They say you should never get emotional in business, but when Larry McDonald walked out of Lehman Brothers’ New York office for the last time, he couldn’t help it. He was furious.

Why had he — one of the bank’s most profitable convertible bond traders, making more than $60m (£36m) for the bank in 2007 — been handed his marching orders? As he walked, the anger dissolved into sadness. The saddest day of his life, he calls it now.

“I’d worked so hard to get there,” he said. “It was devastating. Lehman Brothers was the big league with the best traders. I thought it was the holy grail of banking.”

McDonald was a vice-president when he was sacked in March 2008. He describes his redundancy as “political”.

Now he is getting his revenge with a book, A Colossal Failure of Common Sense: The Incredible Inside Story of the Collapse of Lehman Brothers, that squarely points the finger of blame at Dick Fuld, the chief executive, and his board.

McDonald was not groomed for banking. He didn’t go to the best schools or attend an Ivy League university — though none of that deterred him. After college he bombarded brokerage firms with applications. They said they would hire him only if he had sales experience, so he started selling pork chops door-to-door in Cape Cod.

After a brief stint in a “bucket shop” brokerage flogging penny stocks, McDonald landed a job in the retail arm of Merrill Lynch. His salary was $18,000 (£11,000) a year — a pay cut from his pork chop days — but he loved it.

His brazen approach, such as the time he stole the members book from a local golf club in search of leads, meant he would go far on Wall Street.

By the time he arrived at Lehman in 2004, McDonald was a highly-regarded bond trader. Lured by the bank’s swashbuckling image, the reality did not disappoint. “Lehman’s was this scrappy over-achiever and the culture was everything I expected. It was 25,000 people all with the same oar. You would get in at six every morning, but if you got in at 7:30 you could go through six different coat closets and not find a hanger.”

As part of the fixed-income division, he was in the most cash-generative arm of the business. It was like Camelot when the good times were rolling, he said, but with hindsight, all was not well. The division between the executive board and the rest of the business was devastating. This was physical as well as philosophical: the board was ensconced on the 31st floor, reachable only by a separate lift.

In the four years McDonald worked for the company he never once saw Fuld. His superiors never saw Fuld either. This lack of interaction meant that warning calls from traders on the frontline were not heard, and certainly not heeded, in the years leading to the collapse.

McDonald is a case in point. He called the sub-prime bubble early and started to short mortgage lenders such as Countrywide, Fannie Mae and Freddie Mac. All the while Lehman was increasing its exposure to the very same products. “For every dollar I was making, they were losing six,” he said, “I was making money betting against the edicts that were coming out of the 31st floor.”

He believes jealousy played a part in the board’s insatiable desire for the toxic assets that would ultimately sink it. “They were chasing all of this real estate stuff because Blackstone, which was founded by former Lehman guys, was doing it and there’s always been this intense rivalry between the two. Goldman Sachs was big in it too. It was Goldman-envy and Blackstone-envy.”

For the book, McDonald interviewed 150 former Lehman employees, ranging from senior members of the risk committee to PAs. A very small number had direct exposure to the machinations of the 31st floor and what they witnessed was staggering.

Instead of reviewing the bank’s risk management systems, the executive directors would have endless meetings discussing the corporate dress code as Fuld was a stickler for appearances. A dangerous lack of awareness about the technical financial products the bank was playing with didn’t help matters.

“I think the board was afraid of interacting with the people who genuinely understood things like credit derivatives because they might get caught out,” said McDonald. “The management team was from a different era, they weren’t 21st century financial people.”

Although the book is heavily focused on the failings of the board, it is also a testament to those who tried to “stop the madness”. On the first anniversary of Lehman’s collapse next month, he will join his former colleagues in Ben Benson’s, the New York steakhouse. “It will be like a wake,” McDonald said, “and after that, that’s it. After that I will let Lehman go.”

His future is looking brighter. He recently joined Pangea Capital, a New York-based hedge fund, and if his girlfriend accepts his marriage proposal this weekend, there could be a wedding on the horizon, too.

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