Results tagged “lehmanbrothers”

The NY Times looks at how Lehman Brothers head Dick Fuld tried to save the firm, with the help of government officials, based on reporter Andrew Ross Sorkin's book, Too Big To Fail. A choice quote: Then-Treasury Secretary Hank Paulson telling Fuld he won't call Bank of America's CEO, "I think it’s a hard sell, but I think the only way you’re going to do it is go to him directly. I’m not going to call Ken Lewis and tell him to buy Lehman Brothers." Of course, Paulson did pressure BoA to buy Merrill Lynch—and now Lewis is on his way out.

President Barack Obama will be speaking at Federal Hall in lower Manhattan to discuss financial reform today (it is the eve of the one year anniversary of Lehman Brothers' bankruptcy filing), so expect traffic diversions on the roads while some subway station entrances and exits may be temporarily closed and bus routes may be diverted. As for his pitch, Obama wants Congress to pass financial regulatory reform; the Washington Post reports, "He will urge members of the financial community 'to take responsibility, not only to support reforming the regulatory system but also to avoid a return to the practices on Wall Street that led us to the financial crisis,' an administration official said Sunday."

With the year anniversary of Lehman Brothers' collapse—and the subsequent global economic meltdown—approaching (September 15, 2008 is when Lehman filed for bankruptcy), there are plenty of stories from ex-employees. The Post says "a number of former Lehman employees in its fixed-income, emerging markets and other banking areas will be heading to various watering holes and clubs near Lehman's former Midtown headquarters on Sept. 15, for events that promise to be equal parts networking, reminiscing and working to erase that terrible chapter of their careers"—so consider that a warning! A former mortgage securities broker now admits to the NY Times, "I have blood on my hands," but thinks others are more responsible for the downfall ("regulators, senior executives, rival firms and traders who believed that their elaborate computer algorithms insulated them from risk"). And the Daily News notes that Famous Famiglia pizzeria, right near Lehman's headquarters, had to lay off five of 27 employees.

Bloomberg News has a long article looking at Lehman Brothers' collapse last year, reporting that Lehman executives actually predicated in the memo to government officials, "Massive global wealth destruction... Impacts all financial institutions... Retail investors/retirees assets are devastated." But apparently the banking executives gathered by Treasury Secretary Paulson and then-Federal Reserve Bank of NY (and now current Treasury Secretary) Geithner were thinking about themselves; former Merrill Lynch CEO John Thain tells Bloomberg News, "The discussion among the CEOs was ‘How do we prevent the next firm from going under?’ There should have been much more discussion about the impact directly on the markets if Lehman went bankrupt." Mohamed El-Erian, CEO of Pacific Investment Management Co., "the world’s largest bond-fund manager" remembers, "I remember at the end of the week calling up my wife and saying, 'Jamie, go to the ATM, go to the cash machine, and take cash out.' She said, ‘Why?’ I said, ‘I don’t know whether the banks are going to open tomorrow.’" And some believe the government hasn't learned the lesson, by allowing banks to stay big or get bigger without a thorough regulatory process.

Lehman Brothers may be out of business and bankrupt, but that doesn't mean NYC can't demand over $600 million in underpaid taxes. The NY Times reports, "The Bloomberg administration has accused Lehman of shortchanging the city of $627 million in corporate and other taxes, beginning in 1996. It is now trying to convince federal bankruptcy court in Manhattan that the city should jump closer to the front of Lehman’s long line of creditors." Apparently Lehman, per the city's estimates, unpaid its corporation tax by $615 million and never paid commercial rent taxes of $12 million, which, prompts a lawyer representing some of Lehman's other creditors to ask: "How did the city get to the point where the city was looking at so many tax years, and so much money? It raises a lot of questions." (The city says it had been talking to Lehman about recouping the money and pointed out that audits can take a really long time!)

New second quarter 2009 reports from the real estate firms indicate that the prices of Manhattan apartments has fallen about 25% since the same period last year. Sales were down, as much as 50% in one report and by 61% for new condos in another. Bloomberg News calls it the "Lehman effect" as "the collapse of Lehman Brothers Holdings Inc. and Bear Stearns Cos. caught up to property owners in the nation’s most expensive urban market." The NY Times reports, "The strongest activity was reported in smaller, less expensive apartments, often bought by renters buying their first homes" (who "benefited by low mortgage rates...and a federal tax credit available to many first-time home buyers") and that "sales of trophy apartments had shriveled during the downturn." The head of Corcoran, Pamela Liebman, says sellers shouldn't wait to sell, "Time does not necessarily equate to money here for the seller," while appraiser Jonathan Miller believes, "We will probably get a little worse before it is going to get better, because unemployment is likely to continue to rise after the recession ends this year."

