Analysts on the street predicting a chain reaction in

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analysts on the Street predicting a chain reaction in which the markets would go after each bank, one by one, from the smallest and weakest to the biggest and strongest. Some even foresaw which dominoes would fall next. By Friday, September 12, 2008, everyone knew it was the day of reckoning for Lehman Brothers —either it would go bankrupt or someone would save it. Deep down, I didn’t think it would be allowed to go bankrupt, but part of me thought this may have been the right thing to happen. Dying animals should be allowed to die. I left the office that day knowing that the events of that weekend would be crucial, but that there was nothing I or any of the other hundreds of thousands of people on
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Wall Street could do but stay glued to the TV and our BlackBerrys. We were awaiting news from the New York Fed, where the heads of the country’s most powerful financial institutions were huddled with Paulson and Geithner trying to solve the hardest brainteaser of their lives. That Saturday night, September 13, Nadine and I were out to dinner with another couple, at a favorite Italian place of mine called Supper, in the East Village. It was a schlep from the Upper West Side, but this was a weekend for good, rustic Italian food. The other couple also worked in finance: he in private equity, she at a hedge fund. The mood wasn’t one of panic; it was one of astonishment. We all couldn’t stop saying how surreal the world we were living in had become. It felt as if we were in a movie. I remember saying that night that if you had told me a few years ago that Bear Stearns and Lehman Brothers could both vaporize within months of each other, I would have called you crazy. This was the stuff of the weirdest science-fiction movie any of us could think of. Things would get stranger. Over that weekend of September 13 and 14, Merrill Lynch and Lehman Brothers—both of which turned out to have been as badly exposed in the subprime mortgage market as Bear Stearns—toppled. On Sunday, Merrill Lynch was acquired by Bank of America, and in the early hours of Monday morning, Lehman Brothers filed for Chapter 11 bankruptcy. It was then (and still is) the largest bankruptcy in U.S. history. With two investment banks down, it was only a matter of time before the rest of us were in the crosshairs. And the hits just kept on coming. The Dow lost just over 500 points on Monday the fifteenth, the biggest single drop since 9/11. Money market funds—the safest investment around, with minuscule rates of return—began notching negative returns. If you put your funds into a money market at that point, you would have gotten less back than if you’d stuck them in a mattress. The term for this is breaking the buck . No one thought this could ever happen. It happened. With three investment banks gone by Monday, September 15, both our stock and Morgan Stanley’s got pummeled. On Tuesday of that week, the stock of AIG, the world’s biggest insurance company, dropped 60 percent, after already having dropped more than 95 percent from its fifty-two-week high of $70.13. AIG was an insurance institution that affected millions of lives in almost every country in
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