American Scandal — Lehman Brothers | Lehman is Different | Episode 2

Podcast: American Scandal
Host: Lindsay Graham
Date: January 20, 2026
Theme: The unraveling of Lehman Brothers during the 2008 financial crisis, the company's desperate efforts to maintain confidence amid mounting losses, whistleblowing, and the escalating war between Lehman's leadership and skeptics like David Einhorn.

Episode Overview

This episode plunges listeners into the tense, pivotal spring of 2008 as Lehman Brothers faces pressures following the shocking collapse of Bear Stearns. Through dramatized scenes and detailed narration, host Lindsay Graham explores the personalities at the heart of Lehman, the high-stakes maneuvers to preserve market confidence, and the brutal calculus of Wall Street survival.

Key Discussion Points and Insights

1. The Fallout from Bear Stearns’ Collapse

[00:00–04:00]

• The episode opens on March 17, 2008. Lehman Brothers is gripped by fear as Bear Stearns collapses and rumors swirl that Lehman could be next.
• CEO Dick Fuld scrambles to shore up confidence among trading partners. He takes a comforting call from John Mack (Morgan Stanley's CEO) to reiterate Lehman is "too strong" to fall.
• Importance of confidence in interbank trading is underscored — without it, banks die quickly.

Quote:
“We’ve got liquidity. We’ve got capital. The firm’s been around for 150 years. We’re not going anywhere.” — Dick Fuld, to John Mack ([02:46])

2. Lehman’s Media Blitz and Shaky Fundamentals

[07:00–10:00]

• Fuld and his executives plan a coordinated media offensive, giving interviews and making statements to counteract rumors.
• Internally, the truth is darker— Lehman's balance sheet is burdened with hard-to-value, potentially toxic real estate assets.
• The goal: simply restore confidence, so withdrawals don’t force a crisis.

3. The Make-or-Break Earnings Call

[10:00–16:00]

• CFO Erin Callan’s background and rise, marked by skepticism about her experience, especially as the first woman on Lehman's executive committee.
• On March 18, 2008, Callan leads Lehman’s highly-anticipated earnings call, delivering calm, confident answers:
  • Reports $489 million in quarterly profit (Lehman’s 55th consecutive profitable quarter).
  • Her performance sparks a major stock rebound, with the stock rising $15 by day's end — a record single-day gain for Lehman.

Quote:
“Confidence is not the same thing as truth.” — David Einhorn ([20:54])

Memorable moment:
Fuld jokes that as long as Callan stayed on the call, Lehman’s stock kept rising.

4. Hidden Risks: Repo 105 and Questionable Transparency

[17:00–19:00]

• Narration reveals Lehman’s secret use of “repo 105” — a controversial accounting tactic to temporarily move up to $49 billion of debt off its books before reporting.
• Even top executives, including Fuld, claim ignorance about the full extent of these moves.

5. David Einhorn: The Persistent Skeptic

[19:00–22:00]

• David Einhorn, head of Greenlight Capital, emerges as Lehman’s most vocal, public critic.
• After becoming suspicious of Lehman’s accounting, Einhorn takes a significant short position and warns others at an investment conference in late 2007.

Quote:
“Numbers are the purest thing we have. They're sacred. But sometimes you can’t trust them… And our job is to catch them in the act.” — David Einhorn ([21:14])

• Einhorn doesn’t believe Callan’s confident claims; he contends Lehman is hiding something.

6. Public Confrontation and Open War

[22:00–28:00]

• After an unsatisfying conference call with Lehman staff, Einhorn doubles down on public accusations.
• He and Callan have a tense exchange, with Einhorn critiquing their accounting and transparency on CDO write-downs.

Notable Exchange:
“Confidence is not the same thing as truth. And frankly, I don’t believe a single word she said.” — Einhorn to his team ([20:54])
“The numbers don’t lie. But you don’t understand them, do you? I am CFO.” — Erin Callan, to Einhorn ([25:34])
“It’s how an inexperienced player acts when they're bluffing with a losing hand.” — Einhorn on Callan’s demeanor ([26:01])

7. The War Goes Public: Sohn Conference

[28:00–34:00]

• Einhorn chooses Lehman as the focus of his headline-grabbing speech at the Sohn Investment Charity Conference on May 21, 2008.
  • Dissects Lehman’s latest report, emphasizing inconsistencies and underplayed losses.
  • Effect: Lehman’s stock drops 5% by next day. In following weeks, panic deepens.
• Internally, Lehman struggles to counter the growing negativity; CEO Fuld grows more combative with media.

