Sean Grossberg closed the textbook for his financial derivatives class and sank into the couch. The University of Wisconsin senior hit the remote control and the second half of a Sunday afternoon football game filled the 100-inch screen.
Then his cell phone signaled a text message from a fellow finance major. The mess they'd been watching in the financial markets "has hit the fan," wrote his friend.
By the time he headed for bed, after hours of scouring the Internet for more information, his mind was racing.
By then, a crowd blocked most of a sidewalk 900 miles away, outside a glass tower at Seventh Avenue and 49th Street in midtown Manhattan. Employees of one of the nation's oldest and most prestigious financial firms lugged cardboard boxes stuffed with their belongings to the curb. Some wrapped each other in hugs. Others walked out with tears streaming down their faces.
"What's going on?" one man asked. The answer: This is the house of Lehman and it is about to fold.
Outside the Wall Street bubble, most people sidestep the usual thin stream of business headlines when a weekend is under way. For a day or two, we can do without the reminders that the economy is struggling.
Besides, what are we supposed to make of all these reports about arcane securities backed by subprime mortgages. That's just a Wall Street problem, right?
For the moment, though, on this Sunday night, the nation was just getting ready for bed, leaving behind a weekend of baseball pennant races and presidential politicking. In a few hours, alarm clocks would wake people for their jobs on Main Street -- and on Wall Street, like any other Monday.
But it was already clear this would be no ordinary Monday.
Monday
At 8 a.m., dozens of Wall Street analysts dialed in to a conference call to hear the captains of Merrill Lynch and Bank of America lay out the terms of their deal.
"As you all know," BOA chief executive Ken Lewis told them, "the financial system is operating under almost unprecedented stress."
A few words later, the connection was cut off.
But the message was spreading, nonetheless:
When stock markets opened, the Dow Jones Industrial average immediately fell by more than 200 points. By the time it closed, the market would drop 504 points, the biggest one-day point loss since the aftermath of Sept. 11, 2001.
Not everyone was a loser. Sitting in his room at Otterbein College in central Ohio, 19-year-old George Schubert stared at his computer screen. He'd scheduled his classes so he had plenty of time to watch the stock market. And in August, he'd put his amateur investing skills to work by placing a short position on American International Group -- a bet that the stock of the world's largest insurance company would fall.
Now, like Lehman and Merrill, AIG -- which insured the dubious investments that were pulling the big banks down -- was also under attack. By day's end, its shares were down 61 percent. Schubert could barely contain his excitement -- that is, as long as he could stay awake.
"I never drank so much Red Bull in my life," he said. He would cash in his AIG bet a day later, making a healthy (but undisclosed) profit as AIG fell from $70 last October to $3.
Tuesday
At 6 p.m., on Capitol Hill, the nation's two most powerful financial officials -- Treasury Secretary Henry Paulson and Ben Bernanke, the Federal Reserve chairman -- called congressional leaders into a meeting. There is no choice, they said: The government must step in and take over AIG to keep the crisis from worsening. The meeting broke up a little less than an hour later and rumors of the plan sent the Dow up 142 points for the day.
But now there was something new to worry about.
In New York, The Reserve Fund -- operator of a huge money market fund -- announced it would be forced to do something unseen in more than a decade. Investors put their money in money markets specifically because they are so safe. You may not make much money, but you will not lose anything, or so goes conventional wisdom.
Reserve's Primary Fund, though, had so much invested in Lehman Brothers debt securities that every $1 share would now be worth just 97 cents.
Wednesday
By Wednesday morning, the $85 billion bailout of AIG was all over front pages. But the news hardly calmed the market. It dropped almost 200 points to open and continued to lose ground.
John Mack, chairman and CEO of beleaguered investment bank Morgan Stanley, tried to calm his capitalist army. "I know all of you are watching our stock price today, and so am I," he wrote, in a late-morning e-mail to all his employees. "What's happening out there? It's very clear to me -- we're in the midst of a market controlled by fear and rumors, and short sellers are driving our stock down."
On this day, that fear was truly understandable. The Dow closed down 450 points.
At 4 p.m., lawyers packed into room 601 at the U.S. Bankruptcy Court in lower Manhattan, where Judge James Peck presided over the dismantling of Lehman. Court workers set up chairs in the aisles, but the crowd poured out into the hall. A lawyer presented an offer by Barclays PLC to buy parts of Lehman for $1.75 billion; creditors had hoped to get more.
But opposing lawyers argued that the judge could not afford to wait. Lehman -- once one of the major forces in the world of finance -- now amounted to a melting ice cube, one said.
Thursday
Stocks fell through the morning. In Somerville, Mass., Richart Shortt watched with alarm. Shortt is 63 and semiretired, working as a business consultant. He had seen his stocks fall from $290,000 a year ago to $230,000 a week ago and now to $210,000.
Shortt had planned to quit working altogether over the next couple of years. Now, he told himself, he might have to put off retirement. But would he be able to find work in a down economy, as small businesses cut back on their own expenses?
So many questions, so few answers. When Dan Fagan, a Conn. investment adviser, arrived at his New Haven office on Thursday, there were 20 voicemails from clients and 50 e-mails.
The most alarming call was from a 50-year-old client who moved his money out of stocks months ago and still felt insecure. He told Fagan he'd just come from the bank, where he had tried to withdraw his entire savings, but was told he could only withdraw $10,000 at a time. Now, he wanted to cash out of his brokerage account, too.
Fagan reassured him that everything was fine, and that even having large amounts of cash on hand came with risks. The man decided not to put his money under a mattress.
By mid-afternoon, the market was down sharply.
But around 2 p.m., investors sent shares soaring on early reports of what could be a huge new gambit by the government -- a massive buyup of the Wall's Street poisonous securities. Could this be the magic balm the market had been searching for?
By the time it closed, the Dow had gained 410 points.
Friday
As soon as the opening bell sounded Friday morning, investors poured money into stocks, pushing the Dow up 450 points in less than half an hour. By day's end -- after assurances from President George W. Bush and his Treasury secretary -- the Dow finished with a 370-point gain.
Which left it almost precisely where it was when the roller-coaster week began.
In her office in Bloomingdale, Ill., about 30 miles from Chicago, mortgage broker Jodi York-Caraballo took inventory. After the government had seized control of home finance giants Fannie Mae and Freddie Mac on Sept. 8, she'd sent out more than 200 e-mails to potential customers inviting them to take advantage of a resulting drop in interest rates. But with lenders seized by uncertainty, fewer than 10 had been able to qualify.
The announcement by the Federal Reserve and the recovery in the markets wouldn't solve that problem. But when three customers called her Friday morning asking for her assessment, York-Caraballo answered with measured optimism.
Don't expect rates to drop dramatically, she told them, but "as the dust settles, we should see an improvement."
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