supposed to be in India: Susanne Craig, “Lehman Finds Itself in Center of a Storm,” Wall Street Journal, March 18, 2008.
rumors were rampant that ING: Ibid. When asked about these rumors, an ING spokeswoman said the company would continue to offer funds but will be looking “more carefully at risk and collateral.”
Gregory, who lived in Lloyd Harbor: Lloyd Harbor was Gregory’s primary address, but he owned several other properties, including a 2.5-acre oceanfront estate in Bridgehampton and an apartment at 610 Park Avenue on Manhattan’s Upper East Side. See Michael Shnayerson, “Profiles in Panic,” Vanity Fair, January 2009.
helicopter for his daily commute: Ibid.
missed his son’s lacrosse game: Craig, “Lehman Finds Itself,” Wall Street Journal
He had led Lehman through the tragedy and subsequent disruptions of 9/11: A few days after 9/11, with Fuld leading the way, the firm relocated to the Sheraton Manhattan hotel in Midtown, where desks replaced beds and the cocktail lounge became the global finance group’s base of operations. Eight months later, in April 2002, Lehman moved into its new headquarters. See Andy Serwer, “The Improbable Power Broker: How Dick Fuld Transformed Lehman from Wall Street Also-ran to Super-hot Machine,” Fortune, April 17, 2006.
“Do we have some stuff”: Fuld, as quoted by the Financial Times: “Do we have some stuff on the books that would be tough to get rid of? Yes,” he said, referring to commercial and residential mortgage assets. “Am I worried about it? No. If you have some repricing of these things will we lose some money? Yes. Is it going to kill us? Of course not.” Ben White, “A Fighter on the Ropes,” Financial Times, June 14, 2008.
buying this new tower from Morgan Stanley: In October 2001, Morgan Stanley sold its office building, located on Broadway and West Forty-ninth Street, to Lehman Brothers for $700 million. Charles V. Bagli, “Morgan Stanley Selling Nearly Completed Office Tower to Lehman for $700 Million,” New York Times, October 9, 2001.
“We’ve been characterizing Lehman Brothers”: Joe Kernen, Squawk Box, CNBC, March 17, 2008.
DBS Group Holdings: The memo, however, didn’t mention closing any existing accounts with the firms. Patricia Kowsmann, “DBS Not Entering New Positions with Lehman–Sources,” Dow Jones Newswires, March 17, 2008.
Moody’s reaffirmed its A1 rating: Craig, “Lehman Finds Itself,” Wall Street Journal.
“It’s paving the road with cheap tar”: Fuld, as quoted by Yalman Onaran and John Helyar, “Lehman’s Last Days,” Bloomberg Markets, January 2009.
“Bear Stearns’s demise”: Ibid.
“Lehman may have to follow Bear into the confessional”: McCarty, as quoted by David Cho and Neil Irwin, “Crises of Confidence in the Markets; Federal Reserve’s Rescue of Bear Stearns Exposes Cracks in Financial System,” Washington Post, March 18, 2008.
“I don’t think we’re going bust this afternoon”: This was reported by Andrew Gowers, and while attributed to “the boss” in the Sunday Times of London, “the boss” on the line is actually Jeremy Isaacs, Lehman’s CEO for Europe and Asia, not Dick Fuld. See Andrew Gowers, “The Man Who Brought the World to Its Knees EXPOSED,” Sunday Times (London), December 14, 2008.
“I don’t care who you are”: Fuld, as reported by Gary Silverman and Charles Pretzlik, “Richard Fuld—A Cunning Player Shows His Hand,” Financial Times, August 17, 2001.
As he fumed to the Washington Post: Ianthe Jeanne Dugan, “Battling Rumors on Wall St.; Lehman Brothers Chairman Launches Aggressive Defense,” Washington Post, October 10, 1998.
“We learned we need a lot of liquidity”: Fuld, in an interview with Craig, “Lehman Finds Itself,” Wall Street Journal.
white paper he presented in Davos: Russo’s presentation, titled “Credit Crunch: Where Do We Stand?,” was originally given at the Group of Thirty meeting on November 30, 2007. He updated the paper for the World Economic Forum in January 2008. See http://www.group30.org/pubs/pub_1401.htm.
for $21 million were finished: A broker told the New York Post: “It’s got great bones, but it needs tons of work,” estimating that the renovation of Fuld’s apartment would cost $10 million more. See “$21 Million Wreck,” New York Post, February 6, 2007.
he joined the Reserve Officers’ Training Corps: Fuld’s ROTC recruitment has been reported previously by various publications, including the Wall Street Journal and Fortune, but this scene between Fuld and his sergeant, to the author’s knowledge, has never been published before.
