The Players Remaking Financial World

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Kenneth D. Lewis

Emerging on Top

The boldest gamble of Mr. Lewis's career started with the Saturday morning phone call from Mr. Thain.

Mr. Lewis didn't hesitate. Here was a chance for the Mississippi-born son of a soldier and night-shift nurse -- a man known among bankers for craving the respect of the Wall Street establishment -- to elevate Bank of America as rivals crumbled around him.

Bank of America is the only employer Mr. Lewis ever had. He started in 1969 as a credit analyst when the bank was called North Carolina National Bank.

He took over as CEO in 2001 and since then has engineered more than $162 billion in acquisitions. Bank of America now ranks as the biggest retail bank in the U.S.

Earlier this year, its purchase of Countrywide Financial Corp., the foundering mortgage giant, was thought to be Mr. Lewis's crowning moment. Buying Merrill, with its slogan of "bringing Wall Street to Main Street," would be far more significant.

Only days earlier, Mr. Lewis had considered buying Lehman. By Friday, he decided he couldn't do a deal without government financial support, something Mr. Paulson, the Treasury chief, was unwilling to offer.

So Saturday morning, Mr. Lewis had told his exhausted deal team to return to Charlotte. Then came Mr. Thain's call.

Mr. Lewis ordered his team straight back to New York. The prospective deal already had a code name: "Project Alpha."

Mr. Lewis himself rushed to the Big Apple that afternoon. He met with Mr. Thain for an hour inside Bank of America's corporate apartment, overlooking Central Park.

When Mr. Lewis returned home Monday, a voicemail awaited him. It was from his mentor, Hugh McColl, a buccaneering figure who had kicked off Bank of America's expansion efforts in the 1980s. Mr. McColl offered his congratulations.

Robert E. Diamond Jr.

A Second Chance

Robert E. Diamond Jr., on a plane to New York from London last Thursday, napped for four hours. He knew he'd get little sleep the next few days.

The 57-year-old president of Barclays PLC, the U.K.'s third-largest bank by market value, was thinking of buying Lehman. It represented a golden opportunity to set up a big shop on Wall Street. For the past dozen years, he had helped expanded Barclays from a middling London bank into a broad-based European investment house.

But he felt a deal would be unlikely without some support from the U.S. government or from other big Wall Street firms.

On Friday Mr. Diamond -- using a freight elevator to avoid the media at Lehman's office -- met with Lehman's chief, Richard Fuld. But the structure of the deal he proposed would require funding help from other Wall Street firms, as well as an assist from the U.S. government to cover the value of Lehman's assets.

By late Sunday morning, Mr. Diamond was told his idea was a no-go. Barclay's withdrew. It appeared Lehman would file for bankruptcy.

Then, on Sunday evening, it suddenly looked like Mr. Diamond might get a second chance. As he walked to Smith & Wollensky steakhouse in midtown Manhattan, Mr. Diamond's thoughts had turned to a cool beer, when his cellphone rang. It was Mr. McDade, Lehman's president, raising the possibility that a bankruptcy filing might actually open another path to a deal.

"Is there any chance that if this goes into receivership, we can try and do something?" Mr. McDade asked, according to a person familiar with the call.

Within hours, Lehman had filed for bankruptcy protection. Mr. Diamond then plowed headlong into bankruptcy law to see if he could quickly swoop in and cut a deal. He knew he would have to move quickly before Lehman started losing its employees, one of the firm's key assets.

On Tuesday, Barclays agreed to buy the bulk of Lehman's North American business, which won't include the firm's risky holdings and liabilities, for $1.75 billion.

Richard Fuld Jr.

Down and Out

Lehman colleagues long marveled at Mr. Fuld's knack for winning, at bond trading and on Wall Street. One Lehman partner once told an associate: "If Dick Fuld were in front of you on line to buy a lottery ticket, hand him your $2 because that bastard is going to win."

That luck ran out Sunday. After repeatedly insisting that he would never sell 158-year-old Lehman -- a firm he worked at for 41 years -- Mr. Fuld was forced to try to do just that.

Mr. Fuld, 62, spent much of the weekend holed up in his 31st-floor executive suite overlooking midtown Manhattan. With Lehman employees angry at the firm's precarious condition, Mr. Fuld was given extra security detail.

As he and other Lehman executives scrambled to find a deal, Mr. Fuld told a top adviser: "I just want my people to survive."

A lot was riding on this for Mr. Fuld, who was credited with almost singlehandedly rebuilding Lehman in the mid-1990s after it was spun off from American Express. But in the past two fiscal quarters the firm has rung up losses of $6.7 billion on bad real-estate bets.

He arrived at work at 7 a.m. on Saturday, wearing a blue suit and tie. Exhausted from the week's events, he tried to take a quick nap around 10 a.m., but it was a short one., Almost immediately, Mr. Paulson, the Treasury secretary, called to get a status report, according to a person familiar with the matter.

When Bank of America withdrew from takeover talks with Lehman Saturday afternoon, Mr. Fuld phoned Mr. Lewis several times to make another appeal, according to a person familiar with the matter. Mr. Lewis didn't return the calls.

What Mr. Fuld didn't know was that, by then, Bank of America was already deep in talks to buy rival Merrill.

Sunday, in a last-ditch effort to find a buyer, Mr. Fuld called John Mack, Morgan Stanley's chief, and asked him if a deal was possible.

The answer was no.

With that, Lehman's fate was effectively sealed, and it filed for bankruptcy early Monday.

It was a remarkable fall for an executive who relished control. Under Mr. Fuld, there never were casual Fridays. His signature look included crisp, white, hand-tailored shirts. Employees routinely referred to him as "The Chairman."

Outside Lehman headquarters on Monday, a painter offered angry employees an outlet. He exhibited a large portrait of Mr. Fuld and asked people to sign it. One employee scrawled: "Nice trade, Dick!"

Also on Monday, according to regulatory filings, Mr. Fuld sold more than two million Lehman shares at about 20 cents a share. The sale netted him almost $525,000, filings show.

Those same shares were valued at more than $145 million at the beginning of 2008.

Then, on Tuesday, a quick turnabout: Barclays agreed to buy Lehman's U.S. brokerage unit. That move salvaged, at least for now, part of the once-proud securities firm.

In a letter to employees announcing that deal, Mr. Fuld wrote: "I know that this has been very painful on all of you, both personally and financially. For this, I feel horrible."

-- Jon E. Hilsenrath contributed to this article.

Write to Susanne Craig at susanne.craig@wsj.com, Carrick Mollenkamp at carrick.mollenkamp@wsj.com, Deborah Solomon at deborah.solomon@wsj.com and Dan Fitzpatrick at dan.fitzpatrick@wsj.com

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