Russell E. Palmer Professor of Finance at Wharton; senior advisor of WisdomTree; and author of "Stocks for the Long Run"

After that weekend, the Primary Reserve Fund broke the buck, and I can remember feeling very strongly that Bernanke and Paulson would have to stand up and basically insure money funds.

It's a $4 trillion market and a major panic there would have totally disrupted the financial markets. I was really anxious. For the first time, I was really saying, "My goodness, we are in a credit meltdown."

... As an advocate for long-term stock investing, that time was, to say the least, a trying period. But it was a big, bad bear market. One of my colleagues told me that someone had called him to say, "I got Siegel's 'Stocks for the Long Run.' I'm throwing out that concept. All the book is good for is a door stop now."

But the truth is you don't have to throw it out. As we see this tremendous recovery taking place, we're reminded that the market gives good returns for those who can stay in through these periodic shocks. It's going to go up and then crash again. So you have perma bears and perma bulls, and every so often they're going to hit it.

 

Bank analyst and co-founder of Institutional Risk Analytics

That people were surprised by what happened to Lehman shows how naïve and flaccid we have become as a society -- especially in the financial profession.

We are so convinced that there is no risk. From the collapse of the private mortgage firms in '07, all the way through '08, we were still sleepwalking our way through the crisis.

And going into last September, it was fantasyland. People assumed that someone was gonna pull the trigger on Lehman, and Lehman assumed that it was valuable enough that somebody would buy the firm.

Even I, who thought that something terrible could happen, hadn't really thought about the fact that people weren't gonna get paid.

They had bailed out Bear and made it all right, so why not Lehman? The Bear bondholders were saved, and the Bear people even got $10 a share -- which with today's perspective seems absurd. [Former Bear CEO] Alan Schwartz should be congratulated!

Managed Funds Association CEO and former House representative (R-LA) who fought for more regulation of Fannie Mae and Freddie Mac

The week before Lehman filed for bankruptcy, Fannie [Mae] and Freddie [Mac] set the stage for a collapse. When they were taken over by the government, the world realized that there were risks in the market no one understood; and immediately everybody was suspicious of everyone else.

The market had always viewed Fannie and Freddie as rock solid, which contributed mightily to their political invincibility for so many years. They always earned within a very narrow band of investor-expected performance -- an almost Madoff-like performance...

When I spoke that week with former Congressional staffers, most in various positions in the financial world, we were all in disbelief that the wheels had come off the wagon.

For us, it had been like watching a horror show in slow motion -- wave after wave of failures. Lehman and Merrill Lynch, homeowners and home builders, consumer credit and materials suppliers. And that's how it felt after Lehman, too.

Lehman weekend I was in Baton Rouge and I was glued to the TV. My wife Kay would come in every few minutes and ask, "Is everything okay?" I don't really watch television, so she was wondering why she couldn't pry me away.

My immediate worry was how this would affect our members [who are hedge funds]. I knew it wouldn't be good.... But I didn't know how bad it would be.

Executive director of City Harvest, a charity that distributes food to New York City's hungry
After that weekend we saw a lot of people standing in line for meals for the first time, and we still do. Remember, every Wall Street job creates two or three other jobs: drivers, drycleaners, all sorts of domestic help and caretakers. Not only is unemployment in the city now at an all-time high, thousands of people have had hours cut or wages reduced.
I was actually flying back from London on the 15th, and the minute I landed, my senior team and I brainstormed about how to stretch our resources. We were going into an unknown period of fundraising and would have to deliver more food than ever. We had to ask, what was our exposure to the fallout from that weekend? Who were our big corporate funders, and what had we budgeted to receive from them? We pulled the fall newsletter, which was ready to go. We rewrote the cover story to reflect the surge in demand that we anticipated. We had to be as visible as possible with the message that New Yorkers had to support City Harvest -- if not now, then when?
The meltdown came at the beginning of the peak fundraising season for charities. From October through January, we raise about 40% of our budget. But we actually raised more money than we had anticipated. Individual New Yorkers stepped up to fill the gap created by corporations...and that has been very reassuring.

