The bulge-bracket banking chiefs floored by the short sellers

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The Independent Online

It requires a certain degree of arrogance to regard one of the 20th century's best-known satires as an enormous compliment. But for the super-rich traders who ran Wall Street as their personal fiefdom for more than 20 years, that's exactly what Tom Wolfe's Bonfire of the Vanities represented.

These masters of the universe were never likely to be humbled by a mere work of fiction, or, for that matter, by Michael Lewis's semi-autobiographical Liar's Poker which ridiculed the "big swinging dicks" of the Street. No, humiliation was only ever likely to be delivered in the one language that all the masters understand – cold-hard cash. For men such as Richard Fuld, the chief executive of Lehman Brothers since 1994, that day has arrived. Mr Fuld, known as "the gorilla" on Wall Street for his powerful build, amassed a personal fortune of Herculean proportions through investing mega-bonuses in Lehman stock, of which the price only ever seemed to go one way.

Nothing stopped Mr Fuld. When Lehman's World Trade Centre headquarters was destroyed in the attacks of September 11, Mr Fuld set up shop down the road, taking over an entire Sheraton hotel for his traders. Last year alone, his bonus was £20m, but that was small change compared to his 2 per cent holding in a bank with $350bn (£195bn) of assets.

And then came the credit crisis. For weeks, Mr Fuld insisted Lehman could survive. And when he realised the game was up, he was forced to go cap in hand, begging for a benevolent takeover. The answer was no, even from the US Treasury Secretary, Hank Paulson, who allowed Lehman to go to the wall. Mr Fuld has not been seen since, leaving the negotiations over the break-up of Lehman to his number two.

The staggering arrogance of the masters of the universe is best summed up in the story of Jimmy Cayne, chairman of Bear Stearns. As the once-mighty investment bank staggered towards crisis in March, Mr Cayne was playing in a bridge tournament in Detroit. And by the time he headed home to New York, the Federal Reserve had pulled the plug on his bank, engineering its takeover by JPMorgan Chase.

The $2 bill taped to the Bear Stearns headquarters spoke volumes about public opinion about the behaviour of Wall Street bosses.

Other masters of the universe are rapidly being forced to come to terms with the reality of impotence. John Mack, chief executive of the under-attack investment bank Morgan Stanley, has this week been begging for help from anyone who will listen. Even Hillary Clinton has had to listen to his pleas for curbs on short selling. Just a few months ago, his bank was side-stepping an outcry over profits it had earned selling short the shares of HBOS. As its traders made hay with HBOS's problems, Morgan's advisers were charging the bank millions for giving it advice on a rights issue designed to return it to health.