The Weekend That Changed Wall Street

make it.
Two weeks before the wedding, while Friedheim was still hobbling on crutches, Dick Fuld came into his office. A five-ten former weight lifter, Fuld was an intense guy, and now he directed the full force of that intensity on Friedheim, saying, “I’ve got good news and bad news.”
Friedheim didn’t crack a smile. “Give me the bad news,” he said with a sense of doom.
“You can’t go,” Fuld said.
“To my wedding?”
“Right.”
Friedheim was so flabbergasted that all he could think of to say was, “And the good news?”
Fuld gave him an intense look. “The good news is I need you.”
Friedheim felt a momentary surge of exhausted resentment. He hadn’t had a full day off in a year, and now this. He started explaining to Fuld the magnitude of the wedding event. “I have four hundred people coming to the South of France, and most of the families are already there at the château we rented,” he said, “and you expect me to just say I’m not coming?” He didn’t bother stating the obvious, that it wasn’t just the inconvenience of it—it was his wedding day, arguably one of life’s most significant moments, and his boss was telling him to choose the company over his fiancée and his personal future. If he hadn’t known Fuld better, he would have called the suggestion that he miss his own wedding stone-cold preposterous. But Fuld wasn’t cold. He was just focused—a surgeon with his arm already elbow deep in his patient’s chest cavity. Lehman was on life support and there was no time for niceties.
That Friedheim didn’t go ballistic was a credit to the loyalty Fuld inspired. In spite of his lack of personal charisma, Fuld evoked something akin to a cultlike fervor among his staff. Lehman Brothers was like a religion to them, worthy of any sacrifice. It was also like a family, growing more close knit in the face of crisis. When Fuld challenged his workers to “bleed Lehman green,” they were proud to comply, if not literally, then emotionally.
Friedheim did some quick calculating, trying to figure out how he could meet Fuld’s demand and still show up for his wedding. He canceled his flight and booked a red-eye that would put him on site hours before the ceremony. He made it, but he was so dead tired that after one dance with his new wife, Isabelle, he said, “I’m sorry. I’ve got to go to sleep. I’m exhausted.”
He slept for a few hours and took the earliest flight back to New York, still negotiating on crutches. Not exactly a romantic weekend. “It was absolutely brutal,” he recalled, and yet in a funny way it seemed completely justified. He’d been with Lehman for eighteen years, loyal and dedicated. Lehman was his first wife, and Friedheim was desperately trying to save his marriage. And although that meant getting off to a precarious start in his marriage to Isabelle, he didn’t hesitate.
The urgency had been building ever since Bear’s fire sale to JPMorgan. As much as everybody would have hoped that Bear Stearns was the finale of the crisis rather than the beginning, it was immediately evident that it was a harbinger of worse things to come. The investment banking model was being called into question. From the outset, the Fed was concerned about Lehman. Its similarities to Bear Stearns were inescapable—in particular, poor liquidity and too many real estate assets. Indeed, rumors that Lehman would be the next investment bank to fall sent its shares plunging by nearly 50 percent the Monday after Bear’s sale. Bank executives would later tell me that the assets owned by Lehman were significantly riskier than Bear’s or any other firm’s.
Thursday, March 20, 2008, I interviewed Lehman’s CFO, Erin Callan, on Closing Bell. Callan was an anomaly on Wall Street—a young, forty-two-year-old woman in the top echelon of a legendary firm. She was smart, pretty, and media savvy, and although she had not been in her position long, she had increasingly become Lehman’s public face and primary cheerleader. Some people suggested that Dick Fuld, who hated appearing in the media, sent her out so he didn’t have to go. Fuld was always awkward around the press. He never really knew how to be the face of Lehman, and he wasn’t interested in playing the role. He despised the snarky attitudes and personal slights—such as the way he was dubbed “the gorilla” in the press. He spoke to reporters only on background.
Callan was not universally popular inside Lehman. Sources told me they worried that Fuld pushed her out front too much, and not always to positive effect. She was unquestionably bright and ambitious—a Long Island girl who rose to become the first female member of Lehman Brothers’ executive committee. She was mentored by Lehman president Joe Gregory, and he thought the world of her. But others in the organization wondered whether a former tax lawyer had the proper grounding in financial services. In fact, she was among the bankers working on several high-profile financial service IPOs before being elevated to CFO.
Many people at Lehman were also dismayed by Callan’s flashy public persona. A glowing profile in the March 2008 issue of Condé Nast Portfolio was titled “Wall Street’s Most Powerful Woman” and pictured Callan emerging from a limo showing a lot of leg. The article by Sheelah Kolhatkar emphasized Callan’s femininity, describing her “short crocheted dress with a black belt slung low around her hips, gold hoop earrings, and knee-high caramel-colored high-heel boots.” Callan didn’t mind the focus. “I don’t subordinate my feminine side,” she told Kolhatkar. “I’m very open about it. I have no problem talking about my [personal] shopper or my outfit.”
Then a May 2008 Wall Street Journal profile of Callan raised eyebrows further and annoyed many people with its centerpiece photo of Callan, looking slinky in an above-the-knee black dress and very high stiletto heels. “She seems to be everywhere modeling her wardrobe,” one insider complained to me. “I wouldn’t mind, but does she