Eyes didn't have it

Lewis and Mack are easily identifiable, as is Geithner; Fuld not so, not in this picture. Perhaps it is Fuld's mouth that makes him easily recognizable, though the eyes fit in his infamous scowl. His arrogance and chutzpah come through readily in this article.

In the summer of 2008, two months before Lehman Brothers filed for bankruptcy, Richard S. Fuld Jr., the firm's chairman, was continuing his desperate efforts to find a lifeline. They had begun in March, shortly after the demise of Bear Stearns, when Mr. Fuld called the legendary investor Warren E. Buffett seeking a capital infusion, to no avail. Lehman had raised money elsewhere, but that didn't help for long, and its condition again was worsening.

This article is adapted from "Too Big to Fail: How Wall Street and Washington Fought to Save the Financial System — And Themselves." The book, being published Tuesday by Viking, reveals how officials in Washington, worried about the impact of Lehman's possible failure on the financial system, for months helped orchestrate efforts by Mr. Fuld to seek a solution for the firm and stave off its collapse. The conversations recounted are based on hundreds of hours of interviews with dozens of participants, many of whom agreed to speak on the condition that they not be identified as sources.

I've selected a few paragraphs that display Fuld's chutzpah and ego. In the summer of 2008 Lehman Brothers was teetering, buffeted by the market and the general ensuing panic. Fuld started to consider makin gthe firm a bank holding company, so to get Fed funding. Baxter is Tom Baxter, Geithner's general counsel.

Mr. Baxter, who had cut short a trip to Martha’s Vineyard to participate, walked through some of the requirements, which would transform Lehman’s aggressive culture, minimizing risk and making it a more staid institution, in league with traditional banks.

Regardless of the technical issues, Mr. Geithner said, “I’m a little worried you could be seen as acting in desperation,” and the signal that Lehman would send to the markets with such a move.

A talk with Mack of Morgan Stanley did not result in any action. The logical choice seemed to be Bank of America. Fuld's lawyer, Rudgin Cohen (chairman of Sullivan & Cromwell), called Greg Curl, BofA's top deal maker.

Mr. Curl, though intrigued to be getting a call on a Saturday night, was noncommittal; he could tell they must be desperate. “Hmm ... let me talk to the boss,” he said. “I’ll call you right back.” (The boss was Ken Lewis, the silver-haired chief executive of Bank of America.)

A half-hour later, Mr. Curl called back to say he’d hear them out, and Mr. Cohen set up a three-way call with Mr. Fuld.

“We can be your investment banking arm,” Mr. Fuld explained, the idea being for Bank of America to take a minority position in Lehman and for the two to merge their investment banking groups. He invited Mr. Curl to meet in person.

So he's asking for his firm to be rescued, and offers BofA a minority position.

Mr. Fuld walked him though his proposal. He wanted to sell a stake of up to one-third of Lehman to Bank of America and merge their investment banking operations under the Lehman umbrella.

33% of Lehman for BofA to rescue Lehman.

Mr. Curl was dumbfounded, though he characteristically gave no sign of what he was thinking. Far from the plea for help he had been expecting, the pitch he was hearing struck him as a reverse takeover: Bank of America would be paying Mr. Fuld to run its investment banking franchise for it.

A perfect example of Fuld's temerity. Curl demurred, saying he'd need to consult with his boss, Lewis.

Even before meeting with Mr. Curl, Mr. Fuld had been ringing Mr. Paulson about Bank of America, trying to get Mr. Paulson to make a call on behalf of Lehman. “I think it’s a hard sell, but I think the only way you’re going to do it is go to him directly,” Mr. Paulson had told him. “I’m not going to call Ken Lewis and tell him to buy Lehman Brothers.”

This is interesting in itself, in the context of BofA eventually buying Merrill Lynch.

Later, in New York, a secret meeting between Fuld and Lewis was arranged.

Mr. Fuld explained that he would want at least $25 a share from Bank of America to buy Lehman; Lehman’s shares had closed that day at $18.32. Mr. Lewis thought the number was far too high and couldn’t see the strategic rationale. Unless he could buy the firm for next to nothing, the deal wasn’t worth it. But he held his tongue.

His firm is about to implode, and Fuld asks for a premium over the merket price. Lewis turned him down.

Mr. Fuld was beside himself. He called Mr. Paulson to relay the bad news. The only possible suitor left was a group of Korean banks, who had expressed an interest in a separate deal. Mr. Fuld pressed Mr. Paulson to call them on his behalf — a request that Mr. Paulson resisted.

Then Fuld asks the Treasury Secretary to arrange a blind date. The Koreans turned him down, and Lehman is gone, bankrupt.