In an interview last summer, Dick Fuld was asked whether the credit crunch would take a significant bite out of Lehman Brothers (NYSE: LEH - News) , which to that point had avoided the worst fallout from a crisis that had hit other Wall Street banks.

Mr Fuld, a physically imposing 62-year-old known for his voracious appetite and pugnacious defence of Lehman against all critics, leaned back in his chair and glowered at his interlocutor.

"Do we have some stuff on the books that would be tough to get rid of? Yes," he said, referring to commercial and residential mortgage assets. "Am I worried about it? No. If you have some repricing of these things will we lose some money? Yes. Is it going to kill us? Of course not."

The answer to that question is no longer so certain.

Lehman Brothers, the smallest of the remaining four independent Wall Street investment banks, has seen its shares plunge more than 60 per cent this year. The bank last week said it expected to post a deeply embarrassing $2.8bn (£1.4bn) second-quarter loss, the first in its 14-year history as a public company, and said it would raise $6bn in fresh capital from a group of US institutional investors. On Thursday, Lehman ousted its president and chief operating officer, Joe Gregory, Mr Fuld's partner for 30 years, and demoted Erin Callan, its finance director, after she served just six months in the job. Mr Fuld, now the longest-serving chief executive of a big Wall Street bank (with 14 years at the helm out of a near four-decade long-career at the bank) faces the prospect of being the next chief forced into an early retirement.

Lehman is a dead bank walking, say its critics who argue the reason it has not yet suffered the same fate as Bear Stearns is the emergency facility that allows it to borrow from the US Federal Reserve. "Lehman is propped up now by the US taxpayer and nothing else," said one financial services industry chief executive. "When the Fed window goes away, so does Lehman."

Mr Fuld, a director of the Federal Reserve Bank of New York, may come under private pressure from regulators, eager to take away the temporary borrowing facility, to get Lehman's house in order and pursue a sale to a larger institution as soon as he can, either to a big US bank or a foreign buyer. The problem is it goes against every fibre of his being, especially as he would be selling from a point of weakness.

Richard Severin Fuld Jr (he has the same name as his father) was born in 1946 in New York City. A graduate of the University of Colorado at Boulder, Mr Fuld joined Lehman in 1969 as a commercial paper trader and completed his MBA at night at the New York University Stern School of Business. He is married to Kathleen, a serious art collector, and has three children. His move to Wall Street came after a brief attempt to become an Air Force pilot ended with a brawl with a commanding officer. According to the New York Times, Mr Fuld was defending a younger cadet who was being taunted by the senior officer, one of many instances of Mr Fuld sticking up for the little guy (at Lehman employees own 30 per cent of the shares, a move intended to spread the wealth).

He has carried that bristling intensity into Wall Street, where it is so legendary rivals, only half jokingly, say they would fear for their safety if they were to cross him. "People stopped doing business with Bear at the end", said one executive. "I don't think they would do that with Lehman because they wouldn't want Dick to come crashing through the window to rip their arms off."

In his early days at Lehman, Mr Fuld became a fast-rising protégé of Lewis Glucksman, a hot-tempered trader who wrested power at Lehman away from its old-line investment bankers. He also witnessed Lehman's plunge from its perch as a leading Wall Street partnership to its collapse in 1984 and humiliating sale to Shearson American Express. Mr Fuld endured a deeply unhappy decade as part of an ever-shifting larger institution until American Express spun Lehman off in 1994 with Mr Fuld as chief executive.

Given this experience, Mr Fuld's hesitancy to once again put Lehman inside a larger institution, despite chances to do so when the bank's share price was far higher, is not hard to understand. Yet to some, his failure to sell before the credit crisis will be a stain on his legacy.

Still, the final chapter is not yet written and he has pulled off the seemingly impossible before. The Lehman Brothers that emerged in 1994 was a third-rate bond house that no one gave much chance of surviving for more than a year. "He took a firm that was in disastrous condition out of Amex and because of his brilliance and effectiveness took it to be one of the leading firms in the business," said Richard Bove, a veteran banking analyst at Ladenburg Thalmann.

Mr Fuld beat back critics in 1998 who said Lehman could fall victim to a crisis sparked by the near-collapse of hedge fund Long-term Capital Management. He is said to be just as competitive a golfer (he has a handicap of 10) as he is an executive. In an interview last year, as Mr Fuld assessed different Lehman executives, he usually made some mention of their golf game as if going over in his head whether he had beaten them and how badly. He is an avid squash player too, with a court at his home.

Mr Fuld is also fanatical about good grooming. He favours crisp white shirts and dark suits. When Lehman flirted with a casual Friday policy he ended it by staring down anyone who had the poor sense to turn up wearing anything less than business attire. Lehman employees are now widely known as some of the best dressed on Wall Street.

But he has done far more to reshape the bank's image. In 2001, he led it back from the September 11 terrorist attacks that damaged Lehman's lower Manhattan headquarters. He then expanded it beyond fixed income into equities, merger advisory, asset management and in Asia and Europe. But the backbone was still fixed income and in the past few years that meant heavy reliance on mortgages that could be packaged and sold to investors. For a while, everything worked. Lehman posted record quarter after record quarter, capped by a $1.3bn profit in the second quarter of last year. That led to huge payouts to Mr Fuld, including a package worth $40.5m in cash and stock for 2006.

Yet, as the losses confirm, Lehman is not immune to the mortgage crisis. Its top-of-the-market housing acquisitions and its reliance on borrowed money have left it vulnerable. For Mr Fuld, staunch defender of the little guy, it may no longer be possible to keep the big guys at bay.