8. Failed Rescue Attempts and Internal Whistleblowing

[34:00–39:00]

• Fuld’s failed pursuit of a capital infusion from Warren Buffett (who wanted steep terms Lehman couldn’t accept).
• Lehman sought additional outside investors but found few takers, especially after negative headlines.
• VP Matthew Lee flags six accounting irregularities (including repo 105) in a letter to leadership.
  • Lehman opts to pay Lee to leave quietly rather than address his concerns.

9. The Collapse Accelerates: Shocking Losses and Executive Ouster

[39:00–48:00]

• June 9, 2008: Lehman reports a $2.8 billion quarterly loss, driven by massive mortgage write-downs.
  • Confirmation that Einhorn’s warnings were correct; Lehman’s stock drops another 20%.
• Calls mount for a shakeup: President Joe Gregory and CFO Erin Callan are ousted (portrayed internally as resignations for morale but leaked to the press as firings).
• Callan’s sense of betrayal and realization of her dispensability; Fuld will sacrifice anyone to save Lehman.

Quote:
“Too late, she realizes all that matters to Dick Fuld is Lehman Brothers, and he will do anything to keep it alive.” — Narrator ([47:44])

Notable Quotes and Memorable Moments

• Dick Fuld’s Downplaying of Crisis:
  “We’ve got liquidity. We’ve got capital. The firm’s been around for 150 years. We’re not going anywhere.” ([02:46])
• Einhorn’s Cynicism about Numbers:
  “Numbers are the purest thing we have. They're sacred. But sometimes you can't trust them.” ([21:14])
• Einhorn’s Poker Bluff Allegation:
  “It’s how an inexperienced player acts when they're bluffing with a losing hand.” — to Erin Callan ([26:01])
• Erin Callan’s Realization:
  “Too late, she realizes all that matters to Dick Fuld is Lehman Brothers, and he will do anything to keep it alive.” ([47:44])
• Aftermath of Executive Firings:
  Callan’s profound sense of betrayal after finding out the resignations were spun as firings for optics.

Important Segment Timestamps

• Bear Stearns' Collapse & Immediate Aftermath: [00:00–04:00]
• Lehman’s Media Blitz & Balance Sheet Reality: [07:00–10:00]
• Callan’s Earnings Call and Stock Recovery: [10:00–16:00]
• Lehman’s Secret “Repo 105” Accounting Trick: [17:00–19:00]
• David Einhorn’s Initial Investigation: [19:00–22:00]
• Public and Private Battles Between Einhorn & Lehman: [22:00–28:00]
• Sohn Conference – Public Attack on Lehman: [28:00–34:00]
• Search for Capital & Whistleblower Suppression: [34:00–39:00]
• Post-Quarterly Loss: Callan & Gregory Forced Out: [39:00–48:00]

Takeaways

• Market confidence is as crucial as actual solvency; the loss of trust can be fatal for banks.
• Lehman’s leadership relied on aggressive messaging and selective accounting practices to project strength, while critics and whistleblowers became increasingly aggressive.
• The fate of not just individuals, but global financial systems, rested on the opaque decisions and desperate maneuvers of a handful of executives.

Next episode teaser:
As Lehman's crisis deepens, Treasury Secretary Hank Paulson convenes an emergency summit with Wall Street’s most powerful CEOs, seeking a last-minute savior before Lehman collapses for good.

Recommended Reading:

• Too Big to Fail by Andrew Ross Sorkin
• A Colossal Failure of Common Sense by Lawrence G. McDonald and Patrick Robinson
• The Big Short by Michael Lewis

This summary captures the tension, personalities, and key developments in the high-wire months leading to Lehman Brothers’ downfall, as dramatized in American Scandal, Episode 2.