The Murder of Lehman Brothers, an Insider's Look at the Global Meltdown by Joseph Tibman;

Author:Joseph Tibman; [Tibman, Joseph]
Language: eng
Format: epub
Tags: General, Business, Economics, Finance, Business & Economics, United States, Investments & Securities, Investments & Securities - General, Corporate & Business History - General, History Of Specific Companies, Economic Conditions, Corporate & Business History, Economic History, N.Y.), Financial crises, Economics: Textbooks & Study Guides, Investment banking, 2008-2009, Global Financial Crisis, Wall Street (New York, Business failures, Stockbrokers, Bankruptcy
ISBN: 9781883283711
Publisher: J Boylston & Company, Publishers
Published: 2009-09-13T04:00:00+00:00

120

JOSEPH TIBMAN

own subprime exposure to a very manageable, low level. This was not very

different from what we had done during the dotcom-bubble, when

investors embraced the notion that if we build it they will come. We raked in

the profits while ultimately retaining little of the risk embraced by irra-

tional legions of fervid investors.

More recently, at the 2008 World Economic Forum in Davos, Vice-

Chairman Tom Russo, said as clear as a bell that the interest rate reset on

$550 billion of subprime mortgages would lead to defaults. He added that

Lehman would ably cope. So it was situation normal. Business changed.

We took a surgeon’s scalpel to areas that were no longer viable, a superb

display of risk mitigation, while investors took losses on what we created.

In the meantime, we waited in our seats, perhaps impatiently, but poised

to furiously crank away at the new money machine that would inevitably

debut. In the meantime we did our damnedest to generate what revenues

we could off the good old plain-vanilla activities that had always been our

mainstay. There were no bells and whistles. And as ever we methodically

turned over all stones to locate profits. A fundamental difficulty, however,

was that these regular-way financings were themselves difficult in uncer-

tain markets and could never make up for the revenues lost once the easy

credit boom sputtered. Nonetheless, when the profit machine would ramp

up, and our fortunes return with a vengeance, Lehman and others would

easily hire and recycle staff from the legions of brilliant, yet unemployed

investment bankers that were put out with the cat during the current

downturn.

However, I get way ahead of myself, if only because the above cycle is a

drill I slogged through for years. Indeed, we now know that this time, at

least for Lehman and some others, the routine changed. We thought we

had been here before. We had not.

Early in 2008, The Brothers began to load up on other real estate assets,

most especially Alt-A mortgage58 and commercial real estate investments.

Joe Gregory, forever Joe-the-trader, believed these were oversold. As in

58. These are generally not as dicey as subprime, but by no means the cream of the crop.

Borrowers are people with solid credit histories and scores, but with unverified income.

Yes, lending standards were at least a bit fast and loose.

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