A top Lehman exec's lament

"It didn't have to go this way," a devastated Barbara Byrne, a vice chairman at Lehman Brothers (LEH), told me this morning. Like a lot of senior folks at the now-bankrupt firm, she spent most of the weekend at the office, hoping, praying, and consoling the rank and file. "Talking to a single mother of two, a secretary, in tears is the hardest thing," she said.

She's right that the fall of the house of Lehman didn't have to happen this way. Until 2 p.m. Sunday, there was a deal on the table for Barclays, the British bank, to buy Wall Street's fourth-largest firm. But authorities in London reportedly balked at the terms, and the deal collapsed. Meanwhile, another potential acquirer, Bank of America (BAC) backed out over the weekend and decided to buy Merrill Lynch (ML) instead.

If he'd been able to hang on this week, Lehman CEO Dick Fuld would have announced progress on a survival plan he unveiled last week: He was going to announce the sale of 55% of asset manager Neuberger Berman to either Bain or Hellman & Friedman on Thursday, during Lehman's third-quarter earnings call. He also planned to provide details on a spin-off of Lehman's commercial real-estate assets -- the toxic center of its troubles.

But Fuld ran out of time, and Treasury Secretary Hank Paulson, who was under intense pressure to bail out Lehman, decided against it. Lehman's bankruptcy leaves 28,000 employees with an uncertain future at best. Many had their savings tied up in Lehman's now all but worthless stock.  And as of this morning, employees had not heard from Fuld -- no email, no nothing.

"Where is the apology? I'm mad. I'm furious," says one ex-Lehman executive whose children's education fund, still in Lehman stock, is wiped out. Many of the senior execs -- a ton of talent there -- will move in teams to the Wall Street survivors, Morgan Stanley (MS) and Goldman Sachs (GS), or to hedge funds or, as Byrne says, "to Montana to escape it all."

She is one of the veterans. Hired by former Lehman CEO Lew Glucksman 28 years ago, Byrne navigated the ranks of the investment-banking boys club to become a mega-producer. Now, at age 54 (and weighing seven pounds less than she did a week ago), she is walking away from clients such as General Electric (GE), IBM, EMC, and Altria. Will she retire? "No!" Byrne says emphatically. "I could retire, but I'm mad." She has a couple of job prospects floating. She's meeting with one of the firms today.

No matter how bad things got at Lehman headquarters in midtown Manhattan, Byrne knew it could have been worse. She got a weekend call from a Lehman managing director in Houston, Rob Pierce, whose office windows had been blown out by Hurricane Ike. The Lehman office in Houston, where its natural resources folks are based, was ravaged by the storm. Then a tree fell on Pierce's house. Byrne says he asked her, "Do you think this is Biblical?"