“Wall Street wasn’t just the best example, it was a kind of opinion leader in American financial life that has marked the last couple of decades. It distracts lots of young passionate people from doing the things that they probably should be doing because they think, ‘Well, I better go do this thing on Wall Street because it pays so well.‘”

– Michael Lewis, author of the 1989 best-seller Liar’s Poker, in an interview today on National Public Radio’s Morning Edition. Lewis’s new book, Panic: The Story of Modern Financial Insanity, is a collection of essays and articles written over the past two decades, starting with the crash of October 1987.

Lewis sees an upside to the demise of investment banks. Recently visiting Princeton, his alma mater, he said, “I was so frustrated with how unimaginative young people had become in choosing their path in life that I thought that someone should establish a kind of ‘Scared Straight’ program for Ivy League students. And they should all be made to go and live with 40-year-old hedge fund managers in Greenwich for a week before they set out on their careers on Wall Street–just to see how miserable you were after 20 years of it. But the markets have now corrected that. They’ve provided the program.” –Jessica Shambora

“You can’t go back and change what you had for breakfast.”

–a saying favored by Fortress Investment Group (FIG) CEO Wesley Edens, according to today’s Wall Street Journal. On Tuesday Fortress’s stock fell 23% to $2.76, a steep drop from the alternative asset manager’s February 2007 IPO price of $18.50 (not to mention the $35 it reached on its first day). The phrase, which Edens heard from his father, was referenced in an attempt to add levity to the unfortunate timing of Fortress’s IPO.

“It’s like Wimbledon. When you win one year, you don’t quit. You want to win again.”

– John Paulson, whose three main hedge funds have risen 15% to 25% this year, according to today’s Wall Street Journal. And that comes on top of gains of some $15 billion for Paulson & Co., his 70-person firm, last year. While Paulson made a few mistakes–buying Yahoo! (YHOO) and Mirant (MIR), for example–he’s won big by shorting the financial giants. Now he’s raising money for a new fund that will invest in beaten-down financial companies. –Jessica Shambora

“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?”

“Two of the players I used to watch are Bill Bradley and John Havlicek. They were both known for moving without the ball–working to get into a position where you’re ready to shoot the ball. In contrast, most people spend a lot of time standing around.”

- Eddie Lampert, billionaire hedge fund boss and chairman of Sears Holdings (SHLD). After a stunning rise, which I wrote about in 2006, Lampert is having a really rough run, as he readily admitted when I spoke with him this past June. Now trading around $87, Sears’ stock, his largest holding by far, is down 39% in the past 12 months. And Sears has recently lost key executives including chief marketing officer Maureen McGuire and David McCreight, who ran the Lands’ End unit and left to become president of athletic apparel maker Under Armour (UA). Sears Holdings announces earnings tomorrow morning.