Tibman's 'The Murder of Lehman Brothers'

This is now the second book we've read on the demise of failed investment bank Lehman Brothers (LEHMQ.PK) and today we're here to review Joseph Tibman's The Murder of Lehman Brothers: An Insider's Look at the Global Meltdown. What's interesting about this read is that it provides you with a different viewpoint of the crisis from the inside. The first book we read on this topic was Lawrence McDonald's New York Times Bestseller list book entitled A Colossal Failure of Common Sense: The Insider Story of the Collapse of Lehman Brothers.

While McDonald's book focused on different viewpoints and sources, Tibman takes a different approach by almost exclusively using his own sole account of what occurred within those hallowed walls. There are both pros and cons to this approach. On the positive side, this account is fresh, opinionated, and truly has a tenured insider feel. The negative aspect of this, though, is the fact that the book leaves with you with a limited viewpoint.

One of the strongest focus points of the book is the notion of 'drinking the Kool-Aid' on Wall Street. Given that so much greed (and irrationality) often abounds on Wall Street, the fact that Tibman's work takes aim at this is laudable. The focus on greed is something that always has and always will exist on Wall Street and Tibman's work showcases just how such desire can ultimately send you down in flames.

The book takes aim at Dick Fuld as it chronicles his 20 year rise and fall at the firm and is additionally laced with attacks at various members of the government. While other books on Lehman's demise will focus on the most recent events leading up to the crisis, The Murder of Lehman Brothers takes a slightly different (more elongated) approach. While the author of course covers the pressing issues relating to Lehman's recent collapse, he also details how they almost went under 10 years earlier had it not been for the U.S. government's bailout of Mexico at the time.

Another highlight of the book is its tone. Many books on finance seemingly have an 'intellectual' or condescending feel to them given the subject matter and language used. Not this book. If you hate the typical snobby, academic approach to financial writing or if you don't consider yourself to be the most financially savvy person out there, then The Murder of Lehman Brothers is perfect for you. The tone provides a very easy to read 'everyday' style that is refreshing.

A somewhat problematic area though (at least in our eyes) is the fact that Joseph Tibman is not the name of the individual whose viewpoint we are reading, but rather a pen name. This fact slightly diminishes the authority of the book and leaves us wondering about the author's true identity. However, we do know that he was a senior investment banker who worked at the firm from before it was spun off by American Express in 1994 until the day of its death on September 21st, 2008. Given the increasing focus on transparency in finance these days, a more 'full disclosure' approach would have been welcomed. At the same time though, we can understand the desire or need to remain anonymous for career purposes.

Overall, The Murder of Lehman Brothers is a compelling narrative of one insider's journey within the burning walls of the failed investment bank that provides a fresh account in a concise, easy to understand writing style worth checking out.

Comments

[a. palmer jr.:]

Why didn't he call it "Murder of the Public" or "Murder of Lehman bond holders". The Lehman people got off better in most cases than the stock and bondholders did. I personally lost a good bit of my retirement money because my local "adviser" suggested I buy a Lehman bond. At least the people that worked for Lehman made good salaries before they left; some people that worked in other occupations who invested in Lehman didn't.

Nov 01 08:50 AM

[john s. gordon:]

it is clear that mr. fuld acted foolishly (refusing an attractive buyout offer which could have been accepted).
it is also clear that mr. paulson was offered a chance to get rid of a competitor of his well-connected GS and accepted the opportunity with glee.
> jack

Nov 01 09:00 AM

[exLEH:]

I'm pretty certain Joe Tibman is David Goldfarb, the former CAO. I've been in many meetings with the guy and have heard many presentations. Parts of the book (esp on the LB history) sound almost exactly like word-for-word repetitions of Goldfarb's standard presentation. Of course, it might be written by someone else who also had to listen to Goldfarb talk about The Brothers for hours on end.

Nov 01 09:33 AM

[Joseph Tibman:]

Your comment makes good sense. The discomfort experienced by people at Lehman is minor relative to the damage done to lives outside Lehman that were ravaged by the fallout (though not every Lehman employee was a fat cat). I wrote this book not to whine about personal misfortune, but because I believe strongly that we remain at risk. There is much that needs to be done to prevent a small number of people with faulty judgment (at best) from creating so much pain. Those at Lehman who ruined the firm are not unique. This can happen again. Based on what I've seen to date I remain hopeful, but not optimistic that our elected officials will fix the Wild West that is our financial sector.

