Lehman Boss's Weekend from Hell
On the September weekend when Wall Street went poof, a friendless Dick Fuld, CEO of Lehman Brothers, the 158-year-old securities firm, couldn't get his phone calls returned.
In September, Lehman reported a $4 billion loss; JPMorgan Chase, its largest trading partner, demanded it put up $5 billion in collateral, and its stock started to tumble. Fuld had sworn to colleagues that he wouldn't sell the company. In a way, he got his wish. Having started sales talks far too late to save Lehman, Fuld found himself shut out of the endgame that saw Lehman file for bankruptcy. The Wall Street Journal has the details:
Desperate to avoid steering his 25,000-person company into bankruptcy proceedings, Mr. Fuld dialed the Charlotte, N.C., home of Bank of America Chairman Kenneth D. Lewis. His calls so far that weekend had gone unreturned. This time, Mr. Lewis's wife, Donna, again picked up, and told the boss of Lehman Brothers: If Mr. Lewis wanted to call back, he would call back.
Mr. Fuld paused, then apologized for bothering her. "I am so sorry," he said.
Ken Lewis never called him back, because he was in the midst of negotiating a $50 billion purchase of Lehman rival Merrill Lynch.
Executives at the British bank Barclays, another potential suitor, were talking about an acquisition with their counterparts at Lehman at the behest of U.S. officials. But Fuld was not welcome:
Lehman's talks with Barclays, meanwhile, were moving forward at the New York Fed, under the eye of government officials. "Shouldn't I be there?" Mr. Fuld said to Lehman President Mr. McDade and to attorney Rodgin Cohen of Sullivan & Cromwell LLP, a longtime adviser.
What Mr. Fuld appeared not to know was that some top government officials had instructed key Lehman representatives at the Fed building to keep Mr. Fuld away that weekend. The federal officials had explained that Mr. Fuld — not only Wall Street's longest-serving boss, but a director of the New York Fed — could be an unnecessary distraction and a lightning rod for criticism.
Late Sunday night, as Lehman's board met to debate whether the company should file for bankruptcy, SEC chairman Christopher Cox called in, but he had no helpful advice for Fuld or his fellow directors:
One of Mr. Fuld's assistants broke in to hand him a note: The SEC chairman wanted to address Lehman's board by speakerphone.
Mr. Cox, criticized for his allegedly minor role in the government's bailout of Bear Stearns, had been reluctant to call Lehman. The SEC chief finally called from the New York Fed, surrounded by several staffers, at the urging of Mr. Paulson, the Treasury secretary.
"This is serious," said Mr. Cox. "The board has a grave matter before it," he said.
John D. McComber, a former president of the Export-Import Bank and a Lehman director for 14 years, asked: "Are you directing us to authorize" a bankruptcy filing?
The SEC chief muted his phone. A minute later, he came back on the line. "You have a grave responsibility and you need to act accordingly," he replied.
As the meeting wrapped up around 10 p.m., Mr. Fuld, his suit jacket now off, leaned back in his chair. "I guess this is goodbye," he said. Lehman would file about four hours later.
(Photo by Karen Bleier/AFP/Getty Images)