In the race to save Lehman Brothers, Richard S. Fuld Jr., the firm’s chairman, reached out to Bank of America as early as July 2008, according to the book "Too Big to Fail," scheduled for release today.
Author Andrew Ross Sorkin, a New York Times reporter, gives this account of a secret meeting between Fuld and Bank of America's Ken Lewis, as excerpted in today's NYT story:
"To keep the talks alive after the session at Sullivan & Cromwell, Paulson and Geithner over the course of the next week arranged a secret meeting between Fuld and Lewis.
It would take place at a previously scheduled event on the evening of Monday, July 21, in New York. Paulson was being honored at a dinner at the New York Fed in Lower Manhattan, organized by Geithner as an opportunity for the secretary to get together with top leaders from JPMorgan Chase, Goldman Sachs and Morgan Stanley, as well as Fuld and Lewis.
As the dinner was ending, Geithner, approached Lewis and, leaning close, whispered, "I believe you have a meeting with Dick."
"Yeah, I do," Lewis replied.
Geithner gave him directions to a side room where the two could speak in private. He had apparently already given Fuld the same instructions, because Lewis noticed him across the room looking back at them like a nervous date. Seeing Fuld start to walk in one direction, Lewis headed in the other; with half of Wall Street looking on, the last thing either of them needed was to have word of their meeting get out.
The two men eventually doubled back and found the room. 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. 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.
Two days later, he called Fuld back.
"I don’t think this is going to work for us," Lewis said as diplomatically as he could, while leaving open the possibility that they could discuss the matter again."
- Doug Miller