Andrew Ross Sorkin's 'Too Big To Fail' is published in the UK today, and yet further incredible details about the 'Lehman weekend' (13th - 14th September 2008) have been revealed, in extracts from the book published in The Times newspaper.

According to Sorkin's account, US Treasury Secretary Hank Paulson and New York Fed President Tim Geithner had persuaded the CEOs of some of America's largest banks to help fund a Barclays takeover of Lehman. Barclays, particularly President Bob Diamond, was keen. But, as the Americans fought hard to save Lehman (and prevent what they thought would most certainly become a financial crisis), they hit a snag. Barclays, it seems, couldn't approve any deal without a shareholder vote. And the only party able to waive this requirement was the UK government.

The pressure was building, as there needed to be a solution to the Lehman issue before the markets opened on the Monday in Asia. In the end, it came down to UK Prime Minister Gordon Brown. Would he allow his chancellor, Alistair Darling, to sanction the deal ? The UK authorities, however, were concerned that Barclays hadn't had time to conduct proper due diligence, and that Lehman's toxic assets might end up infecting the UK banking system as well. So there was to be no deal. US Treasury Secretary, who spoke to Darling on the telephone in an attempt to get the deal done, has claimed that Darling said that he didn't 'want to import our (America's) cancer' (although Darling has subsequently denied this).

Paulson's reaction to Darling's stance was that the Chancellor has 'grin-f.cked' us. The view in the US was that by not agreeing to the Barclays / Lehman deal, the financial system (including the UK's) would come under severe stress, and face collapse. Sullivan & Cromwell chairman Rodgin Cohen, who was also involved in the negotiations, summed it all up when he called then FSA chairman Calum McCarthy and pleaded: 'You've really got this wrong if you think this is going to infect you. By not doing the deal, it's going to infect you'. And so it proved to be the case, as Lehman was left to file for bankruptcy.

Finally, Bloomberg reports that, according to an unnamed person familiar with the situation, in the months leading up to AIG's meltdown, CFO Elias Habayeb was busy negotiating with banks in an attempt to get them to take haircuts of up to 40% on the $62bn of credit-default swaps they had purchased from the insurer. But, as events came to a head last September, New York Fed President Tim Geithner instructed AIG to agree to pay out 100% on the contracts, because he was concerned that there was insufficient time to negotiate individual deals, and worried that the banks risked failure unless they were fully paid up.

In the end, AIG is said to have paid Societe Generale $16.5bn, Goldman over $14bn, Deutsche Bank $8.5bn and Merrill Lynch $6.2bn.

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