NEW YORK: Richard Fuld Jr. was fed up with being Wall Street's punching bag.
It was early August, and Lehman Brothers, the venerable investment bank he had run for the past decade and a half, was once again under siege in the stock market.
"In the 28 years you've known me, do you know anyone who bleeds more for Lehman's shareholders, clients and employees?" Fuld complained to a friend.
Fuld, 62, liked to say he bled green - Lehman's corporate color (and, as it happens, the color of dollars). But it was Lehman itself that was hemorrhaging, its stock price spiraling down day after day.
Fuld, the company's chairman and chief executive, continued searching for a way to stanch the wound despite the growing sense on Wall Street that Lehman, one of the oldest and largest U.S. investment banks, might never be the same again - if it survived as an independent company at all.
On Wednesday, nervous employees inside Lehman's headquarters in New York huddled around computer screens to watch the company's stock price flicker by as Fuld mapped out his plans. In a conference call with investors and analysts, Fuld pledged to shrink Lehman in order to save it.
The company announced that it planned to split itself into a "good" bank and a "bad" one to separate worrisome mortgages and real estate; sell most of its investment management division; and cut its dividend to shareholders. Lehman also said it expected to post the biggest quarterly loss in its 158-year history. By the end of the day, Lehman's stock price had fallen an additional 7 percent. The decline left the shares down 55 percent for the week.
It was a remarkable turn of events for Fuld, a personification of his company unlike any other chief executive on Wall Street. He joined Lehman as an intern in 1969, worked his way to the top and, last year, earned more than $40 million. But Lehman, a big player in the bond markets, got itself into trouble by financing real estate, including subprime mortgages.
William Fitzpatrick, an equity analyst with Optique Capital Management, predicted that Fuld would be ousted. "You've got a stock that's basically in free fall," he noted.
Lehman executives insisted that they and the firm's board stood behind Fuld, who had pulled Lehman back from the brink time and again. But Fuld was slow to sell troubled assets and secure the financial lifeline many analysts said Lehman needed, steps that became more difficult every time Lehman's stock fell further.
Lehman's price was never far from Fuld's mind. The stock's 45 percent nosedive Tuesday persuaded him to pre-announce the company's third-quarter earnings and restructuring. The stock's dive earlier this summer persuaded him to pay employees part of their bonuses early. And analysts said that if the stock did not turn around, it could cost Lehman its independence.
Since June, when the company announced its first loss caused by bad mortgage investments, Lehman and its chief have been in the hot seat. Fuld raised capital for the company and replaced several senior executives, but those efforts did not appease investors.
Lehman executives complained that the company had been targets for hedge fund investors who were betting against their stock by short-selling it, and Fuld called senior executives at competitor banks, demanding that their employees stop bad-mouthing Lehman.
People who know him said that the battle was wearing on Fuld but that he intended to fight it out.
"I think any person in Dick's position would be very frustrated by what's transpired," said Jerry Speyer, chairman and co-chief executive of Tishman Speyer. "It's like a 40-foot sailboat in the midst of a 150-mile-per-hour hurricane."
During Fuld's four decades at Lehman, it went into crisis mode at least four times.
"We've been through adversity before, and we always come out a lot stronger," Fuld said Wednesday.
In 1984, Fuld was the head of the fixed-income division when Lehman, then a private partnership, was forced into the arms of American Express. Fuld's mentor, Lewis Glucksman, was the chief executive at the time, and Fuld was one of the executives most opposed to the sale. April 10, 1984 - the date of the sale - became what he would call the darkest day of his career.
In the 1980s, Fuld was viewed within the firm as a trader's trader, with an athletic physique, intense focus and penchant for profanity. It was rare to see him smile, and he did not seem to be on the chief executive path, said Ken Auletta, the author of a book about Lehman's downfall in the 1980s called "Greed and Glory on Wall Street."
One colleague from the 1970s remembers a time when Fuld instructed him to keep an eye on a co-worker. Fuld did not mince words, grabbing the colleague by the arms and saying, "If I ever see him walking the halls of this building and you're not within 12 inches of him, you're fired."
Fuld stayed on at Lehman in the 1980s, even as others left. He viewed the sale as a betrayal and tried to lead a mass defection to join forces with another brokerage house, to no avail.
In 1993, he was named chief executive when Lehman was spun off from American Express. Fuld had the support of Lehman's workers, said Thomas Schick, an executive vice president at American Express.
"He has that one crucial element of leadership that is most important - that is the capacity to make people want to follow him," Schick said.
In 1998, Lehman ran into trouble after the collapse of the hedge fund Long-Term Capital Management. At that time, Fuld publicly blamed Lehman's problems on rumors and complained to the U.S. Securities and Exchange Commission.
Executives at Lehman argued that rumors were at the heart of the problem this time around, too. Erin Callan, its chief financial officer at the time, engaged in a high-profile tussle this spring with David Einhorn, a hedge fund manager who had been publicly criticizing Lehman and short-selling its stock.
Soon afterward, Fuld shuffled his management team, and Callan was out. But Lehman gave out plastic swords to some employees, sending the message: go to battle. Fuld gave a speech over the bank's internal speaker system in June to rally the troops. "Einhorn didn't lose us $2.8 billion; we lost it," Fuld said. "Now let's get out there and beat" them.
Eric Dash and Ben White contributed reporting.