It's important note that there were and are many problems in the financial sector that would have confronted us whether Lehman went bankrupt or not. Still, Lehman's failure unleashed a storm that made it more difficult to manage these problems.

Lastly, I wrote this book in plain English so that people who are not in finance could understand the complex combination of factors that created the conditions that made the financial crisis inevitable. I felt a personal loss when Lehman fell because I'd been there for 20 years. But I in no way make excuses or defend those who caused the crisis. And certainly having worked in investment banking for so many years, while I know I'm not devoid of ethics, I can't possibly claim to be immaculate either.

Long answer to a short comment - but I guess it seems like people assume any book written by an investment banker must be nothing more than one more ploy to cash in. If your public library stocks the book, and it doesn't inconvenience you, I'd be glad if you took a look.


On Nov 01 08:50 AM a. palmer jr. wrote:

> Why didn't he call it "Murder of the Public" or "Murder of Lehman
> bond holders". The Lehman people got off better in most cases than
> the stock and bondholders did. I personally lost a good bit of my
> retirement money because my local "adviser" suggested I buy a Lehman
> bond. At least the people that worked for Lehman made good salaries
> before they left; some people that worked in other occupations who
> invested in Lehman didn't.

Nov 02 06:58 PM

[Joseph Tibman:]

Your comment is one I hear a lot, expressed with a variety of words -- often far more profane than anything you said. You certainly are due an honest response.

First, you're right. The discomfort experienced by people at Lehman is minimal relative to the damage wrought on the global stage. (Though it was pretty crappy if you worked in the mailroom, has little to no savings, were laid off a week before Lehman filed, and found your "package shut down as it was a Lehman obligation. No income. No healthcare.)

1 I would be untruthful if I said I didn't mourn Lehman. I worked there for around twenty years. I had friends and a lot of time within those walls. No question, I tried to be as objective as possible in writing the book, but no insider can be 100% objective. I did use some sources other than my own opinions, but the damned pseudonym prevents me from creating a trail.

2. My personal experience is a distinctive element of the book, but this book is not about me. It's about what happened - events that harmed many.. It would have been far easier not to write the book. But it was clear there would be tabloid accounts by either insiders or outsiders and journalist books that would lack a perspective that an outsider will never possess. If one really wants balance I'd suggest reading an insider Lehman book and Sorkin's new best-seller. He's a good journalist who has uncovered some new info and he has a compelling writing style. Still, from what I've seen, a pure assemblage of facts in some of what he's written pushes an interpretation that occasionally is slightly off target. He didn't live at Lehman.. So I suppose read a book by an objective outysider and an insider whose fiercely trying to be as objective as possible and then draw your own conclusions. Or not. But this st least makes sense to me. I plan to read Sorkin's tome and no doubt I'll find it meaningful.

3. I wrote this book because I believe strongly that we remain at risk. There is much that needs to be done to prevent a small number of people with faulty judgment (far less colorful description than what runs through my book)t) from creating so much pain. Those at Lehman who ruined the firm are not unique. This can happen again. Based on what I've seen to date I remain hopeful, but not optimistic that our elected officials will fix the Wild West that is our financial sector. We need better regulation that is strictly enforced. We need really good police. Imagine America with no police or other crime fighters.

4. Lehman unleashed a torrent, but the problems in the financial sector were not all wrought by Lehman. In my view, the bankruptcy simply unleashed a level of chaos that might have been avoided if we more deftly dealt with the problems. Aren't the Bear, AIG, etc bondholders lucky that it wasn't one of those institutions that went bankrupt before Washington realized the failure of a major financial institution while arguably just, brings unacceptable collateral damage.I

Lastly, I emphasize that I wrote this book in plain English so that people who are not in finance could understand the complex combination of factors that created the conditions that made the financial crisis inevitable. I felt a personal loss when Lehman fell because I'd been there for 20 years. But I in no way make excuses or defend those who caused the crisis. And certainly having worked in investment banking for so many years, while I know I'm not devoid of ethics, I can't possibly claim to be immaculate either.

