Preview Newsletter
Lehman sept 30
-
h
|
-
How the banks ignored the lessons of the crash
Sep 30, 2015 | The Guardian
By Joris Luyendijk
Ask people where they were on 9/11, and most have a memory to share. Ask where they were when Lehman Brothers collapsed, and many will struggle even to remember the correct year.
Client Attorney Privileged/Attorney Work Product/At Request of Counsel
Commentary
-
|
-
How the banks ignored the lessons of the crash
Sep 30, 2015 | The Guardian
By Joris Luyendijk
Ask people where they were on 9/11, and most have a memory to share. Ask where they were when Lehman Brothers collapsed, and many will struggle even to remember the correct year. The 158-year-old Wall Street bank filed for bankruptcy on 15 September 2008. As the news broke, insiders experienced an atmosphere of unprecedented panic. One former investment banker recalled: “I thought: so this is what the threat of war must feel like. I remember looking out of the window and seeing the buses drive by. People everywhere going through a normal working day – or so they thought. I realised: they have no idea. I called my father from the office to tell him to transfer all his savings to a safer bank. Going home that day, I was genuinely terrified.”
A veteran at a small credit rating agency who spent his whole career in the City of London told me with genuine emotion: “It was terrifying. Absolutely terrifying. We came so close to a global meltdown.” He had been on holiday in the week Lehman went bust. “I remember opening up the paper every day and going: ‘Oh my God.’ I was on my BlackBerry following events. Confusion, embarrassment, incredulity ... I went through the whole gamut of human emotions. At some point my wife threatened to throw my BlackBerry in the lake if I didn’t stop reading on my phone. I couldn’t stop.”
Other financial workers in the City, who were at their desks after Lehman defaulted, described colleagues sitting frozen before their screens, paralysed – unable to act even when there was easy money to be made. Things were looking so bad, they said, that some got on the phone to their families: “Get as much money from the ATM as you can.” “Rush to the supermarket to hoard food.” “Buy gold.” “Get everything ready to evacuate the kids to the country.” As they recalled those days, there was often a note of shame in their voices, as if they felt humiliated by the memory of their vulnerability. Even some of the most macho traders became visibly uncomfortable. One said to me in a grim voice: “That was scary, mate. I mean, not film scary. Really scary.”
I spent two years, from 2011 to 2013, interviewing about 200 bankers and financial workers as part of an investigation into banking culture in the City of London after the crash. Not everyone I spoke to had been so terrified in the days and weeks after Lehman collapsed. But the ones who had phoned their families in panic explained to me that what they were afraid of was the domino effect. The collapse of a global megabank such as Lehman could cause the financial system to come to a halt, seize up and then implode. Not only would this mean that we could no longer withdraw our money from banks, it would also mean that lines of credit would stop. As the fund manager George Cooper put it in his book The Origin of Financial Crises: “This financial crisis came perilously close to causing a systemic failure of the global financial system. Had this occurred, global trade would have ceased to function within a very short period of time.” Remember that this is the age of just-in-time inventory management, Cooper added – meaning supermarkets have very small stocks. With impeccable understatement, he said: “It is sobering to contemplate the consequences of interrupting food supplies to the world’s major cities for even a few days.”
These were the dominos threatening to fall in 2008. The next tile would be hundreds of millions of people worldwide all learning at the same time that they had lost access to their bank accounts and that supplies to their supermarkets, pharmacies and petrol stations had frozen. The TV images that have come to define this whole episode – defeated-looking Lehman employees carrying boxes of their belongings through Wall Street – have become objects of satire. As if it were only a matter of a few hundred overpaid people losing their jobs: Look at the Masters of the Universe now, brought down to our level!
For Full Story: http://www.theguardian.com/business/2015/sep/30/how-the-banks-ignored-lessons-of-crash
Client Attorney Privileged/Attorney Work Product/At Request of Counsel
Commentary
Add recipients
Suggested