Mr. Walsh and his crew rushed to sell their inventory. Between November 2007 and February 2008, Lehman shed $2.8 billion of its commercial real estate exposure. But that still left $36 billion of hard-to-value leftovers, including debt and equity from Archstone and SunCal.

Last spring, the hedge fund investor David Einhorn, who was shorting Lehman’s stock, suggested that the bank’s positions in Archstone and SunCal might be worthless. Mr. Einhorn said share prices of Archstone’s competitors had tumbled as much as 30 percent since the acquisition was announced. As for SunCal, he pointed out that publicly traded home builders had written down their Southern California land holdings to “pennies on the dollar.”

Mr. Einhorn called for Lehman to take a multibillion-dollar write-down on its Archstone holdings. Lehman said it was valuing its commercial real estate fairly, based on the prices that Mr. Walsh’s group had been getting on the open market as it struggled to free up the bank’s balance sheet.

Lehman ended up with $29 billion in commercial mortgage exposure on its books in the second quarter of 2008  30 percent more than Deutsche Bank and Morgan Stanley and 70 percent more than Goldman Sachs.

In early September, Lehman announced that it would stuff its toxic commercial mortgages into a new public company to be spun off to shareholders. The idea went nowhere. “They couldn’t get that commercial real estate off their books to save their lives,” says Mr. Hintz at Sanford C. Bernstein.

In short order, Lehman collapsed.

SOON after Lehman’s bankruptcy, a former executive who declined to be identified because he wasn’t authorized to speak publicly about his time at the firm went to Mr. Walsh’s office to talk. But they sat in silence. After two minutes, the executive left. “It became clear that neither one of us was going to say something that the other didn’t already know, or that we were going to actually have a new idea or bring greater clarity to the situation,” he recalls.

Ultimately, Barclays scooped up part of Lehman’s operations. But it dismissed Mr. Walsh and most of his team. Now the United States attorney’s office and the New Jersey attorney general are trying to determine whether Mr. Walsh did anything wrong.