Reinventing the Millennium

Fang Zhuo waited for the storm to come on an ordinary morning in Xiangjiang.

An hour later, the meeting on the other side of the ocean was held as scheduled.

The main convener of this meeting was New York Fed President Geithner, and the topic was the discussion of the rescue of Lehman.

New York time is 8pm on Friday, September 12th, and there is not much time left for everyone.

Judging from the current situation, with the stock market closed on Saturday and Sunday and open on Monday, Lehman is likely to collapse.

As of Friday's market close, Lehman's stock price was $3.43.

At this same time last year, Lehman shares were trading at $70.

How did it get to this point?

In the first quarter of this year, Lehman also announced a net profit of US$1.7 billion, but this was a sharp decline of 57% compared to the previous quarter.

In the second quarter of this year, Lehman suffered its first quarterly loss in 14 years, with losses reaching US$2.8 billion.

Two days ago, it was disclosed in the third quarter that Lehman suffered a loss of US$3.9 billion and announced multiple restructuring plans.

During this period, Lehman has been trying to save itself and looking for funds, but whether it is bank credit financing or the issuance of preferred shares, the stock price will fall every time it gets money.

In this way, 95% of the market value has been wiped out.

The real trigger that directly triggered the rescue discussion meeting was Lehman's determination that it would not be able to obtain a capital injection from the Korea Development Bank.

On its own, Lehman was completely unable to secure any funding that might have helped.

After Fannie and Freddie, the problems of investment banks are before the Federal Reserve.

Fannie Mae and Freddie Mac have been announced as receivers. Do you want to provide additional help to Lehman now?

Although New York Fed President Geithner was the convener of this important meeting, US fiscal steward Paulson was the most important person present.

Paulson directly broke everyone's expectations at the beginning of the meeting and stated his position simply: "Don't expect government funding. You are the protagonist in solving the problem today."

He said extremely forcefully: "If Lehman is gone, our life will be difficult, and your life will be even more difficult."

There have been rumors that Lehman will receive special help from the government.

Paulson's words shattered the rumors.

He has exchanged views with Federal Reserve Chairman Bernanke this morning, trying to prevent Lehman from collapsing in chaos, but only encouraging financial companies to solve their own problems.

Bernanke did not attend the meeting.

But Geithner, who is in the same system, represented his attitude. After Paulson, he said briefly: "The Federal Reserve will not provide special credit support."

He looked at the silent crowd and said threateningly: "If you can't find a suitable solution, panic will spread when the market opens next week, and a local problem will turn into a disaster, and the entire financial system will be affected." will be in danger.”

First Paulson, then Geithner.

First the US Treasury, then the Federal Reserve.

Their attitude was to tighten their purse strings and force Wall Street financial giants to spend money to bail out Lehman.

If you don’t save me, you will just wait to die.

If you don’t save us, we will be criticized in office, and you will lose real money.

The bloody smell of the Lehman crisis has reached the tip of my nose!

However, Paulson looked serious and issued warnings and bottom lines, which was still regarded as a game strategy by everyone present.

Many financial giants present here are not in a hurry to express their stance. Of course, we must save, but how to save, how much to save, and how to maximize our own interests all require more precise discussions and more transparent information.

The basic framework discussion is here.

More transparent and detailed information is available next door.

The New York Fed's closed-door meeting lasted two hours.

Then he went to a cocktail party with Fuld, the head of Lehman.

The reception will be held at the Four Seasons Hotel, and an accounting team composed of Goldman Sachs and Credit Suisse will evaluate Lehman's real assets.

Fuld used to be a very personable boss and was nicknamed "The Gorilla" among the people.

However, at the cocktail party, he was more like a flexible monkey, frequently making promises to the heads of various families.

"As long as BNP Paribas provides money, any business is easy to negotiate!"

"Are you Mellon Bank afraid of defaulting? Haha, don't worry, if there is any problem with the first 5 billion, all of it will be repaid by Lehman."

"What? Is this expensive? Citi, you are too shady at this time. I know Lehman needs to pay a price, okay, okay, let's give another 20%!"

Fuld's negotiating conditions are often 5 billion or 20% of the price. However, the more this happens, the more specious the attitude of these financial bigwigs becomes.

He didn't care to lament the difference in the situation at this time, he only wanted to win the last hope of injecting capital into Lehman.

