Lehman's demise: a banker's personal diary
The last five days has witnessed the re-shaping of Wall Street, with the takeover of Merrill Lynch by Bank of America and the bailout of insurer AIG. But no event has had more visibly personal consequences than the collapse of Lehman Brothers. At the end of a momentous week, Financial News asked one London-based employee for their own account of the last few days. The employee is known to Financial News, but has asked to remain anonymous.
Wednesday 10 September
Most of this year people were giving management benefit of the doubt. Dick Fuld has been here forever and they've been through a lot. The culture of Lehman was: we are one big team and we've got through this before, when Russia defaulted on its debt and all that. We came in on Wednesday and expected them to announce something big in their analyst call to make up for the $2.8bn (€1.9bn) loss reported on the Monday.
On the call, management had this amazing way of answering questions and not saying much. The analysts weren't that hard on them, but they didn't announce a fundraising or any other plans. As we sat there, listening to it, we thought it was weird. We chatted about it and then I returned to normal business. Then the early press feeds came in. They said: "Lehman announces big loss, does nothing." They clearly weren't impressed. But we just went back to work and I went home as normal. This was our last communication from senior management.
Shares close at $7.25.
Thursday 11 September
Pre-market trading started in the US and the market vomited all over the analyst call. I think it had taken them a day to digest the call which basically said nothing. The market opened and it just tanked.
Then we knew we'd be bought. We started reading the press and a takeover was clearly a screaming bargain and we were ripe for the pickings. We continued working on the assumption we were going to get bought by somebody. We began speculating as to where the redundancies would be, depending on who the buyer was. If it was Barclays, the London staff were worried.
Shares close at $4.22.
Friday 12 September
The stock just continued getting pounded. There was the announcement of the big meeting of the Fed brokering the deal, and then Paulson said: "No, we're not going to give any help." We kept working and just watching this stuff. At this time, no one had any idea the firm would go bankrupt. We thought the Fed would announce a forced takeover, à la Bear Stearns. Well, you know. They've got to play those games of being hard.
Shares close at $3.65.
Saturday 13 September
Throughout the day, I kept checking the internet periodically. The news was back and forth. There was the bad assets-good assets plan. Or maybe Barclays or Bank of America would buy it clean. And all this time, radio silence from senior managers.
Sunday 14 September
Another day compulsively checking the internet. The rumours came and went and we started hearing negotiations had come to a standstill. Lehman had hired PwC to work on the bankruptcy provision, but we just thought this was brinksmanship.
Following the saga on the internet, it had clearly become a fluid situation. We stayed up until 11pm to 12am to see if there would be an announcement, and then I went to bed with no additional news, still thinking there was going to be a deal.
Monday 15 September
Woke up at 6am, turned on my BlackBerry and there was an email from the firm sent at midnight or so, New York time. It said the company intended to file for Chapter 11 with no mention of what was happening in London. All the way into the office I had clients calling, trying to find out what was going on. There was a scene outside on 25 Bank Street [Lehman's headquarters], which was pandemonium with all the press going there to watch the car wreck.
I got into the office and started trying to find out what I had to do for the business. There was no detail on the other entities which had filed. I began to put the details in order. You never really contemplate what will happen if a parent goes bankrupt and it sends a ripple effect through everything you do. We were just focused on how to salvage things.
I spent Monday on the phone with clients trying to find out what could and couldn't be done, like a doctor in ER, we started tending to things on autopilot. We couldn't think about what was happening, we were just trying to save the patient. Periodically, we got angry with senior management.
Everyone was scrambling to save the little piece of their world with no leadership. It was just the rank and file. We stepped up to try and save the firm.
Lehman Brothers declined to comment.
This article first appeared on
eFinancialNews.com. It was narrated to Toby Lewis.
