• Choose a category
• All
• Classic-Fiction

company," Paulson later said. "And the run on Lehman had begun before the weekend."

The afternoon after Paulson told Geithner and Christopher Cox, the head of the SEC, that

Lehman would have to file for bankruptcy, Fuld sent McDade and his team back down to

the New York Fed to make sure Geithner fully understood the ramifications of letting

Lehman go. When McDade returned, Fuld asked him: "Did they get it?"

"They got it," McDade replied, wearily.

Meanwhile, Scott Freidheim was drafting an assortment of press releases about the

possible fate of the firm. George Walker entered his office at one point and took a look.

"We've got to take investment management off the table," said the nimble-minded

Walker. "Our portfolio managers have to be allowed to continue to manage clients' assets

or there will be massive client losses."

Walker was working feverishly to sell Lehman's investment management division. After

almost two weeks of round-the-clock negotiations, Bain Capital and Hellman &

Friedman agreed to purchase the majority of the investment management division in two

equal parts for $2.15 billion on September 29, 2008. The investment management

division, which consisted of NeubergerBerman, Lincoln Capital, and Crossroads, among

others, was immediately renamed after its largest operating unit: NeubergerBerman.

Walker would remain its chief executive.

But the story didn't end there.

U.S. bankruptcy law dictates a subsequent re-auction to ensure that the business had been

bought for a fair price.

Against the backdrop of plummeting global equity markets, few companies were willing

to top the Bain and Hellman & Friedman bid, which itself was looking less certain as the

S&P 500 index dropped beneath the agreed floor of 903. NeubergerBerman could be in

limbo and might, like its parent company Lehman, be sold for $1.

To ensure the survival of the business, should the Bain and Hellman & Friedman bid not

close, Walker submitted a bid from NeubergerBerman's own management.

On December 3 he won; 51 percent of NeubergerBerman was now owned by the

management and 49 percent by the Lehman creditors.

For Walker, who had done a straight stock swap when he joined Lehman from Goldman,

it was a remarkable end to a two-year roller-coaster ride.

Around 6 P.M. Sunday night, the Lehman board convened at 745 Seventh Avenue. In the

middle of the meeting, SEC chairman Christopher Cox phoned Fuld's office. Fuld

transferred the call to the board. "The Fed and the SEC are in agreement you should file

for bankruptcy," Cox told them. The implication was that if they didn't, they could be

personally liable.

Fuld looked stunned. So, too, did Harvey R. Miller, the veteran bankruptcy attorney of

Weil, Gotshal & Manges, who had to put together the quickest bankruptcy papers of his

career. Too fast, he reportedly said. This is going too fast.

There was also a hitch. Before Weil, Gotshal & Manges could proceed, it needed its

payment of around $20 million for the filing. According to Steve Berkenfeld, this was

because "they had a claim as a secured creditor against Lehman." As both the firm's

attorney and creditor, "they had a conflict."

So, who did Lehman have to ask for the $20 million? The bank apparently in charge of its

destiny all along: JPMorgan Chase.

According to Berkenfeld, Steve Cutler, JPMorgan's general counsel, initially balked at

handing over $20 million to Lehman, explaining that a "higher authority" had frozen all

Lehman's accounts. Berkenfeld says, he was about ready to snap at that point. Many at

Lehman groused about Dimon "hovering" around their team at the New York Fed that

hellish weekend--wearing black jeans and a black silk shirt and "you know, looking very

hip," recalls one of the attendees.

"I don't know if ' higher authority' means Jamie Dimon or if it means somebody outside

of your organization," Berkenfeld told Cutler, "but when we take your deposition, we will

find out. All right?"

The funds were released.

Lehman could now file