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To Schwartz's left was Richie Metrick, his longtime friend and right arm in the investment–banking business. Metrick was Schwartz's foil in nearly every respect. Short and impatient, the sexagenarian investment banker often had a stain on his shirt or a sleeve unbuttoned. Colleagues considered him something of a ball buster, a man more than willing to take them to task over disagreements. Friends praised a strong intellect that ran in his family—his son, Andrew Metrick, was a professor at the Yale business school—but many of those gathered in the conference room that evening had seen scant evidence of it since he joined Bear twenty years earlier. Mainly they knew him as Schwartz's gruff number two.

Next to Metrick was Gary Parr, the respected financial services banker from Lazard Ltd. Parr, at fifty–one, had seen his share of deals as cohead of the mergers–and–acquisitions practice at Morgan Stanley and copresident of the boutique firm Wasserstein Perella before that. More than once he had worked with insurance companies and banks on the verge of pennilessness.

The conference room they sat in had been ground zero for the internal battles of recent months, and, like much of Bear's headquarters, it was careworn from the many meetings it had hosted. The building, a forty–five–story tower of stone and glass crowned by an octagonal fixture that could be illuminated at night, was emblematic of the firm's grand visions. Designed by the noted architect David Childs, 383 Madison Avenue had been unveiled in 2001, with Bear occupying nearly every floor. It featured a square lobby with open space on all sides and a sleek, black base, just steps from Grand Central Station. A third–floor gym provided workouts and showers. The boardroom and private dining rooms were on the twelfth floor, where a private chef prepared meals. Trading floors were below, and investment banking was high above. Departments like legal, treasury, and research were on the levels in between.

Bear's new abode had already been put to good use. The prior year, the firm had hosted an array of early candidates for U.S. president, including senators Hillary Clinton and John McCain. (Barack Obama, then an Illinois senator, was invited but never committed to a date.) The private dining rooms were used to entertain clients, Wall Street analysts who watched Bear's stock, and other notables. Chairman Jimmy Cayne's office, which included a private conference room, a tricked–out motorcycle from a Chinese client whose firm Bear had taken public, and a stash of high–end imported cigars under the desk, was a particular draw.

But despite those trimmings, the inside of Bear's building was not particularly fancy. Even the sixth floor, where Molinaro, Cayne, a group of board members, and other heavy hitters resided, was essentially a warren of cubicles ringed by offices with views—mostly of the other high–rise buildings that surrounded Bear. Carl Glickman, one of Bear's longest–serving directors, had furnished his own office, spending thousands of dollars on ornate furniture, and Molinaro had a couple of nice chairs and a couch. But many executives had little other than family snapshots to look at, and the tables and chairs that Bear provided were not extravagant.

On either end of a scratched–up wood conference table, the walls in Molinaro's conference room featured symbols of a more euphoric time. One displayed a lithograph of the cover of the Wall Street Journal the day after the Dow Jones Industrial Average had closed at 10,000 in March 1999. If This Is a Bubble, It Sure Is Hard to Pop, read the headline, which was covered by a transparent bubble magnifying the zeroes in the index's record level. On the opposite wall was a framed cover of Barron's from 2004, when the publication had run an admiring cover story on Bear. Under the teaser "Throughout the market slide, Bear Stearns had outperformed its brethren" was a cartoonlike drawing of a brown bear dipping its paw into a honey pot as saliva dripped from its chops. The story inside called the firm "the Rodney Dangerfield" of the brokerage industry, with shareprice growth that was finally generating the respect Bear had long deserved. Back then, the stock was trading at $84 a share.

Now it was at $57—a breathtaking drop from $172, where it had topped out in January 2007 during the froth of the housing boom. Record issuances of new mortgages and skyrocketing home prices throughout the United States were now collapsing under their own weight. Loans issued to "subprime" borrowers whose incomes couldn't support the expense of high–interest mortgages had, in many cases, gone into default. The defaults had prompted a wave of bank foreclosures on subprime borrower homes, forcing people to move out and harming the safety and value of other homes in surrounding neighborhoods. Fast–growing areas of states like Nevada, California, Arizona, and Florida had been especially hard hit.

In reaction to the disastrous lending practices of the housing boom, banks were providing credit to only the wealthiest, most stable consumers, leaving many potential home buyers unable to make purchases. Many of the country's most active mortgage providers, including OwnIt Mortgage Solutions and New Century Financial Corp., had gone into bankruptcy, saddled with the unwieldy costs of mortgages to subprime borrowers that had ceased to be paid down. Increasingly now, the third parties that held bonds connected to subprime loans, once those loans were "securitized" or bundled into new investments, were taking huge losses on those bonds. In a catch–22 effect, the mortgage lenders that still had money to lend were becoming leery of issuing new loans, since their ability to lay off the risk of those loans to other investors was diminishing, and the market overall was slowing to a crawl. As an issuer of new mortgages as well as a trader and holder of mortgage–backed securities, Bear was being hurt by the convulsions in the housing sector—and that was before the events of the last few days.

The mood around the table was lousy. Bear's old hands had seen more than a few competitors come and go over the years, and now their firm was uncomfortably close to becoming a Wall Street casualty. Fixed–income chief operating officer Friedman and others, who had been anxious about the firm's financing since at least last summer, were deeply frustrated. Their suggestions that the firm should sell itself or raise capital had gone largely unheeded, now with disastrous results. Schwartz, Molinaro, and some others were more shocked. They had been working their tails off for months, courting clients and shareholders and trying desperately to return Bear to profitability after its recent November quarter loss. In recent days, they'd labored to counteract the negative rumors in the market, with no success. Now, suddenly, their prized firm was on the brink of oblivion.

Dispensing with the introductions, Molinaro, who had taken a seat on the long side of the conference table not far from Schwartz, began running through a laundry list of questions. "What collateral do we have that we could repo?" he asked the group.

He was referring to repurchase agreements, otherwise known as "repo loans." Repo loans were short–term, often overnight, funding pacts, usually struck between two Wall Street firms or one firm and one investor, like a hedge fund. As the borrower, Bear would offer its counterparty—the other bank in the transaction—a bundle of securities in exchange for immediate cash. Bear could then use the cash to help fund its operations for some brief period of time, often the next twenty–four hours. Afterward, the counterparty could then return the securities to Bear, which would repay the counterparty the cash.