Long response to a short comment - but I guess it seems like people assume any book written by an investment banker must be nothing more than one more ploy to cash in. If your public library stocks the book, and it doesn't inconvenience you, I'd be glad if you took a look there.

Finally, I truly am sorry to har about the losses you took as a result of the imprudence of some at a place where I proudly worked for so long. As I note in the book, I was one of very many senior bankers and certainly not in the top exec inner circle. Still, it's also because of my long association with Lehman and the damage Lehman caused that I felt compelled to write the book. I was certainly not in any sort of position to alter Lehman's sad course. Ironically enough, like most (and don't believe those who claim otherwise) I didn't even know until nearly the end that we were heading toward an iceberg. In this online environment I can't pretend to truly understand your pain -- but it's clearly profound. I wish you the best.

Joe


On Nov 01 08:50 AM a. palmer jr. wrote:

> Why didn't he call it "Murder of the Public" or "Murder of Lehman
> bond holders". The Lehman people got off better in most cases than
> the stock and bondholders did. I personally lost a good bit of my
> retirement money because my local "adviser" suggested I buy a Lehman
> bond. At least the people that worked for Lehman made good salaries
> before they left; some people that worked in other occupations who
> invested in Lehman didn't.

Nov 02 07:48 PM

[Joseph Tibman:]

Your comment is one I hear a lot, expressed with a variety of words -- often far more profane than anything you said. You certainly are due an honest response.

First, you're right. The discomfort experienced by people at Lehman is minimal relative to the damage wrought on the global stage. (Though it was pretty crappy if you worked in the mailroom, has little to no savings, were laid off a week before Lehman filed, and found your "package shut down as it was a Lehman obligation. No income. No healthcare.)

1 I would be untruthful if I said I didn't mourn Lehman. I worked there for around twenty years. I had friends and a lot of time within those walls. No question, I tried to be as objective as possible in writing the book, but no insider can be 100% objective. I did use some sources other than my own opinions, but the damned pseudonym prevents me from creating a trail.

2. My personal experience is a distinctive element of the book, but this book is not about me. It's about what happened - events that harmed many.. It would have been far easier not to write the book. But it was clear there would be tabloid accounts by either insiders or outsiders and journalist books that would lack a perspective that an outsider will never possess. If one really wants balance I'd suggest reading an insider Lehman book and Sorkin's new best-seller. He's a good journalist who has uncovered some new info and he has a compelling writing style. Still, from what I've seen, a pure assemblage of facts in some of what he's written pushes an interpretation that occasionally is slightly off target. He didn't live at Lehman.. So I suppose read a book by an objective outysider and an insider whose fiercely trying to be as objective as possible and then draw your own conclusions. Or not. But this st least makes sense to me. I plan to read Sorkin's tome and no doubt I'll find it meaningful.

3. I wrote this book because I believe strongly that we remain at risk. There is much that needs to be done to prevent a small number of people with faulty judgment (far less colorful description than what runs through my book)t) from creating so much pain. Those at Lehman who ruined the firm are not unique. This can happen again. Based on what I've seen to date I remain hopeful, but not optimistic that our elected officials will fix the Wild West that is our financial sector. We need better regulation that is strictly enforced. We need really good police. Imagine America with no police or other crime fighters.

4. Lehman unleashed a torrent, but the problems in the financial sector were not all wrought by Lehman. In my view, the bankruptcy simply unleashed a level of chaos that might have been avoided if we more deftly dealt with the problems. Aren't the Bear, AIG, etc bondholders lucky that it wasn't one of those institutions that went bankrupt before Washington realized the failure of a major financial institution while arguably just, brings unacceptable collateral damage.I

Lastly, I emphasize that I wrote this book in plain English so that people who are not in finance could understand the complex combination of factors that created the conditions that made the financial crisis inevitable. I felt a personal loss when Lehman fell because I'd been there for 20 years. But I in no way make excuses or defend those who caused the crisis. And certainly having worked in investment banking for so many years, while I know I'm not devoid of ethics, I can't possibly claim to be immaculate either.

Long response to a short comment - but I guess it seems like people assume any book written by an investment banker must be nothing more than one more ploy to cash in. If your public library stocks the book, and it doesn't inconvenience you, I'd be glad if you took a look there.

