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The Weekend that Wall Street Died

I just read an article in the WSJ titled "The Weekend that Wall Street Died" about the weekend of September 13 - 14, 2008 where Lehman was forced to file for bankruptcy and Merrill sold itself to Bank of America.  It's a pretty fascinating play-by-play of the weekend and how the heads of the top remaining banks (Richard Fuld at Lehman, Lloyd Blankfein at Goldman, John Mack at Morgan Stanley, and John Thain at Merrill Lynch) met with the Fed and SEC, met with each other, and met with representatives from Barclays and Bank of America, a series of interactions that resulted in changing the face of Wall Street forever.  It's amazing it all happened in a single weekend.

The basic series of events was as follows:
  • Leading up to Friday Sept 12: Confidence in Lehman had plunged during the week.  Lehman's clearing bank, JP Morgan, was asking for additional collateral and if Lehman couldn't raise more capital they would be downgraded forcing them to put up even more collateral for their loans.  Their options: 1) sell to Bank of America, 2) sell to Barclays, 3) file for bankruptcy protection on Monday.  Amidst this, Merrill realizes that it could very easily be next after Lehman, so they decide to be proactive.
  • Saturday Sept 13: Executives from the top four banks meet at the New York Fed to evaluate the fallout from a Lehman failure and possible bailout options.  Fuld is not present during these talks.  He tries to contact BofA Chairman Kenneth Lewis several times to no avail (harassing his wife on their home phone in Charlotte).  Thain, however, is able to contact Lewis.  Lewis flies up to NYC to meet with Thain and they discuss BofA acquiring Merrill.  Thain, at John Mack's request, also meets with Mack to discuss a merger of Merrill and Morgan Stanley.
  • Sunday Sept 14: Executives from the banks meet for a second day at the New York Fed.  Merrill is able to finalize a purchase price with BofA and they agree on an acquisition.  Lehman, on the other hand, can't finalize a deal until they can conduct a shareholder vote later in the week.  Neither the US or British governments are willing to bridge them to that point, so they're forced to file for bankruptcy protection Monday morning.
The following weekend was equally momentous with Goldman and Morgan agreeing to take deposits.  The days of being leveraged 30-to-1 would be over.
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