it was really bad to see lehman brothers going down this way. one of the oldest and reputed bankers, having a history of 150 years just sank as if it was a ship (with all due respect to titanic). but then, who is to be blamed? is it the management, the sub prime crisis or the governing bodies?
till three years back lehman was on a shopping spree (quite literally),acquiring and merging small and big firms alike at a record speed. lehman’s growth rate was phenomenal. till the last year it had been considered the best, not in one aspect but a whole lot of things. given below are a few achievements that i came across on the lehman brothers website:
- 2000- the firm joins the s&p 100 index and its stock price hits $100 for the first time.
- 2002- lehman brothers executes the largest financial services ipo in history for cit group, and the largest european leveraged buyout in history for kkr and wendel investissement.
- 2002- the firm lead-manages the largest-ever u.s. dollar denominated debt issue for gecc.
- 2002- lehman brothers acquires lincoln capital management's fixed income business.
- 2003- lehman brothers acquires neuberger berman, positioning the firm as an industry leader in the wealth and asset management business.
- 2003- lehman brothers acquires the crossroads group.
- 2004- the firm advises on two of the top five announced mergers & acquisitions transactions worldwide: cingular wireless' acquisition of at&t wireless services; and sprint's acquisition of nextel communications.
- 2004- lehman brothers executes the largest capital markets transaction in the history of the u.s. utility industry for pacific gas & electric and the largest ipo globally in 2004 for belgacom sa.
- 2004- the firm posts record financial results, including best-ever net revenue, net income, and earnings per share. the firm increases its dividend by 33%.
- 2005- the firm's assets under management grow to a record $175 billion.
- 2005- named "best investment bank" by euromoney in its 2005 awards for excellence.
- 2006- ranks #1 in the barron's 500 annual survey of corporate performance for the largest companies in the u.s. and canada.
- 2006- #1 dealer on the london stock exchange by trading volume.
- 2006- advises clients on the three largest global m&a deals announced in 2006:
- 2007- lehman brothers ranks #1 "most admired securities firm" by fortune.
- 2007- acts as financial advisor on largest-ever m&a transaction in financial institutions sector: $98 billion acquisition of abn amro by a consortium of the royal bank of scotland, santander and fortis.
- 2007- #1 dealer on the london stock exchange by annual trading volume for the third year in a row.
financial indices were not the only indicators of lehman’s superiority. it was pretty much a status symbol. a status symbol to work for, to have an account with or to even have a neighbour or a friend who worked for lehman was a big thing. they were one of the highest recruiters from the iim’s till last year and they offered one of the highest packages in india. they had an amazing work culture, but it’s hard to understand what or who went wrong.
most people would think of the subprime crisis as satan here. the satan we all love to hate. from my view it was the credit rating agencies that led to such an ugly situation. if the rating agencies would not have issued false rating against the securities that were sold to the bankers, this situation would have never been created. but again the rating agencies are not the only one to be blamed …to quite an extent it was the governing bodies that did not look into the matters. unlike sebi and rbi, the power vested in the governing bodies out there is pretty less or should i say they are just puppets of the capitalistic greed. but ultimately it started with housing mortgage and it took its toll on the investment banking industry around the world.
to a certain extent it was lehman’s management which was at fault too, which could have rescued it during the time it started sinking, especially the ceo mr. richard s. fuld, jr. who believed too much in himself and did not feel the need of being rescued . otherwise they would have been at the same level where merrill lynch is, secured and alive. sold, but still very much alive and breathing.
it’s really bad to fall in such a situation or to be a part of such a situation. i really felt sad when i saw a bunch of lehman employees leaving the office with their faces sulking, the ids, which they used to flash through out the day being tucked deep inside their pockets and all of them having a big question mark on their faces asking for what’s next??
anyways the crux of the matter is that somebody’s loss is somebody’s gain. lehman had to pay for what the mortgage houses had done and now the axe hangs on the fate of other big investment bankers. it started away with the sub prime borrowers (who did not lose anything), then came the mortgage houses (they also dint lose much) who sold off the securities, after getting some really good ratings by the rating agencies (they also minted money), and ultimately the burden came on the investment houses and other last tier investors (such as the poor municipalities in norway), who ultimately faced the brunt of the happenings as they didn’t find any body else next in line to pass on their debts. so people might think this is a typical case where a few people lost out on their money and a few people gained that amount of money. but the problem is much worse, the money landed in unproductive hands where it will lie idle for some time and will be invested in (mostly) non performing assets. whereas the economy will be liquidity starved. hundreds of thousands of jobs will be lost. so a handful of people gained, the global economy lost…..
