This time last year I was an equity analyst at Lehman Brothers. As the firm collapsed, I sent a series of notes to my friends and family with my take on the situation. To coincide with the anniversary, I have been publishing those observations here one year later. [Photo: Potrait of Dick Fuld, Lehman's CEO]
Last Lehman - For Tonight
Originally written Monday September 15th, 2008, 1:30am (Sunday Night)
I just got home from Lehman HQ which is a combination of an office building being sacked by employees grabbing as much as they can carry coupled with a media circus. I have photos I'll post when relevant and safe to do so. Lehman is filing for Chapter 11 bankruptcy and we have officially been told that tomorrow we work business as usual. I think they want to see whether Lehman is too big to fail or not and go from there. A lot of clients have reduced their exposure to Lehman already and may stick around only to prevent an outright complete collapse or to force the Fed's hand. I think once the Fed made a much larger credit facility available to investment banks late Sunday night, Lehman decided to go for this unexpected Hail Mary. Small chance of preserving Lehman, coupled with greater chance of financial turmoil. I thought it was illegal for a brokerage like Lehman to file under anything but Chapter 7, so this fact alone is interesting (they are saying the holding company can file under Chapter 11 - which lets you stay in business and re-organize - because it is technically not a brokerage, it's an owner of brokerages. The saga continues. The animal has been backed into the corner and has nothing to lose. It's hungry, and angry, and tired, and a risk-taker by nature (the firm is run by people who came up through bond trading). It may behave quite irrationally and without concern for many millions of truly innocent bystanders who might be harmed by a general financial meltdown we haven't seen since 1930. Tomorrow will be spectacular. Stop by 745 7th Ave and get a picture. addendum: just got a internal memo saying Lehman fully intends to stay in business and will meet employee benefits obligations and payroll this Friday. Sounds like hardball..