Monday, 5 August 2013

Still waiting

By Tim Price

The failure of Lehman Brothers in September 2008 will forever be regarded by capital markets professionals as a JFK assassination-style moment, an occasion now set in amber that marked the moment when everything changed – or at least should have done. With the benefit of hindsight, it’s somewhat remarkable that the bankruptcy of a second tier investment bank better known for credit trading than for any facility with stock underwriting, for example, could trigger a global credit crunch. But it did. Andrew Ross Sorkin’s ‘Too Big To Fail’ – still probably the best example of financial crisis porn – masterfully explains why:
It was just past 7:00 a.m. on the morning of Saturday, September 13, 2008. Jamie Dimon, CEO of JP Morgan, went into his home library and dialled into a conference call with two dozen members of his management team.
“You are about to experience the most unbelievable week in America ever, and we have to prepare for the absolutely worst case,” Dimon told his staff.
“..Here’s the drill,” he continued. “We need to prepare right now for Lehman Brothers filing [for bankruptcy]. Then he paused. “And for Merrill Lynch filing.” He paused again. “And for AIG filing.” Another pause. “And for Morgan Stanley filing.” And after a final, even longer pause, he added: “And potentially for Goldman Sachs filing.”
There was a collective gasp on the phone.

As we now know, Lehman Brothers remained the only lamb to be sacrificed at the altar of the financial markets.

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