Fuld is very clear about the current situation. The government hopes that a hero will emerge from Wall Street, or that various companies will jointly provide financial support or guarantees to assist a hero in acquiring Lehman.

The people on Wall Street hope that the government can provide some financing, the more the better.

The lobbying at the cocktail party seemed a bit lonely, but other families had quarrels with each other from time to time.

When Fuld felt tired, everyone moved to the conference room. It was almost early in the morning, and the work of the accounting team in the next room had come to an end.

Accounting teams at Goldman Sachs and Credit Suisse were composed of accountants and lawyers, who reviewed assets item by item and questioned Lehman executives relentlessly.

At 0:13 in the morning, the accounting team asked the final questions and needed to discuss and issue a report.

Lane, the head of Lehman's commercial real estate business, was kicked out. He walked into the conference room and saw Fuld, the head of the company.

Fuld gave the former general a questioning look.

Renn couldn't say anything, he just shook his head slightly with an uneasy expression.

Everyone else in the conference room noticed this scene, exchanged glances with each other, and each mentally estimated the situation.

From eight o'clock in the evening until early in the morning, everything that needed to be said was said, and the basic stance that needed to be given was also given. Everyone was quite tired, but also waiting for the final result to be released.

On the 13th, Saturday, New York time, at 1:30 a.m., the accounting team finished its work, and a Goldman Sachs representative walked into the conference room where the big guys gathered and read out the final report.

Among them, the sentence "Lehman's current assets of more than 30 billion US dollars are actually worth only 65% ​​of the book amount, or even lower" brought the atmosphere in the conference room to a freezing point.

This assessment is far from the figures of Lehman head Fuld, and is also very different from the currently discussed framework for an acquisition led by Bank of America, which has initially agreed to use part of the loan plus equity to acquire the company. Lehman makes acquisitions.

This means that the basis for the previous discussion no longer exists and the already weak trust is once again destroyed.

There were whispers in the conference room.

Bernanke, who arrived after the reception started, asked Paulson incredulously: "Did Goldman Sachs deliberately lower the price?"

Although Paulson is not the head of Goldman Sachs now, he undoubtedly controls the direction of Goldman Sachs.

Paulson said nothing.

Instead, Geithner, who was standing next to him, said: "There are people from Credit Suisse present in this accounting. This only proves that Lehman's problem is bigger than imagined, and we should solve the problem faster."

Bernanke frowned deeply and looked at Bank of America, which was being pushed out this time. Over there, Fuld had already crossed the table to denounce Lehman.

"Let's talk again during the day," Paulson said to Bernanke, stood up and walked towards the door of the conference room.

Behind him were Lehman Fold's efforts to retain him and inquiries from many financial tycoons.

However, Paulson still left the conference room without saying a word.

People on Wall Street gathered around Fuld, but Thain of Merrill Lynch quietly pulled people from Bank of America aside at this time. Lehman had so many problems, and Bank of America had an acquisition plan anyway, so why not use this? money to buy Merrill Lynch.

Merrill Lynch's thunderstorm occurred much earlier, and it filed for bankruptcy in July. However, it was treated differently from Lehman. It first received a guaranteed loan from the government, and then received capital injections from various funds and multinational investment institutions, and was temporarily rescued. return.

But that doesn't mean the problem is completely solved.

Since Lehman is not sincere, let us be acquired first, so that Paulson, Bernanke, Geithner and other big guys will not waste so long time.

Once the framework is set up, just change the object.

In the early morning of the 13th, Merrill Lynch was in action.

At the same time, it was half past two in the afternoon in Xiangjiang.

Fang Zhuo received news from different channels one after another, but Geithner's spokesperson Austin was the most accurate and dramatic, talking about "Paulson's black face", "Ford's face" and "Bank of America's helplessness"...

At night in Xiangjiang, Fang Zhuo was still waiting for Austin's call while enjoying the scenery.

However, this time, midway through the call, Geithner himself was on the other end.

"Bank of America gave up its acquisition of Lehman and instead acquired Merrill Lynch!" Geithner said about the latest shocking news.

Fang Zhuo said flatly: "Wow."

"You don't seem surprised?" Geithner noticed the tone.

"I just feel that anything can happen now. It's so unexpected that Lehman has reached this stage." Fang Zhuo said with regret, "Lehman was destroyed by Fuld after a century."

Geithner couldn't tell how true this business sentiment was. He knew what Fang was always doing, and was immediately worried about what the other party was doing: "It's just on the verge of destruction. Bank of America's acquisition of Merrill Lynch is also not bad."

