By Guy Smith
Producer, The Bank That Bust The World
It was one of the most dramatic weekends that Wall Street has ever known.
News of Lehmans collapse sent shockwaves round the world
And for each person who witnessed the collapse of Lehman Brothers, there came one telling moment when they realised the game was up for the stricken bank.
For some, it was an incidental comment or an overheard remark. For others, it was the reading of a confidential balance sheet or a discreet conversation on the fringes of a meeting.
But for each and every one, there came a dawning realisation during Saturday, 13 or Sunday, 14 September 2008 that the fourth biggest investment bank in America was about to go under and there was nothing they could do to save it.
Brink of collapse
The final act in the drama began the day before.
BBC AFTERSHOCK SEASON
The BBC reports on the first anniversary of the credit crunch across radio, TV, and online.
On the evening of Friday, 12 September, the chief executives of America's leading banks were summoned to an emergency meeting at the New York Federal Reserve in Lower Manhattan's financial district.
US Treasury Secretary Hank Paulson warned the assembled titans of Wall Street that Lehman Brothers was about to collapse, and that the government would not step in to rescue it.
For the next 48 hours, Federal Reserve and Treasury officials, bank chiefs, their lawyers and accountants searched for ways to save Lehmans. But without government financial support, it was a hopeless task.
Merrill Lynch chair and CEO John Thain on the Lehman Brothers collapse
For John Thain, chairman and CEO of Merrill Lynch, the realisation that Lehmans was doomed came early.
Watching the president of the bank face prolonged questioning from Treasury officials made him realise that the game was up.
"Seeing him and understanding the emotional drain of what was happening to him and then knowing that, on Saturday, it was likely they were gonna go bankrupt, in some ways reinforced me. I didn't wanna be that person a week later," Mr Thain said.
So Mr Thain promptly called Ken Lewis, the chief executive of Bank of America, and suggested they discuss "some strategic options".
2008 CRISIS TIMETABLE
7 SEPT: Fannie Mae nationalised
15 SEPT: Lehman bankruptcy
18 SEPT: Lloyds takes over HBOS
19 SEPT: $700bn US bail-out plan
29 SEPT: Bradford and Bingley nationalised
5 OCT: Bail-out plan agreed by Congress
12 OCT: UK bails out RBS and Lloyds-HBOS
Two days later, Bank of America bought Merrill Lynch for $50bn (£30.3bn; 34.5bn euros).
For Rodgin Cohen, counsel for Lehman Brothers, the first suspicions that the bank would go under came on Saturday afternoon, when he heard a rumour that Bank of America was talking to Merrill Lynch.
"There was a slip of the tongue in a meeting that I was at in the Fed," he says.
He passed the news on to Dick Fuld, the CEO of Lehman Brothers who was holed up at the group's Midtown headquarters. "I called Dick and said, 'I'm very worried that this is accurate.' And he said, 'I can't believe it.' And there was an adjective which I will not repeat - or an adverb, I guess - before the words 'believe it'."
Rodgin Cohen's worst fears were confirmed the following afternoon, when Treasury Secretary Hank Paulson came out of a meeting and announced that a proposed deal with Barclays Bank had fallen through. He knew then that "death was imminent".
For private equity manager Christopher Flowers, it was "the most extraordinary weekend" of his business career.
Fears for the health of global finance groups mounted after Lehmans
When he heard that Barclays were not going to buy Lehmans, he, too, knew there was nothing else that could be done to save the bank.
"Frankly, I think if Jesus Christ ran Lehman Brothers, it wouldn't have made any difference. The outcome ultimately would have been the same," he says.
Harvey Miller, America's most famous bankruptcy lawyer, had been on hand all weekend in case the worst happened.
At mid-afternoon on Sunday, he and his team were summoned to the Federal Reserve, ushered into a conference room and told to prepare Lehmans for bankruptcy - by midnight.
In the case of Lehman, two vultures were circling: Bank of America, run by the affable Ken Lewis; and Barclays, led by the quiet-spoken Group boss John Varley and the hard-driving investment banker Bob Diamond
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