In her newly released book, The Weekend that Changed Wall Street (Portfolio/Penguin, $26.95), author and CNBC anchor Maria Bartiromo skillfully describes the fateful events that took place during the weekend of Sept. 12, 2008. Bartiromo gives the reader a fly-on-the-wall view of the discussions and phone calls that determined the fate of Lehman Brothers, the esteemed 158-year-old investment bank, as well as the fate of many other Wall Street firms, from Merrill Lynch to Morgan Stanley (MS) and Goldman Sachs (GS).
Bartiromo's access to movers and shakers from Wall Street to Pennsylvania Avenue is impressive, and it affords her an eyewitness account few others are privileged to have. Many of the anecdotes she shares were previously unreported and reveal the emotions of the key players involved.
The book opens with a prologue that describes the legendary annual holiday party held at Steve and Christine Schwarzman's opulent apartment at 740 Park Ave. in December 2006. Bartiromo attended the James Bond-themed event accompanied by her husband, Jonathan Steinberg (who's father, Saul Steinberg, was the former owner of the apartment). Bartiromo recalls standing in a corner of a room, chatting with Jimmy Cayne (the former chief executive of Bear Stearns) and Dick Fuld (the former head of Lehman Brothers). Little did any of them know that two years later, neither Bear Stearns or Lehman Brothers would exist.
A Tale of Two Suitors
Bartiromo's book portrays Henry "Hank" Paulson, then Secretary of the Treasury, as a marriage broker of sorts during the crisis, desperately trying to find a potential Lehman buyer. Paulson encouraged Fuld to reach out to both Bank of America (BAC) and Barclays (BCS) in order to prevent his investment bank from failing. Bartiromo describes how Fuld and his Lehman lieutenants furiously tried to structure a deal that involved packaging and off-loading the toxic assets on Lehman's balance sheet to make it an acceptable acquisition candidate for a potential buyer.
According to the book, Fuld thought he had a deal lined up with Ken Lewis, CEO of Bank of America, but in reality, Lewis had quietly decided not to buy Lehman. In fact, on Saturday, Sept. 13, a day after informally agreeing to a deal, Lewis was avoiding the calls Fuld made to his home phone.
Indeed, according to Bartiromo, that same weekend, Paulson had also encouraged John Thain of Merrill Lynch to contact Lewis to discuss strategic opportunities between their two firms. While Lewis was avoiding Fuld's calls, he was accepting calls from Thain, who was also trying to save his company. Lewis agreed to fly from his Charlotte, N.C., headquarters to New York to meet with Thain on Sept. 13. Bartiromo writes that when she learned that Lewis was in discussions with Thain that day, she knew that Lehman was down to one possible suitor -- Barclays.
Massive Wake-Up Call
According to The Weekend that Changed Wall Street, Lehman Brothers prepared three different press releases that weekend, unsure of which would be distributed before the markets opened Monday: One announced a sale to Bank of America, another described a sale to Barclays and the third announced that Lehman had found a Middle Eastern investor. In the end, neither Bank of America or Barclays stepped up to the plate because the federal government was unwilling to guarantee Lehman's toxic assets. It was a press release hadn't been prepared -- one announcing Lehman's bankruptcy -- that was distributed to the world on Sept 15.
The Weekend that Changed Wall Street also describes in colorful detail what was going on in the minds of the CEOs of other major Wall Street firms, including John Thain of Merrill Lynch, Jamie Dimon of JPMorgan (JPM), John Mack of Morgan Stanley, Vikram Pandit of Citigroup (C), Robert Wolf of UBS (UBS), Lloyd Blankfein of Goldman Sachs and Robert Willumstad of American International Group (AIG). Bartiromo described how everyone realized that there was much more at stake than just the future of Lehman Brothers. It was a massive wake-up call. Each key player knew that every Wall Street firm was connected to all of the others. If one failed, there would be a ripple effect, and possibly more would be brought down.
The Weekend that Changed Wall Street is more than just a riveting read -- it's an important one. Bartiromo's narrative of the fateful events of that September weekend will long serve as a reminder of how swiftly the great can fall and that confidence in the capitalist system can be extremely fragile and is not to be taken for granted.