AIG CEO Edward Liddy will be stepping down from the troubled insurance behemoth—once a replacement can be found, natch. Liddy, whose salary was $1, became CEO last September "within hours" of the firm's bailout; CNBC explains his "mandate [was] to sell off assets to generate funds to repay taxpayers." Liddy, who weathered criticism when hundreds of millions were handed out in bonuses, is the fifth person to run the company since 2005. An analyst told Bloomberg News, "It really is a terrible job, I’m not sure who would really want it. There is so much political baggage that whoever takes over the company is going to find it an extremely difficult and thankless job." In other news, Richard Fuld announced his resignation from Lehman Brothers last night, "I believe that we have worked together effectively in achieving an appropriate transition."

Yesterday, Bloomberg News reported that Lehman Brothers Holdings was "sitting on enough uranium cake to make a nuclear bomb as it waits for prices of the commodity to rebound, according to traders and nuclear experts," leading to jokes about "NUKE WA$TE" and "(Literally) Radioactive Assets." Apparently, just before the bank filed for bankruptcy, it started traded in uranium ore and has about 500,000 pounds of uranium-oxide concentrate, aka yellowcake. A source tells the Post, "[Lehman] can't get rid of the ore, because with the possible exception of North Korea, nobody is willing to cough up the price it wants -- because the uranium market has tanked." Another fun yellowcake fact: 500,000 pounds is about enough to make a bomb or to power a nuclear power plant for a year.

Despite signing up pledges from a roster of prominent donors whose company names have become synonymous with the financial collapse of the last year, the National September 11th Memorial has managed to keep its finances in good health. More than 15% of the $350 million the memorial announced raising a year ago was promised by financial firms like Merrill Lynch, Bear Stearns, Bank of America, JP Morgan Chase, Barclays and AIG and most have remained on target with their contributions. Notably, the Starr Foundation, which was created by AIG's founder and holds a lot of AIG stock, has given $20 million of its promised $25 million. The only one that dropped off dramatically was Lehman Brothers, who went from a $5 million pledge to a $1 million donation. The memorial's chairman Mayor Bloomberg said, "The creation of the memorial is uniquely important to New Yorkers, and the fact that the city’s corporate citizens are honoring their commitments to it despite the downturn is a reflection of that.” Bloomberg himself has already made good on a $15 million pledge.

lawyers? According to law professor Lynn LoPucki who spoke to the Daily News about corporate bankruptcies, "The lawyers and all the other professionals who work on the case get paid first. The system deliberately makes the old creditors wait - sometimes for two or three years - while payday for the new creditors comes once a month." So while the now-bankrupt Lehman Brothers is selling off assets like their corporate jet for almost $25 million, LoPucki tells the News that legal and professional fees may be as high as $1.4 billion, "with Weil Gotshal & Manges, lawyers for the debtor, snaring about $209 million, and Milbank, Tweed, Hadley & McCloy, counsel to the creditors, getting some $58 million." Lawyers, FTW?

C is for many things, include chutzpah: A man who was fired for calling another broker the c-word is suing his old boss for $50 million. Kai Kemnitz, who was hired from Deutsche Bank in 2006 for $2.7 million a year was sacked in 2007 after the incident. According to Bloomberg News, the word was uttered during a "high stress trade": He was mad the broker didn't have a buyer for some Wachovia options, forcing Kemnitz to sell them at a lower price and say, "How can this happen?... You own it (obscenity)." Kemnitz believes Jeffrey Michaels, who also said he'd help him get a green card, was looking for an excuse to get rid of him, according to his complaint. Kemnitz said, "The use of obscenities were common, especially given that all manner of foul language is frighteningly common on trading floors, including those at Lehman and other investment banks."

Richard "Dick" Fuld, the CEO who led the once-storied Lehman Brothers into bankruptcy, was defensive when questioned by the House Oversight Committee yesterday. The NY Times reports he "blamed the news media. He blamed the short-sellers. He blamed the government, as well as what he characterized as an 'extraordinary run on the bank.'" but "never really blamed himself." Fuld did take responsibility for the collapse, and said he'd wonder for the rest of his life how he could have done something differently.

