And Then the Roof Caved In

Prologue

“On the Verge”

 

 

 

It’s September 14, 2008, the second week of the NFL season. After being out for the day, I’ve returned home with my family and am hoping to settle into the couch to enjoy the day’s late game. But I know that’s probably not going to happen. Try as I might to convince myself otherwise, this Sunday is far from typical. Ever since I left the office on Friday, I had been nervously awaiting this moment, when I could begin to make phone calls to try to find out whether the financial world that I have covered for the last 22 years is a thing of the past.

When I left my office at CNBC’s headquarters on Friday, it was clear the storied investment bank Lehman Brothers was in deep trouble. I had been reporting on its worsening plight for months. Lehman had been battling a crisis of confidence that began in the earliest days of the credit meltdown. A financial company such as Lehman, which is exchanging vast sums of money every minute with other financial companies, must maintain the trust of those with whom it does business. The minute that trust disappears, as it did earlier in the year with Lehman’s competitor Bear Stearns, the firm is unable to meet its obligations. In other words, it’s lights out. The concern among investors and, most importantly, the firms with whom it did business, was that Lehman was not being honest about the value of the assets on its balance sheet. The firm had played big in the mortgage industry and many did not believe Lehman’s endless ...