Lehman Brothers: Three Days That Shook The World

Three days that shook the world - Paulson pulls the fire alarm (1) - FORTUNE

FRIDAY EVENING

As Lehman Brothers tried to find a way out of a liquidity death spiral, Henry Paulson, the Treasury Secretary, and Christopher Cox, the Chairman of the SEC, flew up from Washington for a six o'clock meeting with then-New York Federal Reserve chief, Timothy Geithner at the New York Federal Reserve Bank's Italianate palazzo in lower Manhattan. Going into the weekend, Lehman had two potential suitors - Bank of America and Barclays.

With Geithner at his side, at 6:15 P.M, Paulson stood before CEOs and their top deputies from Goldman Sachs, Merrill Lynch, Morgan Stanley, JPMorgan Chase, Citigroup, Credit Suisse and other firms and delivered a harsh message, according to a source there. "There will be no bailout for Lehman," Paulson said, "The only possible way out is a private-sector solution." Wall Street's top execs had to come up with a plan in 48 hours to save Lehman from insolvency or suffer the consequences of a catastrophic unwind of the Gordian knot of Wall Street's complex and internecine financial relationships...