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 FINANCIAL CRISIS INQUIRY COMMISSION REPORT

On Wednesday night, a New York Fed official circulated a “Liquidation Consor-

tium” game plan to colleagues. The plan was to convene in one room senior-level
representatives of Lehman’s counterparties in the tri-party repo, credit default swap,
and over-the-counter derivatives markets—everyone who would suffer most if
Lehman failed—and have them explore joint funding mechanisms to avert a failure.
According to the proposed game plan, Secretary Paulson would tell the participants
they had until the opening of business in Asia the following Monday morning (Sun-
day night, New York time) to devise a credible plan. The game plan stated that “we
should have in mind a maximum number of how much we are willing to finance be-
fore the meeting starts, but not divulge our willingness to do so to the consortium.” 
Indeed, Paulson would tell the consortium when it met two days later that the gov-
ernment was willing to let Lehman fail. 
Former Bank of America CEO Ken Lewis told the FCIC that Treasury Secretary
Paulson had called him on Wednesday, September , and asked him to take another
look at acquiring Lehman, assuring him that Fuld was ready to deal. Paulson and
Geithner had arranged for Fuld and Lewis to discuss an acquisition in July, but Fuld
had not been interested in selling the entire firm at that time. Because of this history,
Lewis expressed his concerns to Paulson that Fuld would not want to sell the entire
company or would not be willing to sell at a realistic price. Still, a team of Bank of
America executives began reviewing Lehman’s books, and on the next day, Fuld
sounded optimistic about a deal. But Bank of America determined that Lehman’s as-
sets were overvalued, and Lewis told Paulson there would be no deal without govern-
ment assistance. Undeterred, Paulson told Lewis—as Lewis informed the FCIC—to
put on his “imagination hat” and figure out a deal. His insistence kept the Bank of
America executives working, but on Friday, September , Lewis called Paulson to
repeat his assessment—no government support, no deal. Apparently Fuld had been
kept out of the loop, and began to call Lewis at home. Lewis’s wife told Fuld that
Lewis would not come to the phone and to stop calling. 
On Thursday September , an email time-stamped : A.M. from Susan Mc-
Cabe, a Goldman Sachs executive, to Dudley and others set the tone for the day: “It is
not pretty, This is getting pretty scary and ugly again. . . . They [Lehman] have much
bigger counter-party risk than Bear did, especially in Derivatives market, so [t]he
market is getting very spooked, nervous. Also have Aig, Wamu concerns. This is just
spinning out of control again. Just fyi, this is shaping up as going to be a rough day.” 
Bernanke was informed that if Lehman failed, “it would be a much more complex
proposition to unwind their positions than it would have been to unwind the posi-
tions held by Bear Stearns,” because Lehman was “nearly twice the size of Bear
Stearns.” 
Some believed government action was required. At : A.M., Hayley Boesky, a
senior New York Fed official, forwarded to her colleagues an email from the hedge
fund manager Louis Bacon suggesting the New York Fed could “attempt to stabilize
or support the LEH situation” but noting that “none of the above will fix the funda-
mental problem, which is too many bad assets that need to get off too many balance
sheets.” 