$125 billion is a lot to bluff over in these times
John Mack “quickly signed,” the Wall Street Journal said in its coverage of the Treasury meeting with America’s top nine banking chiefs on Monday.
Maybe he did, or maybe he actually signed in alphabetical order — which would put him somewhere in the middle. “Before the meeting, John J. Mack said his bank, Morgan Stanley, did not need capital from the Treasury. It had just sealed a $9 billion deal with a large Japanese bank,” according to the New York Times account of the same event.
The details here might paint different pictures of Morgan Stanley, but the outcome is all the same. Mack and each of his peers definitively signed away on a $125 billion cash injection (executive pay caps included). Both papers clearly made that point in their coverage of the Washington gathering between the nine CEOs, Henry Paulson, Ben Bernanke and other government officials.
And the initial objections, the arguments, the speculation over who signed first vs. who signed last were all part of a great CEO bluffing game. The most eager to sign might seem least confident in the eyes of his investors, but the last to throw in his cards and take a portion of the split pot might lose his best bet.
Not even the clean John Stumpf of Wells Fargo could afford that bluff.
The reasons are countless, but in today’s news alone:
The Dow fell 733 points, bringing it down to 8,578, and all major indexes lost at least 7%.
JP Morgan’s third-quarter earnings fell 84%.
Citigroup continued its litigation against Wells Fargo for billions of dollars in damages over a lost bid for Wachovia.
And all that toxic debt is still floating around.
The credit crisis has only begun to show how bad it can get, and just like with oil reserves, nobody knows where the bottom is. The poker faces are officially off.
October 17th, 2008 at 9:30 am
Good post. Didn’t know about this poker game mentality. Anyone know what the new restrictions on executive pay will be?
October 19th, 2008 at 1:48 pm
I think the post might have worked better with a lede that began something like
When Henry Paulson summoned the CEOs of the nine biggest banks to Washington to tell them he was about to give them capital, the meeting seemed to turn into some sort of high stakes poker game. The bluffing had nothing to do with winning the pot, but with preserving face.
The post could have played out from there.