006.
261 having both vied for the top job in 2003: Grant Ringshaw, “Barclays’ Odd Couple John Varley and Bob Diamond,” Sunday Times, (London), February 17, 2008.
261 In 2007, Diamond earned $42 million to Varley’s $8.4 million: “Barclays’ Diamond Gets 21 Million Pounds in Pay and Bonus,” Reuters, March 27, 2008; Ben Livesey and Jon Menon, “Barclays Pays Diamond Five Times More than CEO Varley,” March 26, 2007.
261 “Bob Diamond 3, John Varley 0”: Ringshaw, “Barclays’ Odd Couple,” Sunday Times (London).
263 trying to buy ABN AMRO: After a harrowing nine-month takeover battle, Barclays withdrew its bid of €67.5 billion for ABN AMRO in October 2007, finally conceding to a consortium led by the Royal Bank of Scotland. Julia Werdigier, “Barclays Withdraws Bid to Take Over ABN Amro,” New York Times, October 6, 2007.
264 been on the phone with Tim Geithner and Hank Paulson twice about it: From Geithner’s calendar for Wednesday, September 10, 2008.
265 “Unless I’ve missed something”: Brian Blackstone, “Ex-Fed Official Poole: Fed Not Defining Post-Bailout World,” Dow Jones, September 10, 2008.
266 Any hope that the SpinCo plan was going to turn Lehman’s fortunes around: Susanne Craig, Randall Smith, Serena Ng, and Matthew Karnitschnig, “Lehman Faces Mounting Pressures,” Wall Street Journal, September 10, 2008.
267 announced his plans to “retire” from the firm: Mark Kleinman, “Jeremy Isaacs to Step Down at Lehman,” Daily Telegraph, September 7, 2008.
267 $5 million severance: Danny Fortson, “Five Lehman Chiefs Coop $100m Days Before Collapse,” Sunday Times (London), October 12, 2008.
267 “engage in detrimental activity”: From Exhibit A of Lehman’s “Termination Arrangements for Executives” in a section called “Restrictive Covenants.” Document was made public by the House Oversight and Government Reform Committee and is available online under “Materials for Lehman Brothers Compensation Meeting,” http://oversight.house.gov/story.asp?ID=2208.
269 pocketing some $540 million from an investment in Shinsei Bank: Matthew Miller, “Cash Kings,” Forbes, October 9, 2006.
269 town house on the Upper East Side for $53 million: Zachery Kouwe, “Sallie’s Suitor—Flowers’ Power: Art of the Deal,” New York Post, October 7, 2007.
270 Goldfield happened to be the banker depicted: Roger Lowenstein, When Genius Failed, 170-85.
270 Greenberg … bought millions of preferred shares: In June 2008, Lehman sold $6 billion in common and preferred shares to a group of investors, which included Hank Greenberg. Greenberg would not disclose how much he spent. Lavonne Kuykendall, “Greenberg: Lehman ‘A Great Franchise,’ Now Has Enough Capital,” Dow Jones, June 10, 2008.
270 “Management did not successfully put to rest”: Patrick M. Fitzgibbons, “Lehman in Sale Talks as Survival Questioned—Sources,” Reuters, September 11, 2008.
271 “The change in rating agency posture”: Alistair Barr,“Treasury, Fed Reportedly Helping as Deal Sought by This Weekend,” MarketWatch.com, September 11, 2008.
271 “He is as feisty as ever”: Louise Story, “Tough Fight for Chief at Lehman,” New York Times, September 11, 2008.
272 buy Chicago’s LaSalle Bank from ABN: “ABN AMRO Shareholders Vote in Favor of Sale, Breakup,” Dow Jones, April 26, 2007.
273 It is with deep regret: Letter obtained by author.
274 had just gotten off the phone with Geithner: The Wall Street Journal reported that Willumstad made his first call to Geithner on Thursday, but they didn’t actually speak on the phone until Friday morning. Author’s subsequent reporting places the phone conversation on Thursday morning. See Monica Langley, Deborah Solomon, and Matthew Karnitschnig, “Bad Bets and Cash Crunch Pushed Ailing AIG to Brink,” Wall Street Journal, September 18, 2008.
275 If the agency cut AIG’s credit rating by even one notch, it could trigger a collateral call of $10.5 billion: Greg Farrell, Aline van Duyn, and Nicole Bullock, “S&P in Warning after AIG Shares Plunge,” Financial Times, September 12, 2008.
274 The cost to insure the debt of AIG: Lilla Zuill, “AIG Woes Knock Its Market Value Below Peers,” Reuters, September 11, 2008.
274 Hank Greenberg, being deposed that day: In the midst of settling a Delaware shareholder suit for $115 million, Greenberg began his deposition with Andrew Cuomo for a civil fraud lawsuit, which would stretch over the next several days. Amir Efrati, “Greenberg Settles AIG Shareholder Case,” Wall Street Journal, September 12, 2008.
274 “What the hell are you people waiting for?”: James Bandler, “Hank ’s Last Stand,” Fortune, October 7, 2008.
275 If the agency cut AIG’s credit rating: Mary Williams Walsh and Jonathan D. Glater, “Investors Turn Gaze to A.I.G.,” New York Times, September 12, 2008