The following piece is an FT Alphaville dramatisation of an account by a junior Lehman M&A banker who watched the collapse unfold in 2008. All rights reserved.

You can also listen to this account, as voiced by a member of the FT Editorial team.

As the Lehman share price declined steadily – and sometimes not so steadily – during the course of 2008, we watched on in horror.

Still, the vast majority of Lehman’s employees remained confident until the end that management, led by Dick Fuld, were telling us the truth: that we had excellent risk management systems and were de-leveraging and cutting costs. Sure, some hedge funds were shorting our stock, but we also had several suitors looking to buy stakes.

We felt confident that Fuld was dealing with the situation. After all, he had transformed Lehman from a failing subsidiary of American Express into one of the biggest and most-respected banks in the world. If he couldn’t do it, we thought, no one could. Some employees were even buying Lehman shares right up till the end, given how ‘cheap’ they had become.

Over time, however, our definition of ‘worst case scenario’ evolved. Initially it was just the share price dropping below $40, then a sale of a stake or of Neuberger Berman, our asset management arm, then a forced Bear Stearns-style ‘marriage’ to a bank like Barclays or Bank of America. But few of us even considered the idea of the Fed not bailing Lehman out as a last resort.

Fast forward to the morning of September 15, 2008.

Overnight, Lehman Brothers had filed for bankruptcy protection. In New York, Fuld was beefing up his personal security team. In London, employees gathered to see what could be salvaged of their jobs and salaries, but primarily to say goodbye to their teams and pack up their desks.

It felt like someone had just died a tragic and untimely death. Yet on the investment banking floors there were no displays of anger or tears. No one was singled out for blame. Shock was the predominant emotion. Things didn’t feel real that day.

Uncertainty engulfed us. Would we be paid for the last month? Were emails going out? Would our mobile phones get  cut off today? If we left the building, could we get back in? What would we tell the clients who won’t stop calling? What would happen tomorrow? There was silence from the senior management in the US – except, eventually, for an email from Fuld saying he ‘felt horrible’. We were hearing rumours that the US side was selling itself to Barclays. Soon it was clear that in London were on our own, and no one here had any idea what to do next.

Someone saw Lehman t-shirts selling for $40 on eBay. Soon the juniors had swiped every marketable Lehman-branded object in sight. The most desirable was a cube-shaped stress toy with Lehman’s operating principles, such as ‘Demonstrating smart risk management’ and ‘Maximising shareholder value’, on it. Had one not sat on my desk for months previously, I would have thought a canny satirist had made it in the aftermath of the bankruptcy. Unfortunately, it appeared our chief executive had not read the cube.

Some found themselves with hundreds of pounds of credit on their staff cards to spend in one day in a sandwich bar. There were people walking around with armfuls of Mars bars, yoghurts and smoothies. We may have lost our jobs, and our shares are worthless – but we were going to take with us all the snacks we had pre-paid for.

Desperate bankers were enthusiastically discussing ideas with head-hunters they would have previously laughed at. Positions in obscure private equity boutiques and relocating families to Bahrain suddenly looked like wonderful opportunities. Some senior guys left that day for new jobs. Others locked themselves in their offices, trying to do the same. In the absence of offices, juniors conducted job interviews in the open plan space.

The ship was very much sinking and we were furiously scrambling out.

This entry was posted by FT Alphaville on Friday, September 11th, 2009 at 13:50 and is filed under Capital markets. Tagged with Lehman Brothers. Edit this entry.