Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the FinancialSystem--and Themselves

Fresh on their minds was the memo that Dick Fuld had sent out the previous night: “The past several months have been extraordinarily challenging, culminating in our bankruptcy filing,” he wrote. “This has been very painful on all of you, both personally and financially. For this, I feel horrible.” To some angry employees, it was an extraordinary un

It was a telling paradox in the debate about executive compensation: Fuld was a CEO with most of his wealth directly tied to the firm on a long-term basis, and still he took extraordinary risks.

the uptick rule—regulation that had been introduced by the Securities and Exchange Commission in 1938 to prevent investors from continually shorting a stock that was falling. (In other words, before a stock could be shorted, the price had to rise, indicating that there were active buyers for it in the market. Theoretically, the rule would prevent s

most Lehman employees had a five-year vesting period, which meant huge sums of their own wealth were tied up in the firm without the ability to sell their shares. And as of Friday, those shares had lost 93 percent of their value since January 31; $10 billion had disappeared. (Fuld, who owned 1.4 percent of the company—some 10.9 million shares—had l

Only Alan Blinder, once a Fed vice chairman and a former Princeton colleague of Bernanke’s, defended the Fed. Blinder told this tale:

Normally, when investors sell shares short, the investor first borrows the shares from a broker, sells them, and then hopes they drop in value so the investor can buy them at a lower price, replace the borrowed shares, and pocket the difference as a profit. But in naked shorting—which is illegal—the investor never borrows the underlying shares, pot

“When I picked up my newspaper yesterday, I thought I woke up in France,” said Senator Jim Bunning, the Kentucky Republican. “But no, it turned out it was socialism here in the United States of America. The Treasury secretary is now asking for a blank check to buy as much Fannie and Freddie debt or equity as he wants. The Fed purchase of Bear Stear

While the firm did employ a well-regarded chief risk officer, Madelyn Antoncic, who had a PhD in economics and had worked at Goldman Sachs, her input was virtually nil. She was often asked to leave the room when issues concerning risk came up at executive committee meetings, and in late 2007, she was removed from the committee altogether.

At the very height of the market, Walsh concluded his last great deal, a joint transaction with Bank of America, committing $17.1 billion in debt plus $4.6 billion in bridge equity to finance the purchase of Archstone-Smith, a collection of premium apartment complexes and other high-end real estate. The properties were excellent, but the price was