One Year Later: How the Fall of Lehman Bros. Changed Your World

One year ago this week, as the gallows humor of the moment had it, there were only two investment positions: cash and fetal.

On Saturday and Sunday, September 13 and 14, 2008, while the country golfed and watched football, the Masters of the Universe convened in Manhattan, looking for a way to keep Lehman Bros. alive. The firm had $18 billion on hand, but was sinking under the weight of $780 billion in leveraged investment positions, including toxic mortgages and derivatives. CEO Dick Fuld was desperate to save his firm from bankruptcy, but both Barclays and Bank of America walked away from a deal. President Bush refused to take his call.

On Monday morning, the 158-year-old company declared itself insolvent and slipped beneath the waves. The resulting vacuum sucked down stock indexes worldwide, as well as companies, jobs, incomes, and the life savings of millions of folks who never even knew there was a problem. One of the oldest, and largest, money market funds broke the buck. AIG and Washington Mutual were wobbling, and Merrill Lynch got hitched to Bank of America in a shotgun wedding.

"People everywhere had the hell scared out of them," says Neil Goldberg, a principal with Boston-based investment advisory firm GW & Wade. "The fear factor was off the charts ― not just 'Will I have enough to retire?' but 'Will I have enough today?'"

One year later, we set out to discover how Lehman's collapse changed our lives. In the following stories, we'll explain how, in addition to our smaller portfolios and less valuable houses, we're learning to live with less stuff. It's a painful transition for an economy reliant on consumer spending, but it might just make us better people. Our job prospects have changed: Women and older workers appear to be winners, while blue-collar men face a tough future. On the investment front, we need to be wary of "safe" Treasury bonds, and we'd do well to keep an eye on energy. And despite lots of talk about "green shoots," it's still pretty tough out there.

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