On the afternoon of Sunday, Sept. 14, Dick Fuld, the CEO of Lehman Brothers, called Ken Lewis, the CEO of Bank of America, at his house in North Carolina to try to sell the investment bank to Bank of America. He got Lewis' wife, who told him Ken wouldn't call back. The ailing investment bank had no more options.
Just after midnight on Monday, Sept. 15, Lehman Brothers, the fourth largest investment bank in the United States, filed for bankruptcy.
Hank Paulson, secretary of the Treasury; Ben Bernanke, chairman of the Federal Reserve; and Tim Geithner, president of the New York Federal Reserve Bank were the three government officials in charge of the response to the financial crisis. They agreed that taxpayer money could not be put on the line for Lehman.
That same morning, Merrill Lynch sold itself to Bank of America, reducing the four remaining big, independent investment banks to just two: Goldman Sachs and Morgan Stanley.
Lehman Brothers had 25,000 employees and 10,000 in New York City. The bank bought its Seventh Avenue building in 2001 from Morgan Stanley for $700 million.
Pictures of Lehman employees streaming out of their offices with their possessions in banker's boxes became some of the most iconic images of the financial crisis.
Stock markets around the world went into free fall following the Lehman bankruptcy. The S&P 500 dropped 4.7%, while Japanese stocks dropped 4.9% the following day.
That afternoon, Treasury Secretary Paulson addressed reporters at the White House.
He said, "When I look at the way the markets are performing today, I think it's a testament to the way the financial industry has come together."
AIG, the insurance giant, was on the brink. After several rating agencies downgraded the company's debt, many thought it had only days left to survive. It was taken over by the government on Tuesday, Sept. 16.
Two days after the bankruptcy filing, Barclays, the British bank, bought Lehman's North American investment banking business for $1.75 billion, including $1.5 billion for its New York headquarters.
Lehman Brothers is, in some sense, still alive. The remaining company is trying to collect as much money as possible to pay its creditors. It's paid out $43 billion so far. When it filed for bankruptcy, it had $613 billion in debts.
Matthew Zeitlin is a business reporter for BuzzFeed News and is based in New York. Zeitlin reports on Wall Street and big banks.
Contact Matthew Zeitlin at email@example.com.
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