Finally, I truly am sorry to har about the losses you took as a result of the imprudence of some at a place where I proudly worked for so long. As I note in the book, I was one of very many senior bankers and certainly not in the top exec inner circle. Still, it's also because of my long association with Lehman and the damage Lehman caused that I felt compelled to write the book. I was certainly not in any sort of position to alter Lehman's sad course. Ironically enough, like most (and don't believe those who claim otherwise) I didn't even know until nearly the end that we were heading toward an iceberg. In this online environment I can't pretend to truly understand your pain -- but it's clearly profound. I wish you the best.

Joe


On Nov 01 08:50 AM a. palmer jr. wrote:

> Why didn't he call it "Murder of the Public" or "Murder of Lehman
> bond holders". The Lehman people got off better in most cases than
> the stock and bondholders did. I personally lost a good bit of my
> retirement money because my local "adviser" suggested I buy a Lehman
> bond. At least the people that worked for Lehman made good salaries
> before they left; some people that worked in other occupations who
> invested in Lehman didn't.

Nov 02 07:48 PM

[Joseph Tibman:]

Not even close. In which part of Lehman did you work. And I didn't sit through Goldfarb's talks either.


On Nov 01 09:33 AM exLEH wrote:

> I'm pretty certain Joe Tibman is David Goldfarb, the former CAO.
> I've been in many meetings with the guy and have heard many presentations.
> Parts of the book (esp on the LB history) sound almost exactly like
> word-for-word repetitions of Goldfarb's standard presentation. Of
> course, it might be written by someone else who also had to listen
> to Goldfarb talk about The Brothers for hours on end.

Nov 02 07:52 PM

[Joseph Tibman:]

Agree on Fuld, but I don't buy into the Goldman conspiracy thing. I do note that one must wonder whether Paulson would have let Goldman go down. For that reason, I beliueve there is inherent copnflict when you appoint Wall Street execs to a position like Sec of Treasury. But I absolutely believe Paulson was driven by an ethos of "moral hazard" and switched gears when he saw the nuclear impact opf the Lehman bankruptcy. I've read all the articles about his phone calls to Goldman, etc, but don't believe his decisions on Lehman were to eliminate a Goldman competitor.


On Nov 01 09:00 AM john s. gordon wrote:

> it is clear that mr. fuld acted foolishly (refusing an attractive
> buyout offer which could have been accepted).
> it is also clear that mr. paulson was offered a chance to get rid
> of a competitor of his well-connected GS and accepted the opportunity
> with glee.

Nov 02 07:59 PM

[TradingHelp...:]

"The Murder of Lehman Brothers"??

Lehman Bros. wasn't murdered. It committed suicide via an overdose of greed and financial risk ignorance.

The financial world is a better place without it. Look at it as a Darwinian process of weaning out the truly stupid.

Nov 07 02:57 AM

[untrusting ...:]

Joseph,
Glad you wrote the book and will try to read it somewhere along the line. Interesting that you reply to SA comments.

With regard to Goldman, some questions would be: (any comments?)
1) How is it possible for Goldman to have quarters of 90+% winning trades.? Never been done in market history to our knowledge. Statistically and mathematically almost impossible. Almost certainly has to involve unethical or illegal practices such as front-running, inside information, etc.
2) Regulatory capture - it is almost inconceivable, that with the large number of GS executives in key governmental and regulatory positions, that valuable information and considerations are not passed back to GS. After all GS ex-executives still have large financial interests in GS stock, LT friends at GS, etc. For example the GS NY Fed board member that resigned, or the Bank of Canada governer, or the GS ex-executive developing mid-east exchange markets.
3) Trading dominance of handful of large traders in today's market - many articles on SA and elsewhere have indicated that as much as 50-70% of the entire trading volume on US equity markets since March/09 have been done by less than 2% of market participants, noteably GS, JPM, and a few HFT's. Not to mention the numerous late day "stick saves" that have turned a market sell-off into a continuation of the uptrend. Many believe that the "recovery rally" long ago would have stalled out and corrected, except for this obvious and consistent market support.
4) HFT's, dark pools, liquidity share rebates, etc - any thoughts on how this is affecting the fairness of retail and institutional investor trading?
5) Gold - what is the real status of gold from the big player perspective? Reports indicate that commercial traders have massive short positions in gold, whereas the retail, institutuional, and hedge funds are overwhelmingly long. Any comments on the gold push/pull fight?

