Chapters 4-5 Summary and Analysis

Chapter 4 describes the efforts of Hank Paulson and his staff at the Treasury Department to prepare for the possibility of the failure of Lehman Brothers. Paulson's first concern was that Lehman did not have enough cash to weather a major market drop and he encouraged Dick Fuld, the CEO of Lehman, to raise more capital. Fuld agreed, but was persistent in expressing his belief that Lehman was under attack by "short sellers," investors who bet against the stock price of a company and made money when the price fell. Paulson thought Fuld was using the short sellers as an excuse to avoid the real problem.

Paulson and his staff prepared a secret plan for how to deal with the situation should Lehman or another large firm go bankrupt, or if several banks should begin to fail at once. They...