The WSJ has the details on how Pauson drew the bailout line in the sand and told Lehman it was toast:
WSJ: One of the most tumultuous weekends in Wall Street’s history began Friday, when federal officials decided to deliver a sobering message to the captains of finance: There would be no government bailout of Lehman Brothers Holdings Inc.
Officials wanted to prepare the market for the possibility that Lehman could simply fail. The best way to do that in an orderly way would be to get everyone together in a room.
Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke and his top New York lieutenant, Timothy Geithner, summoned some 30 Wall Street executives for a 6 p.m. Friday meeting at the Fed’s offices in Lower Manhattan.
“There is no political will for a federal bailout,” Mr. Geithner told the assembled executives, according to a person familiar with the matter. “Come back in the morning and be prepared to do something.”
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