Thanks in advance for any comments or observations on the above.

On Nov 02 07:59 PM Joseph Tibman wrote:

> Agree on Fuld, but I don't buy into the Goldman conspiracy thing.
> I do note that one must wonder whether Paulson would have let Goldman
> go down. For that reason, I beliueve there is inherent copnflict
> when you appoint Wall Street execs to a position like Sec of Treasury.
> But I absolutely believe Paulson was driven by an ethos of "moral
> hazard" and switched gears when he saw the nuclear impact opf the
> Lehman bankruptcy. I've read all the articles about his phone calls
> to Goldman, etc, but don't believe his decisions on Lehman were to
> eliminate a Goldman competitor.

Nov 07 03:15 AM

[acttang:]

Indeed so, a shit show played out by two nasty guys. Dick Fuld's arrogance was beyond reprehension when he turned down the $15ish bid from KIC. And Paulson wasted no time to use this opportunity to deal a deadly blow to this mother f*cker, who in normal times had been a pain in the ass in many ways to Goldman Sachs. None of them cared much about the shareholders, creditors, and employees. Amazing...


On Nov 01 09:00 AM john s. gordon wrote:

> it is clear that mr. fuld acted foolishly (refusing an attractive
> buyout offer which could have been accepted).
> it is also clear that mr. paulson was offered a chance to get rid
> of a competitor of his well-connected GS and accepted the opportunity
> with glee.

Nov 07 07:43 AM

[Nathaniel C:]

Personally I am glad that Lehman went under (wish Goldman and Morgan Stanley went down as well). It is what should happen under a capitalist system. Failures are rewarded with bankruptcy and success is rewarded with riches. That is how it should be.

I also have very little sympathy for Lehman employees who had 100% of their net worth in Lehman. That pretty much symbolizes why Lehman failed. No one ever heard of risk management. The idea that you could use 30-1 leverage was absurd. You think Lehman would have learned its lesson in 1998 when it narrowly avoided collapse due to the Asian financial crisis.

That being said what did Fuld do to piss off Bernanke so much that it prevented Lehman from getting a taxpayer bailout?

Nov 07 02:24 PM

[untrusting ...:]

After Enron and Worldcom, it is nothing short of amazing that any employee in any company would risk anywhere near 100% of their net worth or pension account in one single company, even if it is their own employer. Even more questionable is that finance-based employees (supposedly with some finance background), like those at Lehman or any Wall Street firm, would have no diversification.


On Nov 07 02:24 PM Nathaniel C wrote:

> Personally I am glad that Lehman went under (wish Goldman and Morgan
> Stanley went down as well). It is what should happen under a capitalist
> system. Failures are rewarded with bankruptcy and success is rewarded
> with riches. That is how it should be.
>
> I also have very little sympathy for Lehman employees who had 100%
> of their net worth in Lehman. That pretty much symbolizes why Lehman
> failed. No one ever heard of risk management. The idea that you could
> use 30-1 leverage was absurd. You think Lehman would have learned
> its lesson in 1998 when it narrowly avoided collapse due to the Asian
> financial crisis.
>
> That being said what did Fuld do to piss off Bernanke so much that
> it prevented Lehman from getting a taxpayer bailout?

Nov 07 06:11 PM

[Joseph Tibman:]

1. Agree on Goldman track record. The firm is largely a big hedge fund that moves markets. As the market has risen, the inflows area fraction of the money that came out when it plummeted, so your comments make sense. But you don't need govt favors to manipulate the market. You need only a system with few police, none of whom are enforcing, and in many cases are not as savvy as those they oversee.

2. Agree that Goldman must get better info for reasons sited. A mid-level Goldman guy was just appointed to #2 spot in SEC enforcement. But still don't believe Paulson kicked Lehman down the stairs to eliminate a competitor. Too much ego involved to sacrifice his legacy for that. Also, would seem to be an awfully crazy game to play; i.e. destabilize the market and know that one day later you will save AIG whose failure would have rocked Goldman's world as AIG held the bag on Goldman subprime risk. Too much a game of high stakes poker. Goldman plays the sure thing.
3. Already answered in 1. I essentially agree.
4. Not an even playing field.
5. Don't know enough about gold trading to answer.

