MacroScope

Insider recalls the day that Lehman died

Joseph Tibman was a senior banker at Lehman Brothers for 20 years and is now the author of “The Murder of Lehman Brothers, An Insider’s Look on the Global Meltdown”. Tibman writes under a pseudonym to preserve his ability to work in finance. The views expressed are his own.

September 12, 2008 was a Friday like no other.

Just one day earlier, I was somewhat concerned about the hammered Lehman Brothers share price and the persistent rumors about my firm, but I had been here before. Well not exactly here. But I was sure Lehman would survive as an independent firm.

Had I overdosed on the Lehman-distributed talking? Soon after I arrived at my office in the Lehman headquarters at 745 Seventh Avenue on the north end of Time Square, it was clear my world, and that of all those around me, was spinning off its axis. The word was out. The Federal Reserve Bank and U.S. Treasury were in the building. So were Bank of America and Barclays Capital. Or were they?

What did it matter where they were? This was it. Two of our competitors, far weaker in investment banking, were negotiating to buy us. All I can remember, even after just a couple of months, is obsessively trading Blackberry messages with restless colleagues and perpetually scanning television general and business news channels for just one more sliver of incremental info, for hope. My world had stopped rotating.

Throughout the weekend, our Blackberries continuously hummed, expressing the collective freak-out. Then a bombshell dropped. Merrill Lynch was to be acquired by Bank of America in a government-brokered deal. We were toast. We would fail. If there were to be a Lehman deal, it would have been announced at the same time. Fail. This was surreal. On Sunday, many of us rushed to the office to retrieve personal possessions, just in case we were locked out on Monday. The firm had not yet been pronounced dead, but the Lehman I had long made my second home was teetering on the brink.

Graphics: Markets since Lehman’s fall

Junk Bonds


Credit markets today have healed after the entire U.S. junk bond market traded at distressed debt levels suggesting a substantial risk of default. Those bond prices have since recovered and now offer investors returns of 40 percent to lead major asset classes.

Rising Stocks


The U.S. stock market too has recovered lost ground, with financial stocks leading the charge. The S&P 500 Index has rallied for most of this year. The Dow Jones industrial average <.DJI> now trades around 9,300 — up sharply from a 2009 closing low at 6,547.05, but down only about 15 percent from its close at 10,917.51 on the day of Lehman’s bankruptcy filing.

Financial Shares

Financial shares have led the charge, including gains by Goldman Sachs, Citigroup, JPMorgan Chase and Bank of America.

Lehman plus 365 – and interactive

The anniversary of Lehman Brothers’ collapse on September 15 will doubtlessly bring with it vast numbers of stories about what it all meant. It was, after all, the largest bankruptcy in U.S. history, a marker for the near collapse of the financial system and the trigger for government to pump trillions of dollars into economies to stave off another Great Depression.

We at Reuters will be analysing the fallout, of course, in the traditional way. But we have also launched a special web documentary and interactive timeline to mark the event. Pictures, video, and text all combine — sometimes poignantly — to chart the year of upheaval since the momentous day. 

Quite inconceivable to the founders of Lehman some 158 years ago. But then again, so probably was the collapse.

from Davos Notebook:

Hank Paulson is not Gavrilo Princip, Lehman is not the Archduke Franz Ferdinand

Was letting Lehman go down the biggest mistake of the crisis? Many, including George Soros in the Financial Times, have argued that letting Lehman go down sowed panic to markets, consumers and businesses.

Not so fast, says Harvard historian Niall Ferguson, in an interview in Davos:

"My position is this is a typical error of historical understanding in which a single event is blamed for much more than it can possibly have caused. You can say ‘Hank Paulson is to blame for my troubles' and if you can change one thing in the story it would have a happy ending.

It's like saying if only Princip had not shot the Archduke Franz Ferdinand in 1914 there wouldn't have been a First World War.