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arguably the second most senior woman in the investment banking division, told Fuld

point blank that Callan did not have the right skill set to be the CFO, and that this was the

worst possible time to experiment. They were courting disaster. Her arguments fell on

deaf ears.

Gregory was thrilled--he had put a woman on the executive committee. To celebrate, a

dinner was given in Callan's honor at La Grenouille, something that hadn't been done for

anyone else promoted to the big table.

Callan was given three months to get up to speed, which meant that Chris O'Meara put

out the earnings call in November 2007 announcing yet another record year, with

revenues reaching $19.3 billion, along with the boast that the firm had "maintained a

conservative funding framework to mitigate risk."

The company's liquidity pool had grown by $7 billion in the last year. All divisions had

record revenues. Marquee transactions had included work on the Blackstone IPO, the

Fortress IPO, Man Financial IPO, Citi, and Ochs Ziff. Banking got its first significant

advisory assignment for General Electric, which was for the sale of GE Plastics. Standard

& Poor's rated Lehman at A+, while Moody's had it at A1 and praised the "scale and

breadth of the franchise."

The other big banks were mystified. How could they all be suffering while Lehman was

doing so well?

Lehman held a dinner for its alumni in 2007, at the suggestion of Scott Freidheim, who

had taken it upon himself to copy Goldman Sachs and McKinsey--both companies found

that an alumni network was a useful ecosystem of relationships that often spawned new

business.

Fuld was a gracious host all evening. He was thrilled to greet successful men such as

Steve Schwarzman, Peter Solomon, and Peter Cohen, who all came to toast Fuld and the

extraordinary story of a phoenix rising from the ashes--in this case, literally, after 9/11.

A cocktail reception was also held for the so-called A-minus list in the pool room of the

Four Seasons restaurant. Fuld spoke to a packed crowd.

Not everyone was blinded by the bonhomie. Steve Carlson, the former head of emerging

markets, who was now the chairman of Provident Group, had a question for Steve

Lessing: "Stevie, aren't you worried about the real estate?"

Lessing, careful not to ruin the spirit of the night, raised his glass in toast, and said, "Oh,

don't worry--we're hedged."

Chapter 16

The Talking Head

I guess you could argue that Erin Callan was an interesting idea--and at a different

moment in time might have been a brilliant choice. But it was the worst moment to put a

rookie in the seat--very unfair to her.

--Peter A. Cohen

In the middle of a bank run, perception is reality. In the early spring of 2008, Bear

Stearns was perceived to be the Wall Street firm most vulnerable in the mortgage crisis-and as soon as one big client began asking questions about its solvency, it was fighting

for its life. Erin Callan, a new species of CFO (Conspicuous and Female) was perceived

to be one of Lehman's biggest assets, and was, to some, a welcome change from the old

way of doing business.

She was tall, five feet eight inches, blonde, and had dimples. She was confident and

voluble. She looked and sounded like a straight talker. Meanwhile, Bear Stearns CEO

Jimmy Cayne's marijuana habit had been news since the Wall Street Journal first

reported it in November--the sort of gossip that corroded the image of the firm as it

slouched toward the abyss.

Bear Stearns's stock lost more than half its value the week of March 10, closing at $30 on

Friday, March 14, after JPMorgan agreed to facilitate a Federal Reserve maneuver to

keep Bear afloat while they could look at the implications of its demise.

That weekend JPMorgan CEO Jamie Dimon and about 150 of his employees descended

upon Bear to begin scouring the books, and by Sunday, March 16, he had determined that

about $30 billion of the firm's securities were too risky to take on without government

help. Much to the horror