The NY Post reports on the overall unfairness of former Lehman Brothers employees' severance being cut off, while "former Lehman Brothers CEO Dick Fuld received a total compensation package of $71.9 million last year." Though a former employee--who was laid off in March after 16 years with the firm--had signed a severance agreement giving her pay and health insurance through April 2009, she received a letter last month saying it was ending because of the bankruptcy. A few weeks ago during the chaos, Dealbreaker heard from more recently laid-off Lehman employees who were told their severance would run out soon or be non-existent.

After talk that Barclays would keep many Lehman Brothers employees on after buying the bankrupt firm's broker-dealer business, the AP reports the British firm "announced Monday that Lehman Brothers has begun to re-open for business under the ownership of Barclays Capital." However, according to the Post, "about 10,000 Lehman employees of the units that Barclays is buying were sent letters stating there will be no guarantees they will keep their jobs" and many are being interviewed. More: New York magazine has an article about a Lehman trader coping with "income shrinkage" and the Sun finds the NYC pension fund "lost $200 million since June from the collapse" of Lehman, Merill Lynch and AIG.

Now that Barclays is buying Lehman Brothers' broker-dealer business, the British firm is also getting Lehman's Seventh Avenue headquarters. The NY Times has a great story following the building's history: It was originally built for Morgan Stanley, but MS decided back out before it was finished and Lehman bought the building four weeks after the 9/11 attacks. The Partnership for NYC's Kathryn Wilde said, “Barclays has had a rather modest presence here, so this is a big new commitment to New York. Given the role that many of our New York-based firms have played in building London’s presence in the world’s financial markets, it seems like a good quid pro quo.” Barclays will also have another marquee NYC address for its name: The Barclays Center where the Nets will play at the Atlantic Yards.

The faltering economy and the fall of Wall Street banks has turned city leaders into counselors trying to calm New Yorkers down, given the huge impact of those businesses on the city.

Last night, the federal government gave insurer AIG a new lease on life with an $85 billion loan--in exchange for a 79.9% stake in the company. The NY Times reports, "The decision, only two weeks after the Treasury took over the federally chartered mortgage finance companies Fannie Mae and Freddie Mac, is the most radical intervention in private business in the central bank’s history." As the Wall Street Journal noted, the Fed decided not to bail out Lehman Brothers, but "this time, the government decided AIG truly was too big to fail."

The fallout from Lehman Brothers' self-destruction meant employees spent the weekend and yesterday packing up their things and working on their resumes. The NY Times reported that the trading floor was a third empty and the "bankers’ dress code was mostly out: while a few holdouts kept their ties knotted firmly, most of the traders moved around in jeans, casual shirts, even sneakers. One young employee showed up in a green Lehman T-shirt."

As speculated earlier this morning, U.K-based Barclays has reached an agreement to acquire a large chunk of Lehman Brothers' U.S. operations, which, according to the Financial Times, "perform securities underwriting tasks, provide merger advice to lucrative clients, and conduct trading." Though the cost of the deal is unclear, it's expected to quickly boost Barclays' U.S. presence by enabling the bank to assemble a pre-existing American investment banking business. As for the tainted Lehman Brothers assets, the Journal notes that Barclays could potentially could leave behind Lehman's troubled assets "at the parent level." Shares in Barclays fell 12% in afternoon London trading today, which is consistent with other nosediving UK financial stocks.

After the Dow Jones industrial average fell 504 points--the most since September 17, 2001--yesterday upon news of Lehman Brothers's bankruptcy, the sale of Merrill Lynch, and A.I.G.'s troubles, Wall Street is in for another difficult day. Asian stock markets were down sharply: Tokyo's Nikkei was down 5%, Seoul's Kospi was down 6.1% and Hong Kong's Hang Seng fell 5.9%.

The Dow Jones industrial average lost over 500 points today, the biggest one-day decline for the Dow since Sept. 17, 2001, when the market reopened for trading after the 9/11 terrorist attacks. "You have to throw out the history books because there's really nothing to compare this to," Jim Dunigan, chief investment officer at PNC Advisors, tells CNN. Stephen Leeb, president at Leeb Capital Management, says, "People are panicked but it's not the end of capitalism. This may usher in something worse than what we've seen in terms of the economy, but the companies left standing at the end of this will be OK." Phew! The last half hour of trading saw heavy selling despite Governor Paterson's effort to calm investors by letting faltering insurance company A.I.G. borrow $20 billion from its subsidiaries. And a group of 10 banks have given up to $7 billion each to create a $70 billion lending pool to help smaller institutions.