United Merchants & Manufacturers: “Jacob W. Schwab, 89, Textile Manufacturer,” New York Times, March 30, 1982.
Fuld’s Lehman internship: Justin Schack, “Restoring the House of Lehman,” Institutional Investor—Americas, May 12, 2005; Tom Bawden, “Bruiser of Wall St Dick Fuld Looked After His People, But Didn’t Know When to Quit,” The Times (London), September 16, 2008; Annys Shin, “Capitol Grilling for Lehman CEO,” Washington Post, October 7, 2008.
“I truly stumbled into investment banking”: Schack, “Restoring the House,” Institutional Investor.
magnificent 1907 Italian Renaissance building: Ann Crittenden, “Lehman’s Office Move Marks End of an Aura,” New York Times, December 20, 1980.
“He didn’t let his emotions get the best of his judgment”: Edward Robinson, “Lehman’s Fuld, a Survivor, Now Eyes Investment Banking Business,” Bloomberg Markets, July 2008.
Glucksman, who died in 2006: Diana B. Henriques, “Lewis Glucksman, Veteran of a Wall St. Battle, Dies at 80,” New York Times, July 8, 2006.
Lehman’s history: Charles Geisst, The Last Partnership: Inside the Great Wall Street Dynasties (New York: McGraw-Hill, 2001), 49–51; Auletta, Greed and Glory On Wall Street, 27–30.
commercial paper trading operation: Keith Dovkants, “The Godfather, a Man They Call the Gorilla and How a Banking Legend Was Lost,” Evening Standard (London), September 16, 2008.
21 While this anecdote has been reported previously, the scene and dialogue between Kaplan and Fuld have been reported newly by this author. A brief mention of this event was previously reported by Fishman, “Burning Down His House,” New York.
“The Gorilla,” a nickname…stuffed gorilla: Susanne Craig, “Trading Up: To Crack Wall Street’s Top Tier, Lehman Gambles on Going Solo,” Wall Street Journal, October 13, 2004; Schack,” Restoring the House of Lehman,” Institutional Investor—Americas; Louise Story, “At Lehman, Chief Exudes Confidence:” New York Times, June 17, 2008.
“I was one of those people who didn’t want to disappoint Dick”: Fishman, “Burning Down His House,” New York.
the “Huntington Mafia”: Shnayerson, “Profiles in Panic,” Vanity Fair.
“Fucking bankers!”: Auletta, Greed and Glory, 118.
Glucksman, Peter Lusk’s office: David Patrick Columbia, “Highs and Lows,” New York Social Diary, January 27, 2009.
Glucksman ousting Peterson: Ken Auletta “Power, Greed and Glory on Wall Street: The Fall of the Lehman Brothers,” New York Times Magazine, February 17, 1985.
“That’s kind of like talking about my first wife”: Robinson, “Lehman’s Fuld,” Bloomberg Markets, July 2008.
Shearson/American Express acquiring Lehman: Robert J. Cole, “Shearson to Pay $360 Million to Acquire Lehman Brothers,” New York Times, April 11, 1984.
“I loved this place”: Ken Auletta, “The Fall of Lehman Brothers: The Men, the Money, the Merger,” New York Times, February 24, 1985.
“It was like a ten-year prison sentence”: Peter Truell, “Market Place: Is Lehman Ready to Take the Plunge?” New York Times, June 3, 1997.
“Stay together, and you will continue to do great things”: Glucksman’s quote, as well as his pencil demonstration, from Robinson, “Lehman’s Fuld,” Bloomberg Markets.
Fuld pushed out Pettit: Peter Truell, “Pettit Resigns as President of Lehman Brothers,” New York Times, November 27, 1996; Peter Truell, “Christopher Pettit Dies at 51; Ex-President of Lehman Bros.” New York Times, February 19, 1997.
&nbs
p; “You’re the best business fixer I have”: Fishman, “Burning Down His House,” New York.
Fuld began by slashing payroll: And brokers, too. Fuld noted, “Within a week or 10 days we fired 60% of the 550 brokers [who] weren’t representing the firm.” He shaved expenses from $1.25 billion to under $1 billion and fired nearly two thousand people. See “Take Notice, It’s Lehman,” US Banker, May 1, 2001.
