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SEPTEMBER : THE BANKRUPTCY OF LEHMAN 

dent and me over and said, ‘We have the consortium, but the British government
won’t do it. Darling said he did not want the U.S. cancer to spread to the U.K.’” 
At around : P.M., Lehman’s team—President Bart McDade, CFO Ian Lowitt,
Head of Principal Investing Alex Kirk, and others—reconvened at Lehman’s offices to
“digest what obviously was stark news.” Upon arriving, they heard that the New York
Fed would provide more flexible terms for the PDCF lending facility, which would
include expanding the types of collateral borrowers could use.  McDade, Kirk,
Lowitt, and Miller returned to the New York Fed building and met with the Fed’s
Baxter and Dudley, the SEC’s Sirri, and others to discuss the expanded PDCF pro-
gram. According to McDade and Kirk, the government officials—led by Baxter—
made it plain they would not permit Lehman to borrow against the expanded types
of collateral, as other firms could. The sentiment was clear but the reasons were
vague, McDade told the FCIC. He said the refusal to allow Lehman to provide the ex-
panded types of collateral made the difference in Lehman’s being able to obtain the
funding needed to open for business on Monday. 
Baxter explained to the FCIC, however, that Lehman’s broker-dealer affiliate—not
the holding company—could borrow against the expanded types of collateral.  A
New York Fed email written at : P.M. on that Sunday, September , stated that
Lehman’s counsel was informed of the expansion of PDCF-eligible collateral but that
such collateral would not be available to the broker-dealer if it filed for bankruptcy. 
The minutes of Lehman’s September  board meeting show that the Fed rejected
Lehman’s request for an even broader range of collateral to be eligible for PDCF fi-
nancing and preferred that Lehman’s holding company—but not the broker-dealer—
file for bankruptcy and that the broker-dealer “be wound down in an orderly
fashion.”  In a letter dated September , the New York Fed informed Lehman Sen-
ior Vice President Robert Guglielmo that the broker-dealer could finance expanded
types of collateral with the PDCF, but that letter was not sent until : A.M. on Sep-
tember —after Lehman had filed for bankruptcy.  The Lehman broker-dealer
borrowed  to  billion from the PDCF each day over the next three days. 
As Kirk recounted to the FCIC, during that Sunday meeting at the New York Fed,
government officials stepped out for an hour and came back to ask: “Are you plan-
ning on filing bankruptcy tonight?”  A surprised Miller replied that “no one in the
room was authorized to file the company, only the Board could . . . and the Board had
to be called to a meeting and have a vote. . . . There would be some lag in terms of
having to put all the papers together to actually file it. There was a practical issue that
you couldn’t . . . get it done quickly.”  Unmoved, government officials explained that
directors of Lehman’s U.K. subsidiary—LBIE—would be personally liable if they did
not file for bankruptcy by the opening of business Monday. As Kirk recalled, “They
then told us ‘we would like you to file tonight. . . . It’s the right thing to do, because
there’s something else which we can’t tell you that will happen this evening. We
would like both events to happen tonight before the opening of trading Monday
morning.’”  The second event would turn out to be the announcement of Bank of
America’s acquisition of Merrill Lynch.