Corners # 1: Living through ‘The Lehman Experience’

Interesting People
I caught up for a Corner Conversation with “Maria” on her experience working for Lehman Brothers during the Global Financial Crises.

2008 Timeline

  • Jan – the interview with Lehman
  • Feb – verbal job offer to work @ Lehman’s
  • Mar – paper job offer to work @ Lehman’s | The Bear Stearns event
  • Mar to Sep – rumours swirl, share price plummets
  • Sep – bankruptcy and eventual sale
    • Sep 13 – Fed steps in
    • Sep 14 – ISDA exceptional trading
    • Sep 15 – ASX suspends Lehman
    • Sep 16 – Reorganisation filed in Tokyo
    • Sep 17 – NYSE delists Lehman

Into the eye of the storm

PC @ MMA:  We’ve had corner conversations about this in the past and now it’s time to commit-to-paper.  What exactly went down at Lehman during the GFC?

Maria:  Well I received a job offer to work at Lehman’s Feb 08 but the paperwork didn’t come through til March. Around that time, all the investment banks were looking quite good.

But then March came along and if you remember, there was a bailout on Bear Stearns around that time and the headlines were screaming out: “Who’s next?“.  

Lehman’s name was being bandied around at that time as the next one to go. So I was really worried at this point as I haven’t handed in my official resignation and I had the opportunity to back out. That feeling of ‘should I stay or should I go?‘ echoed inside my head.  I knew Lehman had the same business model as Bear Stearns and people were talking about it.

But I decided to go to Lehman’s in the end as I still thought of them as a highly reputable company and I thought of them as being safe. It was a tough decision.

PC @ MMA:  Tough call but choices had to be made.

Maria:  Yes it was.

I started in April and at that stage it wasn’t very clear whether we were going to go bankrupt or not. I even spoke to the manager along the lines of “..well, there are so many rumours about Lehman going bankrupt. Could it be..” just to get his opinion. This guy has been with Lehman for many many years and dismissed it as speculation: “How can Lehman fall?”   (PC @ MMA note: How can Bear Stearns fall?)

Lehman at that stage bought Grange Securities and we were in the midst of moving from Australia Square, which was a really old building, to Governor Philip Tower.

PC @ MMA:  That’s a nice building.

Maria:  Yes that was impressive. They mentioned that they spent $10-12 million on renovating that place. It was very extravagant. It had these extravagant paintings along the walls. It was pretty modern and high tech compared to our other building.  

And the trading floor was incredible! It was nicely fitted and decked out. It made you feel good coming to work.

But by the time we moved in, only half of the trading floor was occupied. The rumours continued to swirl around and we were watching our share price drop pretty much on a daily basis. Obviously information is everywhere on the trading floor. It’s on your terminal, it’s on the screens and it’s in the air. You even carried the news at home as soon as you turned on the TV or even when you switched your phone on. The thing was:

The more it surrounds you, the more it breaks you down.

And to give you a little bit more context, we were part of a larger Asia-PAC team and the head office in our region was in Tokyo, Japan. We had a big development team in India too but our team was quite small here in Australia for Fixed Income.  Anyway, the email’s kept pouring in around Asia-PAC: “Don’t worry, everything will be fine“. There were emails daily, some official internal comms and others were emails between work colleagues.

The Event

PC @ MMA:  And then the big event happened.

Maria:  Yes.

Just prior to that day, the COO called this meeting with all staff. This was surprising because up to this point, there was no staff briefing.

He reassured us that Lehman was not about to go bankrupt. But that didn’t really help the mood and we were still worried; the news was widespread and the people were having corner conversations everywhere.

So on that day we all went to work as usual. The morning was uneventful.

But then the news  hit us around midday. It must have come late in the evening in the US but due to the US-Australia time difference, it hit us around our lunch time.  

An email read: Farewell drinks at 2 pm!

PC @ MMA:  Oh no.

Maria:  Exactly. The comms from the US read something along the lines of ‘Get your things and get ready to go as the administrators might be moving in‘. We knew they were going to filing for bankruptcy.

Immediately after that, there was a ton of emails across the Asia-PAC region from colleagues saying “hey it was nice working with you“. Some of these guys have been working with each other for years so you can imagine how they felt. It’s like that old saying ‘you don’t know what you have until it’s gone.’  But I also think of this other quote:

Nothing binds people more than misery.

I wasn’t really too worried as I was financially prepared not to work for 6 months. I was one of the lucky ones I suppose.

When we knocked off work that day, I noticed there was a few cameras below the building trying to record our departure, or more precisely from the journo’s point of view, ‘our downfall’. I think they managed to capture me sneaking out of the building in the background.

You know I look back at those times and think to myself “I was part of the financial crises.” That’s a pretty significant event. Nothing really comes close to that event during my working career.

PC @ MMA:  Then what happened?

Maria:  Well the official correspondence did not contain any note about coming back to work the next day and so we took it easy and turned up around 10 am. Our normal start was 7 am, but these were exceptional times.  We left around 2 pm as there wasn’t really a lot to do. 

I spoke to my manager and told him that I wanted to look for another job.  He said “I’m surprised you haven’t yet. I’m doing it now!” A complete turnaround from his response not too long ago. Time can change people and they can change people pretty quick.

PC @ MMA:  Indeed. So what happened after that?

Maria:  Well the funniest thing was that I had some prearranged holidays during this time. Prearranged as in, I arranged it months before collapse. So I was there for the bankruptcy filing but I was not there for the buy-out.

The Collapse

PC @ MMA:  I see. But you kept in touch right?

Maria:  There was a news flash a day later about Barclays buying the European portion of Lehman. I read about it while on holidays and the rumour at this stage was Normura was about to buy as out. So yes, I was still checking emails and keeping in touch.

The rumour of course turned real and we received a letter about transfer of employment to Normura. We had 2 choices: accept the transfer or resign. There was a catch to this; if you accepted the transfer then your benefits transferred but if you resigned then you forfeit your benefits. I guess that’s how they worked the terms of the deal.

So I was overseas at this stage and I was already job-hunting. I was very fortunate to find a new job while I was overseas, which I verbally accepted. The timing worked in my favour in that I still transferred to Normura but resigned after a few days when the paperwork for my new employer came through. I had my benefits paid but this wasn’t much given I was only there for less than a year.

That entire episode was such an interesting period. Of course you read a lot about it these days and it was a significant game-changing event. But there’s not a lot out there about what happened inside Lehman from the perspective of an employee.

Our world has not been the same since.


Indeed.

I would like to thank Maria for her time and insights within Lehman. BIG thanks for this conversation!