Fang Zhuo's slight surprise disappeared in a circle. Now, for the Fed, at least Merrill Lynch's problem has been properly resolved.

Geithner continued: "The British bank Barclays has made a new offer. They will buy Lehman's North American business for 10 billion, provided that the toxic assets are divested."

"That's Lehman's business with the best cash flow." Fang Zhuo is very familiar with Lehman's situation.

"There is no other way. As long as Barclays is willing to pay, Lehman will accept it even if it doesn't accept it." Geithner's tone was quite vicious. Then he calmed down his anger and said as if he was talking about a very ordinary matter, "Fang General, are you willing to participate in the disposal of Lehman's toxic assets? We are looking for strong buyers."

This was Geithner's main reason for participating in the call, Lehman was going to get a piece of it.

Fang Zhuo didn't know whether to laugh or cry. He reached out to take the tea handed over by his secretary and pondered: "How will Lehman's 'toxic assets' be disposed of?"

There are also less toxic parts of toxic assets.

However, he did not expect that Geithner would be so impatient to extend the invitation.

It seems that this person is very sure that the British Bank is the last guarantee for the acquisition of Lehman and has begun to consider the interests after the Lehman incident.

However, this "Lehman incident" is obviously more impactful than everyone imagined.

"Subscription, auction, and we are also considering whether to introduce a short-term asset-backed securities lending mechanism." Geithner is really serious.

Fang Zhuo suppressed the absurdity in his heart and had an equally serious chat with the New York Fed president about the issue of toxic assets.

Clearly, as close money-making partners, how to define and allocate toxic assets is a murky and profitable matter.

Fang Zhuo could only thank the invitation and express his willingness to let the funds participate in a small round of sharing.

By the time this even somewhat pleasant call was over, there was only one question left.

Will Barclays Bank of the United Kingdom acquire Lehman Brothers' North American business as promised?

Fang Zhuo put aside all activities in the evening and watched a performance of "Swan Lake" on a projector in the hotel. Among them, the solo dance of Odelia, the black swan, made him applaud frequently.

However, the movement of Barclays and Lehman was relatively sluggish, and they did not receive any definite news until they fell asleep in the early hours of the morning.

Fang Zhuo thought about this before going to bed. Lehman's bankruptcy is imminent and has reached 99.99%. The final step may indeed be more troublesome.

At half past five in the morning, the sun was already shining on the water in Victoria Harbor.

Fang Zhuo, who had a relatively light sleep this time, was awakened by the sound of a phone call, but this time it was from Kong Yu.

"Mr. Fang, Mr. Fang, I heard that Barclays Bank's plan to acquire Lehman was rejected by the British Banking Regulatory Authority!" Kong Yu's voice was very excited.

"How do you know?" Fang Zhuo yawned and walked to the floor-to-ceiling window.

"It's all going viral, it's all going viral!" Kong Yu couldn't help but raise his voice, "It seems to be news coming from the UK. Mr. Fang, do you think there will be any new plans from the US authorities?"

It was half past five in the morning in Hong Kong, but it was still the night of the 13th in the United States.

"I don't know. You were the first one to call. Everyone over there must be crazy busy." Fang Zhuo could imagine the ringing of phones in various offices.

Maybe Fuld is crying? Geithner is furious? What does Paulson think?

Fang Zhuo's thoughts were pulled back by the phone call and he said: "Just wait, I believe there will be definite news soon."

Kong Yu said "hmm", hung up the phone, and desperately continued to inquire about the latest news from various channels.

Fang Zhuo didn't ask, he just wanted to hear official news.

When the news came out frequently, Geithner, who was extremely busy, still had time to make a call.

"The Bank of England will not acquire Lehman. The Federal Reserve has decided not to rescue Lehman. Lehman will declare bankruptcy tomorrow." Geithner's voice was low.

Fang Zhuo immediately asked: "Wow, are we going to dispose of more toxic assets?"

Geithner was stunned: "..."

He was silent and didn't know how to answer. In the end, he hung up the phone with a complicated mood.

On the morning of Sunday, September 14, New York time, the British Banking Regulatory Authority rejected Barclays’ acquisition plan, and the Federal Reserve decided to voluntarily abandon all potential commitments to Lehman.

Lehman is confirmed dead.

However, this still requires the corpse to announce its own death the next day.