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States of America is powerless. And we can do whatever we want for a commercial bank,

but for an investment bank we can't. And we've got a problem.' [Even though this] was

true. And so what I said was something very narrowly true.

"What I'd meant was, ' If there had been a deal where we could have put government

money in, I would have considered it.'"

While Paulson talked to the press, Diamond and McDade set up a war room on Lehman's

31st floor, where Fuld could watch them brain-storming through the window of his

office--a somewhat uneasy arrangement for all parties.

"It was really horrible to watch him suffer," says one of Fuld's friends.

But Diamond, sorry as we was for Fuld, had to get down to sealing the deal of his career.

To stave off Armageddon while Barclays hammered out a deal, Lehman's clearing bank,

JPMorgan, had agreed to keep the New York trading desk in working order by funneling

the broker-dealer tens of billions of dollars in loans from the New York Fed. JPMorgan

CEO Jamie Dimon would later claim in a letter that JPMorgan did this at the request of

not only Lehman and the New York Fed but Barclays itself. Lehman had to survive.

Or, rather, Lehman America did. Lehman's treasurer, Paolo Tonucci, had been instructed

not to move any money outside the United States. (Usually Lehman did; it moved $8

billion to Europe.) This meant that on Monday morning, in London, Christian Meissner

had no money to pay his 10,000 employees, and no news to deliver.

Meissner was livid. He was surrounded by chaos. His secretary was due to give birth and

suddenly she had no health insurance. People stopped coming in to work; no one knew if

they'd be paid that week.

"You' re on your own," Tom Russo says he told the firm's London general counsel,

Andrew Wright, during a phone conversation. After all, if not for the protectionist

unresponsiveness of the British at the Financial Services Authority (FSA), many felt that

the firm might still be alive. "Please don't ask me to feel sorry for the British," one

Lehman senior executive said. "After what they did to us over the weekend? Please! They

got what they deserved." This was payback for the FSA and for Alastair Darling.

Meissner felt that Fuld had shafted him. Where was "one firm" now? Why hadn't

McDade and Fuld tried to negotiate for Europe and Asia, too? But Barclays Capital

wasn't interested in Europe and Asia.

Meissner implored employees to come to work, since the firm's value lay in its people.

Meanwhile he tried to keep cool and look for a buyer in markets that were shifting like

roiling seas.

In New York, Diamond and McDade were hammering out basic terms. First on the

agenda was that the deal could not move forward unless eight key executives, including

Skip McGee, Eric Felder, Jerry Donini, and Ian Lowitt, stayed. They were apparently

offered generous retention packages, which rumors had put at high as $50 million for

McGee (he said this was a "ridiculous" figure).

Significantly, McDade, Kirk, and Gelband were not among the eight. Gelband would

quickly leave for the hedge fund Fortress. McDade and Kirk knew Diamond already had

his own trusted deputies, so they would be on their own. After ensuring a smooth

transition, they left in November 2008.

On Tuesday, September 16, Diamond felt sufficiently confident that he'd got a deal that

he went down to the trading floor mid-afternoon and announced that for $17 billion

BarCap had bought the U.S. broker-dealer.

He was met with a standing ovation.

Upstairs was Fuld, who sent out a letter saying he felt "horrible" about what had

happened. He wanted to go down to the trading floor, too--but McDade stopped him.

"We were worried someone might try to hit him," a colleague said.

Fuld had not yet realized how the firm felt about him. A picture of his face was being

defaced by angry bankers on the office wall.

As soon as McGee had shaken hands with Diamond to seal their deal, he flew to London

to see if he could help Meissner while