The following account of the tense 48 hours preceding the bankruptcy of Lehman Brothers is excerpted from former Treasury Secretary Hank Paulson's new book, "On the Brink."

Saturday, September 13, 2008

Early Saturday morning, I left the Waldorf-Astoria Hotel in Midtown Manhattan, climbed into a car, and sped down a deserted Park Avenue, arriving at the New York Fed just after 7 a.m.

We rode the elevator up to the 13th floor, where Tim Geithner had arranged for me to work in an office just down the hall from his own suite. I called (Bank of America CEO) Ken Lewis, who reported that after closer inspection his people now believed that Lehman's assets were in even worse shape than they had thought the previous evening. It was increasingly obvious that he didn't really want to buy Lehman.

I joined Tim in his office for a conference call with Barclays at about 8 a.m. Bank Chairman Marcus Agius and CEO John Varley were on the line from London, and (President) Bob Diamond was at Barclay's midtown Manhattan offices. Varley said they were working hard on a possible deal, but had serious concerns about some of Lehman's assets, and indicated Barclays would need to leave $52 billion of them behind.

I told Varley to focus on the biggest problems first—the assets he thought were going to be the most troubled—and tell us what he needed to take care of them. If Barclays gave us its best offer that day, we believed we could deliver a private-sector consortium that would fund whatever shortfall there was. Even as we spoke, the leaders of virtually the entire banking industry were assembling downstairs at the Fed.