Jamie Dimon may have missed the memo about not kicking a man when he’s down, a section of today’s FCIC report reveals.
The JPMorgan chief was one of the few bank CEOs in September 2008 that could walk around without his tail between his legs.
Which is why the Fed was harassing the bank to save one of its stricken competitors.
As everything came to a head that week in September, Jamie Dimon was not going to be bullied into a corner just because his bank was one of the few that was in a position to help out.
He was going to play hardball.
On the Thursday morning before Lehman imploded, Fed officials circulated the outline of a plan to assemble a group of counterparties and creditors who would make plans to deal with a Lehman bankruptcy. Those parties would agree to hold off on fully exercising their rights to close out their trades with Lehman and would instead reduce all their exposures using a “common valuation method.”
But JP Morgan was basically like – ah, no.
The bank would only agree to the “net down” plan if Lehman posted another $5 billion in cash by the opening of business tomorrow on Friday morning.
If Lehman didn’t come up with the funds, JPM would “exercise our right to decline to extend credit to you.”
That’s what Jamie Dimon said to Dick Fuld on the phone that day, and to Lehman’s CFO and Treasurer, Paolo Tonucci.
Tonucci replied that there was absolutely no way Lehman could scrounge up the money. To which Dimon said, well that’s not our problem.
Tonucci told the FCIC,
“They just wanted the cash. We made the point that it’s too much cash to mobilize. There was no give on that. Again, they said ‘that’s not our problem, we just want the cash.'”
And do you know what JD said to Tonucci when asked he what would keep JP Morgan from asking for another $10 billion tomorrow? “Nothing, maybe we will.”
Way to mess with their heads!
Of course, the Fed was not enjoying Dimon’s mind games. And hadn’t been for a long time. Apparently, earlier in the year, when officials realised JPMorgan was going to play tough, one of them said to Tim Geithner: “tell those sons of bitches . . . to unwind.”