“Inside” to Fuld’s “Mr. Outside”: Fishman, “Burning Down His House,” New York.
“I want my employees to act like owners”: Schack, “Restoring the House of Lehman,” Institutional Investor.
point system similar to the one that he used to reward his son: Wall Street Journal, October 14, 2005.
his vacation with James Tisch: “Ben, lead the way”: Schack, “Restoring the House of Leh man,” Institutional Investor.
“Every day is a battle”: Fishman, “Burning Down His House,” New York.
“I tried to train investment bankers”: Robinson, “Lehman’s Fuld,” Bloomberg Markets.
Gregory’s $34 million, Fuld’s $40 million: Yalman Onaran, “Lehman Brothers Paid CEO Fuld $40 Million for 2007,” Bloomberg News, March 5, 2008.
people inside Lehman referred to as a “Joeicide”: Fishman, “Burning Down His House,” New York.
“People need broad experience”: Ibid.
Callan history, early career: Susanne Craig, “Lehman’s Straight Shooter,” Wall Street Journal, May 17, 2008.
“Would it be weird for someone like to me to work on Wall Street?”: From a profile of Callan in NYU Law School’s alumni newsletter, “Erin Callan, ’90: Chief Financial Officer, Lehman Brothers Holdings Inc.,” April 2008. See http://www.law.nyu.edu/alumni/almo/pastalmos/20072008almos/erincallanapril/index.htm
Citadel Investment Group, she orchestrating landmark sale of $500 million worth of five-year bonds: Pierre Paulden, “Rainmakers—Alpha Female,” Institutional Investor, June 2007.
her personal shopper at Bergdorf Goodman: Craig, “Lehman’s Straight Shooter,” Wall Street Journal.
negotiations to buy her dream home: According to New York City housing records, Callan signed both her deed and mortgage on April 16, 2008. Lysandra Ohrstrom, “15 CPW Alert! Lehman Lady Lands $6.5 M. Pad,” New York Observer, April 25, 2008.
15 Central Park West: James Quinn, “Sting Rubs Shoulders with Giants of Finance at $2bn Apartments,” Daily Telegraph (London), February 2, 2008; Christina S. N. Lewis, “Private Properties,” Wall Street Journal, October 3, 2008.
borrow $5 million to pay for the $6.48 million space: According to New York City housing records she took out a $5 million mortgage. Also see DealBook, “Lehman’s C.F.O. Checks into 15 C.P.W.” New York Times, April 29, 2008.
“I don’t want to make too much of words”: Matt Lauer interview with Treasury secretary Henry Paulson, Today, NBC, March 18, 2008.
quoting from the front page of the Wall Street Journal: Robin Sidel, Greg Ip, Michael M. Phillips, and Kate Kelly, “The Week That Shook Wall Street,” Wall Street Journal, March 18, 2008.
Goldman, Lehman first-quarter earnings: Jenny Anderson, “Swinging Between Optimism and Dread on Wall Street,” New York Times, March 19, 2008.
“Lehman kind of confounded the doomsayers”: “Lehman Lifts Mood, and So Does Goldman,” International Herald Tribune, March 19, 2008.
“all in all solid”: Susanne Craig and David Reilly, “Goldman, Lehman Earnings: Good Comes from the Bad,” Wall Street Journal, March 19, 2008.
“There’s no question the last few days”: Callan, from transcripts of the Lehman Conference Call: Lehman Brothers Holdings Inc. (LEH) F1Q08 Earnings Call, March 18, 2008.
“You did a great job, Erin”: Ibid.
The stock would end the day up: Anderson, “Swinging Between Optimism and Dread,” New York Times; Rob Curran “Lehman Surges 46% As Brokers Rally Back,” Wall Street Journal, March 19, 2008.
she slapped him a high-five: Curran, “Lehman Surges 46%,” Wall Street Journal.
“I still don’t believe any of these numbers”: Alejandro Lazo and David Cho, “Financial Stocks Lead Wall Street Turnabout,” Washington Post, March 19, 2008.
CHAPTER TWO
“That makes me want to vomit!”: A version of this story was previously reported by Kelly, Street Fighters, 204.
raise the price to $10: Kate Kelly, “The Fall of Bear Stearns: Bear Stearns Neared Collapse Twice in Frenzied Last Days,” Wall Street Journal, May 29, 2008.
