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Continuing with this September of negative nostalgia, former Cravathassociate James B. Stewart serves up an exhaustively detailed look(sub req’d) in The New Yorker at last year’s efforts by Ben Bernanke and Hank Paulson to stave off another Great Depression. Stewart’s tremendous access to the major players at the banks, AIG, the Fed and elsewhere pays off with a slew of behind-the-scenes details. For example, when John Thain and a Merrill team met with Ken Lewis and some Bankers of America at Wachtell’s midtown offices, the psychological dynamic at play was, according to one Merrill participant: “South versus North, traditional banking, blue collar versus the trailblazers, the masters of the universe … The acquisition was tinged resentment that went beyond the numbers. It was as if the tortoise had eaten the hare, and they were not very good at hiding it.”
Then there’s positively cinematic exchange between Weil Gotshal's Harvey Miller and the New York Fed’s general counsel Tom Baxter:
“What’s the next step?” Miller asked.
The next step was bankruptcy. “You have to file by midnight,” Baxter said.
Miller and his lawyers hadn’t even started drafting papers. The day before, when he heard from Fed officials, he hadn’t sensed any urgency.
“You don’t realize what you’re saying,” Miller argued. It’s going to have a disabling effect on the markets and destroy confidence in the credit markets. If Lehman goes down, it will be Armageddon.”
According to this account, eventually Miller yelled “We just want to understand!”
The best line in the piece belongs to Lloyd Blankfein (Harvard Law ’78). When an underling complained to the Goldman chief that the marathon negotiations were wearing him down (“I don’t think I can’t take another day of this”), Blankfein witheringly put things in perspective: “You’re getting out of a Mercedes to go the New York Federal Reserve. You’re not getting out of a Higgins boaton Omaha Beach.”
-posted by brian
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