Please, please take your seats. That includes you, Hank.
Welcome to our annual closing dinner. In years past, we gathered to celebrate the deals of the year and the deal makers behind them. But given that 2008 turned out to be the worst in modern history, this isn’t going to be much of a party.
I apologize in advance for the box wine and paper plates—a far cry from our dinner at the Burj al Arab hotel in Dubai last time. My request for TARP funding went unanswered.
It’s nice to see so many familiar faces in the crowd. At the dais, there’s the new top deal-making troika: Henry M. Paulson, treasury secretary; Ben S. Bernanke, chairman of the US Federal Reserve; and Timothy F. Geithner, president of the Federal Reserve Bank of New York and Paulson’s designated successor.
Then there’s Lloyd C. Blankfein from Goldman Sachs Group Inc. and John J. Mack from Morgan Stanley at the other table near the front, joined by their bank holding company peers, Vikram S. Pandit of Citigroup Inc., Jamie Dimon of JPMorgan Chase and Co. and Kenneth D. Lewis of Bank of America Corp. The party planner put you all at the same table because you were all listed under “government”.
Over at Table 8 is Carl C. Icahn, the activist of activists; Jerry Yang of Yahoo Inc.; and Steven A. Ballmer of Microsoft Corp. It seems like eons ago, but it was just last year that you battled each other and frankly, you all lost, some more than others. We’ll get to how you can fix that in a moment.
Alan Greenspan was good enough to make it. I’m sorry to say that your $100,000 (Rs48.7 lakh) speaking fee last year will look like a bubble in 2009. But you know all about bubbles. I see you’re sitting with John Paulson, hedge fund manager extraordinaire, who successfully shorted everything you created. When TARP runs out, John, we’re coming to you. Or to you, Warren Buffett, playing bridge with Jimmy Cayne in the corner.
A special thank you to judge Gabriel Gorenstein for allowing Bernard L. Madoff out of his apartment to join us this evening. We had to seat you by yourself, Bernie, with security, for obvious reasons. Do me a favour: Please stop telling the bathroom attendant that if he gives you a dollar you’ll come back tomorrow with $10.
There’s the “toes up” club in the back: Richard S. Fuld, the erstwhile head of Lehman Brothers Holdings Inc.; Robert B. Willumstad, formerly of the American International Group Inc.; Daniel H. Mudd, late of Fannie Mae; Richard F. Syron, formerly of Freddie Mac; and Alan D. Schwartz, the one-time chief of Bear Stearns Cos Inc.
Finally, it’s nice to see the private equity gang come out, even though 2009 is arguably going to be your toughest yet. Remember: BK doesn’t stand for Burger King—it’s short for bankruptcy.
And now onto the official toasts and roasts (with a little friendly advice thrown in).
Bank of the year, for now: Jamie Dimon, take a bow. You managed to steer JPMorgan through the crisis largely unscathed, avoiding the worst of the subprime mess, and picked up Bear Stearns over a weekend.
The good news is that your bank is at the top of the heap—more solid, at least for the moment, than even Goldman Sachs. The bad news is that what goes up...well, you know.
Rough roads ahead:Stephen A. Feinberg, I hate to say it, but if 2008 was a mess for you, this year is only going to be worse. The government bought Chrysler Llc. and GMAC Llc. a temporary reprieve but come March, when Detroit has to submit its new business plans to Congress, the debate about private equity’s role in the automobile industry’s debacle is likely to re-emerge. Like it or not—and I’m sure you don’t—your firm, Cerberus Capital Management Lp., is in the headlights now.
Showtime at Apollo: Leon D. Black, you became the whipping boy of the leveraged buyout industry in 2008. If your companies go BK in 2009, things will be even tougher. So it’s time to show the world that you can weather the storm with your reputation intact.
The struggles at the companies you’ve bought, such as Harrah’s, have been well reported. You tell us we don’t get it, that your firm, Apollo Management, does best during downturns. It doesn’t seem that way this time around, but for your sake, I hope you rise to the challenge.
Yahoo’s losers: Mr Ballmer, Mr Yang and Mr Icahn: What a mess you all made. At first blush it looks like Ballmer is the smart one. Look at how far Yahoo’s shares have fallen. He could now buy it on the cheap.
But, Mr Ballmer, Yahoo has lost a lot of value because of your little game. Maybe that was your goal. But Microsoft didn’t increase in value or market share in the meantime either, so it’s hard to claim success. Buying Yahoo now would be buying a diminished asset. Whatever you do in 2009, try not to let ego trump logic.
Good deal, bad form:John A. Thain, you deserve a round of applause for selling Merrill Lynch to Bank of America before Mother Merrill went the way of Lehman Brothers. That’s the good news. The bad news is that you have a tin ear. You asked your board—in this environment!—for a $10 million bonus. And even though your press people said you withdrew the request on your own, it was only after the board told you in no uncertain terms that you wouldn’t get it.
By the by, this is an issue everyone in the room should take note of. Many of you have taken no bonus in 2008, but 2009 will be a different story when you start having cash flow problems. It’s time to downsize. I’ll say it to you, Mr Thain, but it applies all around: Eat your fill tonight—then prepare to tighten your belt.
©2009/The New York Times