Bottom line, when I say I don't believe in Goldman conspiracy, I say I don't think they took out Bear, Lehman, and to a large degree, Merrill to take out competitors. Nothing really suggests that. People have found all sorts of smoke, but no gun. But I do agree that Goldman, (and others) manipulate markets. Information is a currency and they are better placed than anyone else on the Street.
On Nov 07 03:15 AM untrusting investor wrote:

> Joseph,
> Glad you wrote the book and will try to read it somewhere along the
> line. Interesting that you reply to SA comments.
>
> With regard to Goldman, some questions would be: (any comments?)
>
> 1) How is it possible for Goldman to have quarters of 90+% winning
> trades.? Never been done in market history to our knowledge. Statistically
> and mathematically almost impossible. Almost certainly has to involve
> unethical or illegal practices such as front-running, inside information,
> etc.
> 2) Regulatory capture - it is almost inconceivable, that with the
> large number of GS executives in key governmental and regulatory
> positions, that valuable information and considerations are not passed
> back to GS. After all GS ex-executives still have large financial
> interests in GS stock, LT friends at GS, etc. For example the GS
> NY Fed board member that resigned, or the Bank of Canada governer,
> or the GS ex-executive developing mid-east exchange markets.
> 3) Trading dominance of handful of large traders in today's market
> - many articles on SA and elsewhere have indicated that as much as
> 50-70% of the entire trading volume on US equity markets since March/09
> have been done by less than 2% of market participants, noteably GS,
> JPM, and a few HFT's. Not to mention the numerous late day "stick
> saves" that have turned a market sell-off into a continuation of
> the uptrend. Many believe that the "recovery rally" long ago would
> have stalled out and corrected, except for this obvious and consistent
> market support.
> 4) HFT's, dark pools, liquidity share rebates, etc - any thoughts
> on how this is affecting the fairness of retail and institutional
> investor trading?
> 5) Gold - what is the real status of gold from the big player perspective?
> Reports indicate that commercial traders have massive short positions
> in gold, whereas the retail, institutuional, and hedge funds are
> overwhelmingly long. Any comments on the gold push/pull fight?<br/>
>
> Thanks in advance for any comments or observations on the above.
>
>
> On Nov 02 07:59 PM Joseph Tibman wrote:

Nov 08 07:39 PM

[Joseph Tibman:]

I agree that institutions that are headed for bankruptcy due to mismanagement should go. Absolutely. And for that reason I think Lehman deserved to go bankrupt. You will never hear me complain for a second about the impact of the Lehman bankruptcy on me personally. In my book I describe the fraught days when Lehman was going, but that is it. As to all these firms failing, I believe its naive to think that you can allow the complete collapse of the financial system and not see the rest of industry, the country, and the globe suffer as a result. Some institutions are too big to fail. The real problem is poor oversight. Because large financial institution hurt others, not just themselves, when they die, there should be better oversight that helps prevent this. And those that are guilty of criminal activity, including misleading financial disclosure, should personally pay for their crimes. As to Lehman having crappy risk management: First Lehman did not almost go under in 1998 -- unfounded rumor. Lehman did almost go under, however, during the Mexican tesobonos crisis. Absent the US led support for Mexico, Lehman would have gone bust. It was this that led Lehman to put in place state-of-the-art risk management. What existed (or actually didn't exist) before that was scary. Lehman also had a top notch risk management head, Madelyn Antoncic until a few top execs removed her and threw all the sound risk management in place since after '95 under the bus. Why could they do this, despite the cries of those who could see we were getting into an extremely dangerous position - because there was no one to stop it; i.e. regulation and enforcement to prevent this. I don't view Lehman as filled with a couple of bad guys and thousands of saints. But the people at all the investment banks are not unique mutations. Without proper oversight, they will all be gone. And yes, Lehman went bankrupt. And guess what? With Barclays taking only what was clean, Barcap is better poised to pay its bankers and traders (mainly ex-Lehman) more than all the banks that were saved and got government assistance. Does that seem fair? Yah, let Wall Street go down the tubes and then you'll really hear the country calling for their scalps.


