Meanwhile, Pete Peterson licked his wounds by spending more time than usual that summer in East Hampton, improving his tennis, relaxing with Joan and his visiting children, and talking incessantly about what had happened at Lehman. He received warm, testimonial letters of praise from competitors, clients, friends and Lehman colleagues.

John C. Whitehead, co-chairman of Goldman, Sachs, wrote, in part:

“This is an unabashed fan letter … You’ve done a wonderful job in bringing Lehman Brothers from the brink of disorganized chaos to the highly profitable, distinguished organization it is today. Your partners will miss you—more than they know.”

Barbara Walters wrote: “You have made success out of failure, respectability out of chaos. You are admired within your industry and, even more important, loved by all of us who are fortunate enough to have you as a friend.”

Peterson’s behavior at Lehman during his remaining months was magisterial. So as not to embarrass Glucksman, he stopped attending board meetings. He agreed to call and reassure clients of Lew Glucksman’s virtues, calls that also conveyed the impression that Pete Peterson was standing tall. He drafted three different form letters and dispatched literally thousands of them to corporate clients, to Wall Street competitors, to the five-hundred members of the Bi-Partisan Budget Appeal, to acquaintances in Washington and New York. The A list—consisting of his most important friends and clients, of movers and shakers and people in the media—received a telegram on July 26, followed later that evening by a hand-delivered packet containing the press release. In each of the four versions one paragraph was the same:

I am personally excited at the prospect of going into the classical merchant banking business of special investments in promising businesses and corporate restructuring, a line of activity in which I have long had an intense interest. I would not feel free to leave, however, were I not so confident of Lew’s ability to manage the firm successfully.

Torn between wanting to tell the truth and wanting to retain his dignity, Peterson and George Ball finally adopted the “limited hangout route.” When the July 30 issue of the Economist reported that Glucksman gave Peterson “a polite, but firm shove out of the door,” Ball shot back a two-page letter, insisting the parting was done “in a friendly spirit.” (Later asked to explain “friendly,” Ball, who was not a diplomat for nothing, said, “‘Friendly’ is a word of art in that situation.” By that definition, so is war.) Ball wrote to Fortune denying its assertion that both men knew that in a board showdown Glucksman would win, the opposite of what he told Peterson. And Peterson granted interviews in which he flatly denied that an ultimatum had been given or implied. Glucksman wore a similar mask. The August 8 issue of Time magazine quoted Glucksman as saying of Peterson: “We’ve been good friends, and we will always be good friends. In fact, I do not have many friends besides Peter.”

What Glucksman’s “good friend” didn’t know was that the new CEO of Lehman was seething inside, angered that Peterson still came to the office, still served as a counterpoint to Lew Glucksman. What Peterson thought was noble, Glucksman thought demeaning, another example of noblesse oblige. “Pete was just hanging on,” says Glucksman. “It created dissension.”