Saving the Sun by Gillian Tett

Author:Gillian Tett
Language: eng
Format: epub
ISBN: 9780061877636
Publisher: HarperCollins

By the start of September, Ripplewood seemed tantalizingly close to victory. J. P. Morgan had pulled out of the negotiations, partly because it could not stomach the idea of the “put.” It was willing to make a bid with a simple loss-sharing scheme, but it feared that if—or when—the Japanese public ever realized the implications of the “put,” there would be a backlash against the new owners of LTCB. “We just thought the whole put idea was crazy,” a senior J. P. Morgan executive later explained. “We were in a totally different position from a vulture fund and just could not afford that level of reputation risk.” Ripplewood, however, had agreed to the “put.” Flowers could see that the “put” could be very lucrative, if the government honored the deal. And as long as the investors had a legal contract—and the government did not try to rip up the contracts—he reasoned that Ripplewood would be in a watertight position. “There are a lot of ways to do mechanically what the ‘put’ achieved, but I think it was the right way to proceed,” Flowers later insisted.

Rumors swept Tokyo that the Americans had won the bid. Then, some of the Japanese bureaucrats and politicians started to panic. Back in the autumn of 1998, plenty of politicians had been willing to talk about reform in a theoretical way; but now that they were staring a vulture fund in the face, they were getting cold feet. Moreover, by the autumn of 1999, the political climate was subtly shifting. When LTCB had collapsed in October 1998, the mood was swinging in favor of bank reform—partly because there was a sense of economic crisis. Then, during the course of 1999 the economy had started to recover again and the shares of banks had soared. So, in a familiar pattern that had been played out in Japan over and over again during the 1990s, as the sense of crisis ebbed, the reform demands receded as well. By the summer of 1999, with the Nikkei near 20,000, the need to overhaul the banking sector—or appease the Americans—did not seem so urgent.

Behind the scenes, some bureaucrats and politicians dragged Chuo-Mitsui back into the fray. During the summer, the Japanese bank’s bid for LTCB had seemed to lose steam, largely because the Japanese bank was blatantly unenthusiastic. It had not bothered to submit any bid at all until July 9—or two months after Ripplewood made its first bid. And when it did make an offer, it filled this with such impossible conditions that the LTCB bankers had the impression Chuo-Mitsui was deliberately torpedoing its chances. As September dawned, politicians and bureaucrats exhorted Chuo-Mitsui to try a bit harder. “We felt it was unhealthy to not have a Japanese bid,” one senior bureaucrat later explained. The hapless Chuo-Mitsui dutifully complied—yet again—and the local media started to run stories suggesting that a Japanese bank was now going to win.

Alarmed, Collins and Flowers rallied the troops. They could not bear to have come so close, only to see LTCB slip out of their hands at the last minute.

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