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the next eight years, with a maximum of $50 million in any one year. The Lehman senior

management saw it as a "Get Out of Jail Free" card. The terms weren't that bad--and

finally they were in charge of their destiny.

To fund the spin-off, Amex agreed to inject over $1 billion into Lehman--$904 million to

buy Lehman common shares that would then be distributed to Amex shareholders as a

special dividend, plus another $200 million to buy Lehman preferred shares. American

Express would not hold a single common share of Lehman, nor have a single seat on its

board.

The deal still had to be approved by American Express's board--most of whom were

skeptical that a spin -off was a good thing. Lehman, after all, made money. Golub

placated them by saying that the spin-off would be tax-free.

Golub asked John Cecil and Lehman investment banker Michael Odrich, a good-looking,

personable banker who was then Fuld's chief of staff, to make a presentation to the board,

explaining how Lehman could be successful as a public company. It was set for January

20, the day of the AT&T Pro-Am golf tournament at the legendary Pebble Beach golf

course, and Odrich says he appealed to Fuld for a dispensation so that he could play in

that event. He reminded his boss that if one played even once in the Pro-Am, one was

"in" for life, but if one declined an invitation, one wasn't invited back. Golf was an

obsession for both Fuld and Odrich (and was the hobby of choice at Lehman), but Fuld

told him no, and said he 'd make it up to him. (He never did.)

The presentation--a basic run-down of the businesses within Lehman, and what the

economics looked like going forward--went over well, and the board signed off on the

deal. Two memorable moments occurred, first, when former Secretary of State Henry

Kissinger, then on the American Express board, opened a sweetener packet, emptied it

into his iced tea, then stirred the beverage with his pencil--eraser end first.

The second was when another board member, former U.S. President Gerald Ford, asked

Golub if he could please explain the difference between "equity" and "revenue." There

was an awkward moment of silence as everyone digested this.

One person in the room recalls that Golub "did a very skillful job. I was very impressed.

It's a very basic concept, and he explained it to the former president without making it

sound like he was talking down to him."

On May 2, 1994, Lehman went public. By the end of the month, the spin-off complete,

Golub reportedly exclaimed, "Let this puppy fly!" Cecil had been persuaded to come

onboard--theoretically as chief administrative officer (CAO). Cecil understood implicitly

that he was number three in the food chain, with Pettit immediately above him.

It was an arrangement that sat well with all three. Neither Pettit nor Fuld felt threatened

by Cecil, who was aided in this regard by his unimposing physique and academic

manner. Traders regularly joked about his analytical brain being woefully out of place in

a bank made up of rough-and-tumble brawlers.

At one meeting Fuld said, "John, what do you think?"

"I' m still thinking," came the reply.

"Well, get yourself warmed up," said Fuld. "We' re waiting."

But Cecil was a valuable member of the team. He was able to analyze the new bank

objectively, identify its strengths and weaknesses, and give Fuld and Pettit guidelines for

what they needed to do.

The short answer: There was a lot that needed fixing.

Despite the valiant predictions to the American Express board and the garish celebration

held in the Winter Garden Atrium, a party venue in downtown New York where balloons

cascaded down from the ceiling and where Lara Pettit recalls her father standing "very

proud, upright, his fist in the air" reminiscent of a triumphant French revolutionary, the

new Lehman Brothers was very fragile.

By September, Lehman began buying back stock from investors who owned fewer than

100 shares. Earnings in the second quarter of 1994