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By Root 13493 0

earlier that week as a potential lender and had been unimpressed. He also had decided to request some extra collateral from the firm out of fear it might fall. In the next twenty-four hours, Dimon knew, Lehman would either be rescued or ruined. Knowing what he did, however, Dimon was concerned about more than just Lehman Brothers. He was aware that Merrill Lynch, another icon of Wall Street, was in trouble, too, and he had just asked his staff to make sure JP Morgan had enough collateral from that firm as well. And he was also acutely aware of new dangers developing at the global insurance giant American International Group (AIG) that so far had gone relatively unnoticed by the public—it was his firm’s client, and they were scrambling to raise additional capital to save it. By his estimation AIG had only about a week to find a solution, or it, too, could falter.

Of the handful of principals involved in the dialogue about the enveloping crisis—the government included—Dimon was in an especially unusual position. He had the closest thing to perfect, real-time information. That “deal flow” enabled him to identify the fraying threads in the fabric of the financial system, even in the safety nets that others assumed would save the day.

Dimon began contemplating a worst-case scenario, and at 7:30 a.m. he went into his home library and dialed into a conference call with two dozen members of his management team.

“You are about to experience the most unbelievable week in America ever, and we have to prepare for the absolutely worst case,” Dimon told his staff. “We have to protect the firm. This is about our survival.”

His staff listened intently, but no one was quite certain what Dimon was trying to say.

Like most people on Wall Street—including Richard S. Fuld Jr., Lehman’s CEO, who enjoyed one of the longest reigns of any of its leaders—many of those listening to the call assumed that the government would intervene and prevent its failure. Dimon hastened to disabuse them of the notion.

“That’s wishful thinking. There is no way, in my opinion, that Washington is going to bail out an investment bank. Nor should they,” he said decisively. “I want you all to know that this is a matter of life and death. I’m serious.”

Then he dropped his bombshell, one that he had been contemplating for the entire morning. It was his ultimate doomsday scenario.

“Here’s the drill,” he continued. “We need to prepare right now for Lehman Brothers filing.” Then he paused. “And for Merrill Lynch filing.” He paused again. “And for AIG filing.” Another pause. “And for Morgan Stanley filing.” And after a final, even longer pause he added: “And potentially for Goldman Sachs filing.”

There was a collective gasp on the phone.

As Dimon had presciently warned in his conference call, the following days would bring a near collapse of the financial system, forcing a government rescue effort with no precedent in modern history. In a period of less than eighteen months, Wall Street had gone from celebrating its most profitable age to finding itself on the brink of an epochal devastation. Trillions of dollars in wealth had vanished, and the financial landscape was entirely reconfigured. The calamity would definitively shatter some of the most cherished principles of capitalism. The idea that financial wizards had conjured up a new era of low-risk profits, and that American-style financial engineering was the global gold standard, was officially dead.

As the unraveling began, many on Wall Street confronted a market unlike any they had ever encountered—one gripped by a fear and disorder that no invisible hand could tame. They were forced to make the most critical decisions of their careers, perhaps of their lives, in the context of a confusing rush of rumors and policy shifts, all based on numbers that were little more than best guesses. Some made wise choices, some got lucky, and still others lived to regret their decisions. In many cases, it’s still too early to tell whether they made the right choices.

In 2007, at the peak of the economic bubble, the financial