Comments on: The multimillionaire men of Lehman http://blogs.reuters.com/felix-salmon/2012/04/30/the-multimillionaire-men-of-lehman/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: traducator romana daneza http://blogs.reuters.com/felix-salmon/2012/04/30/the-multimillionaire-men-of-lehman/comment-page-1/#comment-53849 Mon, 29 Sep 2014 15:32:48 +0000 http://blogs.reuters.com/felix-salmon/?p=13592#comment-53849 stylish, restrained and easy

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By: Danny_Black http://blogs.reuters.com/felix-salmon/2012/04/30/the-multimillionaire-men-of-lehman/comment-page-1/#comment-38617 Thu, 03 May 2012 11:53:51 +0000 http://blogs.reuters.com/felix-salmon/?p=13592#comment-38617 Will have to agree to disagree… Shame someone mentioned Hoffman rather than say Walsh who most certainly did contribute in a major way to LEH collapsing along with their loan portfolio to companies and private equity. If someone had said these guys were brilliant, it would be a much shorter conversation.

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By: dsquared http://blogs.reuters.com/felix-salmon/2012/04/30/the-multimillionaire-men-of-lehman/comment-page-1/#comment-38609 Thu, 03 May 2012 06:26:40 +0000 http://blogs.reuters.com/felix-salmon/?p=13592#comment-38609 Danny, the guy said “fine”. The securities were not “fine”.

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By: TFF http://blogs.reuters.com/felix-salmon/2012/04/30/the-multimillionaire-men-of-lehman/comment-page-1/#comment-38576 Wed, 02 May 2012 13:40:42 +0000 http://blogs.reuters.com/felix-salmon/?p=13592#comment-38576 @Danny_Black, those salaries are the norm for top management at investment banks. List the top 50 at JPM or GS and you’ll get numbers at least that large. As FifthDecade says, that nullifies the objection that these individuals did not receive the delayed compensation that they expected.

As for AAA bonds, you are correct. **HOWEVER** investment professionals seem to get the two confused sometimes. Doesn’t matter if the bonds pay out if you fail from a lack of liquidity (triggered by MTM losses).

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By: Danny_Black http://blogs.reuters.com/felix-salmon/2012/04/30/the-multimillionaire-men-of-lehman/comment-page-1/#comment-38575 Wed, 02 May 2012 13:31:10 +0000 http://blogs.reuters.com/felix-salmon/?p=13592#comment-38575 FifthDecade, why can you assume the salaries of the top 50 people in an organisation with thousands of people are the norm? Are you suggesting that the salary bill for LEH was 8,000,000 * 25,000 = 200bn every year or that “order of magnitude”.

dsquared, to be fair in my initial response I did misunderstand why you thought 0.17 credit losses was not a valid measure for AAA as opposed to mtm losses. I have heard over and over again that that AAA are “ultra-safe” and you “can’t lose money” when in fact it is merely a statement on how likely the issuer is to make the promised coupon and principal payments on time.

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By: FifthDecade http://blogs.reuters.com/felix-salmon/2012/04/30/the-multimillionaire-men-of-lehman/comment-page-1/#comment-38573 Wed, 02 May 2012 13:00:14 +0000 http://blogs.reuters.com/felix-salmon/?p=13592#comment-38573 It should be remembered too that the figures quoted by Felix were not exceptional, one can assume they were the norm. That nullifies all arguments that these salaries may not have been received, because salaries of similar scale from previous years that became ‘freed up’ (and let’s make no bones about this, simply to save tax) would have been paid in 2007. There may be some variability in the actual values, but not by orders of magnitude.

The issue for most people is whether such salaries are justifiable, in the interests of shareholders, markets, or economies, or even necessary as a means of recruitment.

Of course, those who receive the salaries will always try to justify them, while headhunters (paid again by proportion of salary achieved) will always say they are necessary. Remuneration committees will always say they are worthwhile for the company because executives sit on each others’ remuneration committees. Shareholders – in the form of institutions – will not say it is not in the interests of the company because they always vote with the management and sit on each others’ remuneration committees, or are paid a commission bonus basis for the running of their funds and would hardly vote against the system that keeps them feeding from the same trough.

As for the politicians, they vote with their backers, and their backers are very often rich bankers – this is certainly true of the UK Conservative Party. Any political system that depends on high spending to be elected will be susceptible to the influence of those with the biggest pockets.

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By: Danny_Black http://blogs.reuters.com/felix-salmon/2012/04/30/the-multimillionaire-men-of-lehman/comment-page-1/#comment-38564 Wed, 02 May 2012 06:26:06 +0000 http://blogs.reuters.com/felix-salmon/?p=13592#comment-38564 dsquared, you seem to be chopping and changing comparisons.

If you are saying “not fine” in the sense of short-term mtm losses then a) AAA corporates in later part of 2008 also suffered large peak to trough losses b) the email was written in feb 2007 and for the next 4 months he would have been absolutely right. Also LEH was one of the first to cut back on sub-prime when it first started declining in mid-2007.

I am also pretty sure I can find a 18 month period in which japanese government bonds differ peak to trough by 20% too.

If you are saying “not fine” in the sense of expected credit losses at maturity, then the proper comparison is AA corporates because in 2007 they were trading at roughly the same spread and AA corporate credit over that same time period is around 1%.

LEH went bankrupt because of its holdings of AAA subprime-RMBS? It took huge losses on AAA sub-prime RMBS? Because that is most definitely NOT what the bankruptcy examiner found:

“Lehman’s management also successfully hedged its subprime mortgage risk, at least until early 2008, and avoided some of the catastrophic investments that other financial institutions made in the mortgage market, for example in CDOs.”

“In general, your usual approach of combining bluster and other people’s talking points and trying to pass it off as expertise isn’t going to work this time” – weird because this is exactly what you do. You make claims that GS couldn’t repo CDOs in Oct/nov 2008 when it clearly could through TSLF. You made claims that libor-OIS spread was not coming down in end Oct/ beg nov 2008 when it clearly was. You are claiming here that LEH took huge losses on AAA subprime when it didn’t and implying that it had something to with LEH bankruptcy when if the rest of their investments had performed as well they would still be here.

Let me guess… equities right?

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