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I first worked for Lehman Brothers as a trainee in London in the summer of 2005, while I was halfway to a graduate degree in economics. I rented a room in the student lodgings of Imperial College London, which meant a long daily commute between the massive steel and glass office tower of South Kensington and Lehman in Canary Wharf. But I did not care about the practicalities. I was just delighted to have experience in the capital markets and live in London for a few months.
And it was exciting. I was part of a large cohort of trainees, each of us looking at whether we had jobs in finance and, if so, whether we would do the work to join Lehman, a large bank American investment. The atmosphere in the group was sociable and full of enthusiasm, but there was also an undeniable undercurrent of competition, of size from each other; After all, only a few trainees would receive offers to come back as full-time analysts. The company encouraged this competition, notably by launching a trading game that simulated with brutal clarity how well the groups managed to manage a fictitious equity portfolio. (Bad in the case of my group, if you must know.)
It seems hard to believe now, but at that time – in the mid-2000s – the investment bank was a fascinating industry. It has attracted many of the brightest students. It was a ticket for an intellectually stimulating and potentially lucrative career. Doing it meant choosing to work hard and play hard, very "Bright Lights, Big City".
My internship seemed to confirm it. I have been challenged by it. I liked that. It was exciting to be in this huge trading space, surrounded by dozens, if not hundreds, of colleagues engaged in a virtual battle with the market, brightly colored monitor banks, sky-high price rises, or steep drops. At one point, Dick "the Gorilla" Fuld, the long-time CEO, popped up on us on a giant screen linking him from New York City and said, "This concerns my people!
At the end of the summer, I was offered a permanent analyst position for the following year. I was delighted to have made the cut. I would be one of Dick's people.
In retrospect, and if I had not been so naïve, this course contained warning signs of what was coming. I spent the first half of the summer working on what constituted the tax arbitrage bureau. The game consisted of moving client assets around different tax jurisdictions and lending or borrowing shares on their behalf, while fully respecting the timing of dividend payments or other corporate actions. to avoid – their taxes. It was legitimate in the letter, but hardly in the spirit of the law.
Did this mean that Lehman and the other investment banks were risky, greedy only and intended for their support? I did not know, and I rationalized all the concerns. After all, the second half of the summer had been great. I had worked on the emerging markets research bureau with solid economists and smart currency analysts, speaking the language of the international economy, feeling like part of the real world of international capital flows. for so many years at the university in action.
In the end, I did not join Lehman the following year, because I decided to do a doctorate first. (I know – so many bad decisions!) But Lehman HR has agreed to extend my offer until I submit my thesis. This turned out to be the summer of 2008.
Again, that seems hard to believe now, but back then, even a few months ago, when I joined the company, the collapse of Lehman seemed highly unlikely. In October 2007, the New York Times even published an article on Lehman Brothers entitled "The Survivor."
I had my worries and I expressed them to friends – all, each in my turn, assured me that I was paranoid, that joining Lehman as a senior associate was an excellent one opportunity and that the worst possible scenario was that to be redeemed by a bigger player. After all, that's what happened a few months ago, when Bear Stearns, the fifth-largest investment bank in the US (at Lehman # 4), was bought by JP Morgan, Inc. ° 1.
So I went to Lehman Brothers. And during the first two months of my professional life, now completed and academic, I was a leading sailor on the good ship Lehman Brothers, while she collapsed directly into a reef and was sinking . Here are some things I remember.
Fly to New York for joint training and corporate indoctrination with other associates. Sitting in the giant auditorium listening to a presentation on business strategy by newcomers (ex-McKinsey). Looking at his bar chart showing $ 60 billion in commercial real estate and thinking that it was a bit weird, Lehman was supposed to be a franchise of customers, not a big risk taker on his own book. This composition of the balance sheet seemed rather more. . . speculative?
Sitting in another auditorium, this time in the London office, he was shown a slide full of alarming news about Lehman "on the edge of the abyss", "about to implode", "facing bankruptcy". These headlines dated back to 1998, when the collapse of Long-Term Capital Management, a hedge fund, put Wall Street at risk. Bumps! Lehman always bounces!
Be sober by someone at the top of the London office hierarchy that his main advice to us, the new carpenters, was to find a tax advisor. I think the rich have recourse to tax advisers, but this suggestion seemed to me perverse. if anyone could afford to pay his taxes, are the finance professionals earning high wages?
I shared a house with five good friends. The jokes that Lehman was passing and I was not pulling my weight off with rent were starting to go down, or at least seemed to be getting less fun for everyone as the news fell in August and early September.
We finished our training and we prepared to be assigned to desks. This process involved a matching process, starting with interviews with some office managers, through some of the offices of interest, and categorizing them according to supply and demand. Even though it was becoming obvious that things were going very badly in the business, HR continued to act as if nothing had happened. I interviewed the head of the sales office of the central bank, which at one point put his head in his hands. Maybe I was getting on particularly badly, but I think maybe he had bigger concerns in mind. I accompanied stock analysts to a meeting with clients. The client excused himself and explained with irony that he had faced "all the problems that your institution is currently causing". Everyone laughs, a little too loud.