“I could see something nominal, like one or two dollars per share”: Kelly, Street Fighters, 205.
government’s offer to backstop $30 billion of Bear’s debt: A week later, to limit exposure, the Fed revised its offer to $29 billion. See Robin Sidel and Kate Kelly, “J.P. Morgan Quintuples Bid to Seal Bear Deal,” Wall Street Journal, March 25, 2008.
Bear’s shareholders and employees had practically revolted: Ibid.
“This isn’t a shotgun marriage”: Moldaver, as reported by Kelly, “The Fall of Bear Stearns,” Wall Street Journal.
“All these years of deregulation by the Republicans”: Maura Reynolds and Janet Hook, “Critics Say Bush Is Out of Touch on the Economy,” Los Angeles Times, March 18, 2008.
Paulson advising Bush on his Economic Club speech: Kelly, Street Fighters, 34.
“You may need a bailout, as bad as that sounds”: Ibid.
worked in the Nixon White House: In 1972, after two years as a Pentagon aide, Paulson assisted John Ehrlichman, Nixon’s domestic policy chief, who would later be jailed for his role in Watergate. See “The Quiet Ascendancy of Hank Paulson,” Institutional Investor, July 1, 1998.
“I will get down here and”: David Cho, “A Skeptical Outsider Becomes Bush’s ‘Wartime General,’” Washington Post, November 19, 2008.
pushing especially hard for Paulson: See Fred Barnes, “Bolten’s White House: And Why Hank Paulson, the Former Goldman Sachs Chief, Is the New Treasury Secretary,” International Economy,
had been a “pioneer” for Bush: Landon Thomas Jr., “Paulson Comes Full Circle,” New York Times, May 31, 2006; Terence Hunt, “Treasury Secretary Snow Resigns, Replaced by Goldman Sachs Chairman Henry M. Paulson,” Associated Press, May 30, 2006.
“This is a failed administration”: Ellis, The Partnership, 662.
“I love my job”: Susanne Craig, “Boss Talk: Goldman CEO Tackles Critics, Touchy Issues,” Wall Street Journal, April 26, 2006.
“Fear is the fountain of sickness”: Eddy, Science and Health, 391–92.
He demanded assurances in writing: Cho, “A Skeptical Outsider,” Washington Post.
same status in the cabinet as Defense and State: Deborah Solomon, “Bush Taps Paulson as Treasury Chief—Goldman CEO Is Promised More Power Than Snow,” Wall Street Journal, May 31, 2006.
“As a prudential matter, I will not participate”: From the six-page “Ethics Agreement of Henry M Paulson Jr.,” dated June 19, 2008.
some 3.23 million shares: “Paulson to Sell His Goldman Shares,” Bloomberg News, June 22, 2006.
“Given how [Hank] moved from a low-ranking position”: Valerie Shanley, “Profile: Hank Paulson,” Sunday Tribune (Dublin), September 14, 2008.
Goldman Sachs in turmoil: “Goldman Seeking Capital Investment; Firm Beset by Falling Profits, Departing Partners,” Bloomberg, September 16, 1994.
“Hank, nothing could please me more”: Ellis, The Partnership, 541.
looked at dozens of apartments: Kevin McCoy and Edward Iwata, “Treasury’s Paulson Is ‘The Hammer’ Behind the Bailout,” USA Today, September 23, 2008.
cutting expenses by 25 percent: Emily Thornton, “Wall Street’s Lone Ranger,” BusinessWeek, March 4, 2002.
Ex-partners seeking to return, being rebuffed: Of the five partners wanting to return to Goldman in 1995, only one was welcomed back (he had “gone limited” but continued to work for the firm while away). See Endlich, Goldman Sachs, 228.
became co-chief executive in May 1998: Paulson was named G
oldman’s co–chief executive and co-chairman on June 1, 1998—less than two weeks before Goldman voted to go public. “Goldman Sachs Promotes Paulson, Takes Step Toward Public Offering,” Dow Jones, June 1, 1998.
$300 billion as a part of a Wall Street of bailout Long-Term Capital: Lowenstein, When Genius Failed, 215.
Goldman pulling its IPO: Patrick McGeehan, “Goldman Shelves Plan to Go Public—Unsettled Markets Cited as Chief Cause,” Wall Street Journal, September 29, 1998.