He had scheduled a call that Saturday afternoon with Timothy F. Geithner, president of the Federal Reserve Bank of New York, who was helping manage the financial crisis.
Mr. Fuld’s outside lawyer, Rodgin Cohen, chairman of Sullivan & Cromwell, had recently suggested an idea to help stabilize the firm: to voluntarily turn itself into a bank holding company. The move, Mr. Cohen had explained, would make it easier for Lehman to borrow money from the Fed “just like Citigroup or JPMorgan.”
Mr. Cohen, a 64-year-old, mild-mannered mandarin from West Virginia, was one of the most influential and yet least well-known people on Wall Street. Pacing in his hotel room in Philadelphia before the wedding of his niece that night, he joined the call between Lehman and the New York Fed.
“We’re giving serious consideration to becoming a bank holding company,” Mr. Fuld started out by saying. “We think it would put us in a much better place.” He suggested that Lehman could use a small industrial bank it owned in Utah to take deposits to comply with the regulations.
Mr. Geithner, who was joined on the call by his general counsel, Tom Baxter, was apprehensive. “Have you considered all the implications?” he asked.
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.
Exhausting Their Options
Mr. Fuld ended his call deflated. Later that evening, Mr. Fuld called Mr. Cohen, finding his lawyer in the waiting room of a hospital, attending to a cousin who had become ill at the wedding.
It was time to consider a different deal, he told Mr. Cohen. “Can you reach out to Bank of America?” Still standing in the emergency waiting room of the hospital, Mr. Cohen found Greg Curl, Bank of America’s top deal banker, on his cellphone in Charlotte, N.C., where the bank was based. Mr. Curl, a 60-year-old former naval intelligence officer, had helped orchestrate nearly all of the many deals Bank of America had made over the last decade.
“Do you have any interest in doing a deal? Of all the institutions we’ve been considering, you’d be the best fit,” Mr. Cohen said.
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.
Dressed in a blazer and slacks, Mr. Curl arrived at Sullivan & Cromwell’s Midtown offices in the Seagram Building on Sunday afternoon, July 13, having flown to New York from Charlotte that morning on one of his bank’s five private jets.
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.
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.
Mr. Curl said he was interested, but that he and Mr. Lewis often disagreed about whether they should acquire an investment bank or continue buying other commercial banks.
“I’d prefer a deal with you,” Mr. Curl continued, “but to be honest, Ken would probably prefer to buy Merrill or Morgan.”
Mr. Fuld was confused. What was Mr. Curl signaling?
“So do you think we have something here?” Mr. Fuld asked.
“I don’t know,” Mr. Curl replied. “I need to talk to the boss. It’s obviously his decision.”