On Nov 07 02:24 PM Nathaniel C wrote:

> Personally I am glad that Lehman went under (wish Goldman and Morgan
> Stanley went down as well). It is what should happen under a capitalist
> system. Failures are rewarded with bankruptcy and success is rewarded
> with riches. That is how it should be.
>
> I also have very little sympathy for Lehman employees who had 100%
> of their net worth in Lehman. That pretty much symbolizes why Lehman
> failed. No one ever heard of risk management. The idea that you could
> use 30-1 leverage was absurd. You think Lehman would have learned
> its lesson in 1998 when it narrowly avoided collapse due to the Asian
> financial crisis.
>
> That being said what did Fuld do to piss off Bernanke so much that
> it prevented Lehman from getting a taxpayer bailout?

Nov 08 07:53 PM

[Joseph Tibman:]

Btw, what this review and many -- but not all -- miss is that the book does not blame everything on Fuld and his best buddies. They carry much of the blame, but the book also talks about the many who created the conditions for Lehman. And given that so many institutions had to be bailed out, the siutuation wasn't unique to Lehman. Unless we accept that ego and greed will forever dominate the decisions of people who can at times have a powerful impact on our markets and our world -- and police them -- we are doomed to repeat the mistakes of the past. Lehman is one of many contemporary as well as many past examples going back centuries of this brand of bad behavior.

Nov 08 07:58 PM

[Crocodilian:]

The "Murder" of Lehman Brothers? Anyone consider that it might be suicide?

Let's see: buy illiquid complex securities of doubtful quality, and leverage them 40 to 1, much of it with overnight money.

What could possibly go wrong with a plan as brilliant as that?

Nov 08 09:57 PM

[The WaveNET...:]

I agree with Joseph Tibman that the risk of another crisis has not diminished, mostly because the "band-aids" in place still ignore the reasons behind the Great Panic.

I notice that Goldman Sachs and Morgan Stanley were saved by the conveniently timely privileges accorded to a "bank holding company", while Lehman and Merrill were treated as stepchildren.

These survivors, which still have no or negligible deposits, are essentially giant hedge funds supported by government guarantees. They can continue gambling ( or trading, as they call it) with more risk than before borne by taxpayers ,and more profits than before available for executive bonuses.

If "moral hazard" needed an abject illustration, we are looking at it. So Joseph, you are not alone in thinking that we are worse off.

Nov 08 11:36 PM

[TVFH:]

Had they been called Lemon Bros., instead of Layman Bros., it wouldn't have happened.

Nov 09 09:11 AM

[Joseph Tibman:]

Exactly. Top management threw risk management under the bus. Of course, LB wasn't the only firm to do that. So doesn't it seem we should have regulation and enforcement, just like our larger society has laws and police?


On Nov 08 09:57 PM Crocodilian wrote:

> The "Murder" of Lehman Brothers? Anyone consider that it might be
> suicide?
>
> Let's see: buy illiquid complex securities of doubtful quality, and
> leverage them 40 to 1, much of it with overnight money.
>
> What could possibly go wrong with a plan as brilliant as that?

Nov 10 06:41 PM

[Joseph Tibman:]

Thank you. I think some people assume from the title that I believe Lehman was blameless. That's too bad. Maybe I should have called the book "The Assisted Suicide of Lehman Brothers."


On Nov 08 11:36 PM The WaveNET Perspective wrote:

> I agree with Joseph Tibman that the risk of another crisis has not
> diminished, mostly because the "band-aids" in place still ignore
> the reasons behind the Great Panic.
>
> I notice that Goldman Sachs and Morgan Stanley were saved by the
> conveniently timely privileges accorded to a "bank holding company",
> while Lehman and Merrill were treated as stepchildren.
>
> These survivors, which still have no or negligible deposits, are
> essentially giant hedge funds supported by government guarantees.
> They can continue gambling ( or trading, as they call it) with more
> risk than before borne by taxpayers ,and more profits than before
> available for executive bonuses.
>
> If "moral hazard" needed an abject illustration, we are looking
> at it. So Joseph, you are not alone in thinking that we are worse
> off.

Nov 10 06:59 PM