There's a coffee cart man who has declared (via a sign on his cart) that he will not serve coffee to those reporting on the Lehman Brothers (ahem, WSJ). Now Dealbreaker has gone to the caffeine source, named Leon, to get the real deal on his declaration of solidarity. The coffee purveyor told them, "When they suffer I suffer," and that he "thinks the bankruptcy filing 'sucks, but what can you do?'" He also noted that "it's probably going to get worse," and said there were specific reporters he will continue to refuse to serve. There's also an aw-factor in the story, however, as the website gave him "a few hundred" dollars.

In the first ten minutes of trading this morning, the Dow Jones industrial average dropped more than 300 points, while the major European stock exchanges sank more than 4 percent, the Times is reporting. What color is your parachute? The nosedive is the unsurprising result of several days of increasingly bad news from investment bank Lehman Brothers, which announced its bankruptcy filing after 158 years in business. Today is the first day of trading since the announcement, which also comes with bad news from AIG and Washington Mutual. Since the first minutes of trading, the Dow had recovering slightly, with American stocks doing a bit better than those in Europe.

The financial industry's worst weekend ended on these notes: Lehman Brothers filed for bankruptcy, after being unable to find a buyer; Bank of America, previously interested in Lehman Brothers (but didn't want to buy it with government protection) decided to buy Merrill Lynch for $50 billion; and it's worried AIG and Washington Mutual will fall next. The financial markets are expected to be in tumultuous territory, and a banking analyst told USA Today, "We are in a hysteria."

The fate of Lehman Brothers is still to be determined, as the Wall Street Journal reports that it has become "increasingly clear that a clean sale of the entire firm to a big bank would be too difficult to execute." More "high-level talks were held Saturday" --including participants like Treasury Secretary Henry Paulson, who doesn't want the government to bail out the bank a la Bear Stearns. One possibility: Lehman might be sold in pieces. One employee described the company's Midtown headquarters as a "morgue" to the Daily News, who also spoke to local restaurants who say their business would go down 25-50% if Lehman folds. Update: The NY Times reports this afternoon that Barclays, considered the leading contender to buy all or part of Lehman, says that it could not reach a deal without financial support from the federal government or other banks. Thus it looks likely that Lehman will have to liquidate.

Last night, the Federal Reserve Bank of New York "held an emergency meeting" between heads of Wall Street banks and officials including Treasury Secretary Henry Paulson, NY Fed President Timothy Geithner, and SEC Chairman Christopher Cox. The officials want a plan to discuss the faltering markets as it continues to batter financial institutions, and, per the NY TImes, "Geithner told the participants that an industry solution was needed, no matter what, and that it was not about any individual bank." This comes as a deal to save Lehman Brothers might not happen this weekend. One financial services firms labeled the big banks "toxic."

After its shares fell amid news it failed to get a strategic investment--and pushed the Dow Jones 280 points lower--yesterday, Lehman Brothers said it lost almost $4 billion during the third quarter. Per CNN Money, "It was Lehman's biggest quarterly loss since the firm went public in 1994, exceeding a $2.8 billion loss announced in June," (analysts were expecting a $1.99 billion loss). The investment bank is planning a major restructuring, spinning off most of its real estate assets and selling its investment management division. However, an analyst said of the spinoff, “It’s not a good sign. It’s really a sign of the illiquidity in the markets — that no one wants to buy these assets.”

Today, Lehman Brothers' shares fell as, per the NY Times, "reports that Lehman’s efforts to secure a strategic investment from Korea Development Bank...had failed." That sent the Dow Jones Industrial Average 280 points lower. And in other Wall Street news, an analyst believes that there will be many more layoffs to come. Crain's reports that Meredith Whitney of Oppenheimer believes there will be a bigger lay off rush than the dot-com bubble, "The slowdown in business today is far more pronounced and has been far more protracted than it was in 2001/02, hence we believe this resize will be at least equally painful."

Different media outlets report that investment bank Lehman Brothers will cut anywhere from 1,000 to 1,500 jobs, about 5-6% of its 26,200 workforce. Dealbreaker reports that there have been rumors of layoffs for the past few weeks, and, per Bloomberg, "Lehmanites will hold on to their jobs for a little longer, at least until Lehman announces its third-quarter financial results." Lehman has already cut 4,000 jobs this year. Earlier this week, the NY Times' Andrew Ross Sorkin wrote "When will Lehman Brothers die?", given its financial situation, but suggested "it may be too important to fail" because its chief Richard Fuld Jr. is on the board of director of the Federal Reserve Bank of NY.