Founder of hedge fund Kynikos Associates
It was an interesting time for me because I happened to be in the UK that weekend. I was moving my daughter into her new flat in Edinburgh, and I had just gotten back to London the weekend in question. I immediately had to deal with the short-selling ban, which had the most interesting impact on my business.
If you recall, that was done immediately after the Lehman/Merrill/AIG weekend. The archbishops of York and Canterbury were railing out against hedge funds and short sellers, so I was asked to comment while in the UK on what the good archbishops had said. I was on BBC News and took some pretty harsh questions from the talking heads that didn't understand that the role of hedge funds in the crisis was pretty negligible.
The bans that were enacted right after that weekend were disconcerting and I think in hindsight very bad policy. It sent the wrong message at the wrong time because, as you know, most short selling is done as a hedge. It's not done directionally as I do it. I'm in the minority. Most people are shorting a security to protect against other things they have bought. It added to market concerns at the time and it threw a lot of hedge fund strategies completely off the road, and that had implications for liquidity later. It was a very strange time.

Morningstar managing director

Where all this really hit home for individual investors -- and where it went to a whole different level -- was when the Reserve Fund broke the buck.

I remember that day so vividly. It was mid-week and I had walked home from work ... It was a nice way to unwind with all of the stress going on.When I got home, there was a call from the [Wall Street] Journal saying, "The Reserve Fund has broken the buck. What do you think?" My first reaction was, this is very, very bad.

The next day, those quotes are on the front page of the Wall Street Journal and they are all over Europe. It was such a scary point because this is where you could get a real panic on Main Street.

People had bought into this "stocks for the long run" mentality without fully understanding what it's like to live through the bad parts of the long run.

The baby-boom generation essentially came of age during a bull market. And it was one of the most glorious and extended bull markets, and it had a huge impact on our thinking.

This financial crisis has permanently altered that. I think people will be more conservative for the rest of their careers. And there will probably be some healthy lessons for the next generation

Morgan Stanley CEO

There were so many balls in the air, and if any one of those balls hit the floor, it could've been pretty devastating. There was no confrontation, and there was no explosion.

I think [Citigroup CEO] Vikram Pandit said to Hank [Paulson] at one point, "If we help out Lehman, what happens with AIG, and what happens with Merrill?"

Hank's view was, "You -- the Street -- help me with Lehman, and I can go back to Washington and get help on other problems." That stuck out.

People say, "Well, you should've never let Lehman go out of business." But this was ground we'd never been on before. So if you want to say what could we have done differently, you need to back up a few years and say, it's too bad we didn't have a systemic risk manager.

If you had a systemic risk manager working, probably you could've come up with a solution and it wouldn't have gone under.

But you know, there's a lot of we should, could, et cetera. I'm not sure there's one thing you could've done differently that weekend that would've made a difference.

Anchor on CNBC

Things were changing so quickly. I remember speaking to a source inside Lehman who said that he was inside Dick Fuld's office and Dick was on the phone with Ken Lewis on Friday and he said, "I look forward to being your partner," to Ken Lewis.

And then by Sunday -- even, actually, by Saturday -- Ken Lewis had agreed to buy Merrill and not Lehman, and Lehman had agreed to file.

Things were moving at an incredibly fast clip. All weekend, I was on the phone with various players within the story. There was a feeling in the air this had never been seen before, and there was a real scare that some of the so-called strongest institutions were going to go down.

The most unbelievable thing was that nobody was infallible. For a moment there, even the kingpins of international finance, Goldman Sachs, was questioning what would be next.

Former assistant secretary for financial institutions for the U.S. Treasury

Everybody was there all hours of the night. I can recall conference calls with 20 people on them at three in the morning.

Right around the Columbus Day weekend was when we announced we were going to first deploy some TARP money. The weekend going into that was probably the most memorable for me. Everyone of prominence in the regulatory community -- from Paulson to Geithner to Bernanke to Sheila Bair to John Dugan -- and all of their key people were huddled in an office across from Hank's personal office, all in casual clothes on a Sunday.

At that meeting, we decided that we were going to slap a U.S. full-faith and credit guarantee on basically all liabilities in the banking system. In that moment you're turning Citigroup debt into U.S. Treasury debt. It was incredibly powerful and scary.

I worked on the money market mutual fund guarantee and the equity investment to the banks. The second one was really a sea change. We were investing U.S. taxpayers' dollars into private companies -- hundreds of billions of dollars...

Just setting it up was harder than you can imagine. The dollar amounts are huge and the stakes are high and the political pressure is off the charts. Yet you're still sitting in your office alone. You're just praying you don't make a mistake that gets put on the front page of the paper.