On Wednesday, September 10, 2008, we escaped from our basement and trading floor class to listen to the quarterly earnings call, which had been advanced in a vain attempt to convince the market to survive. The CFO announced a quarterly loss of $ 3.9 billion, the inability to find an investor willing to inject new capital, and the rest was noise. The trading room was silent. Despite this, some of the work continued until the end of the week, even as the company's stock price kept falling. Many of the staff did not know what to do except to act as if nothing had happened. At the end of the week, for the first time, there was an open discussion that something really had to happen. But not once, I heard the word "bankruptcy" mentioned. Instead, the focus of the discussion was whether Lehman would be bought by Bank of America (good for the London office) or by Barclays (bad for the London office).
I woke up on the morning of Monday, September 15, 2008, at the news that Lehman Brothers had just filed for bankruptcy protection in New York. The news was not a complete surprise, but it was still hard to believe. Not getting any advice on what to do, myself and most of my incoming associate colleagues went to work.
After all, there were things to take care of. The vending machines and the building catering services used a prepaid card system. The balance of my card had to be spent quickly. Soon, vending machines were emptied of everything but one year old cheese curls. My membership in the gym of the building had to be canceled. The cancellation form has forced me to complete my reason. I wrote "company in liquidation" and added my form to the stack.
The trading room looked like a party room the next morning. Small groups of people have been sympathetic, usually discreetly but with a few passages to the act, echoing pathetically through bursts of triumphant machismo – a great trade! – who had frequently marked this space.
In the middle of the morning, in the lively bar in front of the building, a grizzled Lehman veteran approached our small group of associates. He sympathized, "Dude, it's a terrible situation for everyone, but I'm especially sorry for you, the new ones.I mean, you're new, you're excited, you're entering the markets and. .. the bear is sitting on your head. " It summed up just about everything that it felt.
Our human resources managers were angry and upset. Far from the financial front lines of the company, they did not really know that the company had been bankrupt for months. They had continued their recruitment and boarding tasks, and now they felt like fools. They were embarrassed that they were as perplexed as us. Some were so upset that some of us ended up trying to comfort the HR professionals who had sold us the chimera of joining this beautiful Wall Street investment bank.
The calls from the liquidators informing us of all that we were redundant arrived a few days later. This was followed a few weeks later by the letters we had all prepared. Lehman Brothers had paid its accreditation fees to new employees, but in the form of loans that would be canceled one year after their accession. This allowed the company to recover the bonus if a new employee had been released on bail for a competitor in less than a year, or had simply failed. Now that the company was bankrupt, these conditional loans were assets of the corporation that the liquidator was obliged to recover. With interest.
In addition, the loans were denominated in US dollars, but they had been paid in pounds sterling to our London office staff. Thanks to the financial crisis, the dollar had gained in value, inflating what we had to repay about £ 8,000. The letter is like saying, "Thank you for joining Lehman Brothers two months before the bankruptcy. You idiot. It will be £ 8,000 from here Friday, please.
I understand of course the disregard of people for Lehman Brothers and investment banks in general because of the financial crisis. By all accounts, they had a party as if tomorrow was gone, and when the bill came due and they could not pay it, they sort of put everyone on the spot. , and everything stopped. There is a lot of truth to that, but it is not all history.
Banks like Lehman and other institutions were guilty, but their weaknesses were also a symptom of other major problems. Huge savings in emerging economies, mainly in Asia (as Asian policymakers were traumatized by the Asian crisis of 1997-98 in anticipation of the next day) interacted with loose monetary policy in the United States. , the Hebrew belief that the economic cycle was dead and that brilliant economic policies had ushered in a new era of stability, a "great moderation". Do not forget, really at the heart of it all, the simple greed of many actors, triggered by the US housing boom, with all the grotesque distortions that accompany these manias.
I do not defend Lehman Brothers, but at the same time, he must not become the bogeyman of the entire financial crisis. It was only the smallest and smallest investment bank left on the scene as things intensified in the second half of 2008. It deserved to fail, but unfortunately the collateral damage – the biggest bankruptcy
As for me, I was lucky. Being caught up in Lehman's debacle has taught me to be more critical and cautious, and more inclined to question power even when he's dressed in corporate gloss. More importantly, it has taught me that you can not always control the major outcomes of your life, a realization that makes me a less neurotic person. (To my wife Sarah, if you're reading this: it's all relative, darling.)
I am also happy to have been ultimately immune to the attractiveness of investment banking. Maybe if everything had worked, I would have liked it, but I doubt it. I have continued to work in the banking sector for a few years. I wanted more business experience and opportunities were limited for a while after the crisis. But today, I work for an international organization, contributing modestly to the achievement of the objectives of an imperfect institution, without doubt, but which inspires regularly, has a valid objective which I believe and which has entered into the In the first place. And I met my wife at work that I took after Lehman 's failure. If Lehman had not collapsed, I guess I would never have met him, which seems inconceivable to me now.
Other members of this class of 2008 associates with whom I stayed in touch are doing just fine. Alison is still in finance and seems happy. Dan, who said that Dick Fuld was his hero after this appearance at Big-Brother on the big screen in London, now has a Facebook stream dominated by his laughing young children. Richard, who wanted to become an algorithmic trader, now helps couples become parents through surrogacy. It would be nice to know what other students in our class do about 30, but we do not stay in touch. A meeting would be odd, perhaps because no one really wants to remember to be part of the 2008 Lehman Associates promotion. Everyone makes mistakes, but some are more public than others.
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