Monday, September 15, 2008

Black Monday - the demise of Lehman Brothers

Lehman-BrothersWhen a couple of us had a mini gathering on Sunday evening celebrating Mid-Autumn Festival, feasting on mooncakes and char kuey tiao, occasionally braving the chilly winds outside to view the full moon, no one had any idea what would hit us the very next day.

The Monday after Mid-Autumn Festival will be forever remembered in the financial industry as the day that saw the collapse of US investment banking giant Lehman Brothers.

Once the institution filed for bankruptcy in the early hours this morning, the effects began to rippled as the news spread. For starters, 5,000 of its staff in London were told during the morning meeting that the firm (and thus their jobs) ceased to exist. They were told to pack their bags and leave with immediate effect.

Though not many will shed tears for these bankers who made their pile of gold when the times are good, many others in the finance industry fear the worst.
This morning, everyone was going around asking, "So, do you know anyone working at Lehman? Wonder how bad it'll be...".

I understand that Lehman Brothers has got offices in Singapore and HongKong as well. I don't suppose their staff were any the wiser than their London counterparts.

At the moment, there will be 5,000 people reworking their CVs. One thing's for sure... there'll be many more to follow.

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Rich Dansereau said...

According to the wires, Lehman has filed for Chapt. 11 bankruptcy protection. While this is a huge shock to the global financial markets, the EU finance ministers apparently knew it was coming. They gathered in Nice over the weekend to discuss how to deal with this on Monday morning.

xiaocangshu said...

It's on the front page of the Straits Times today (the 16th). The staff said they couldn't really comment apart from saying that for the moment, it's still business as usual.

kyh said...

This is to add on to the worsening unemployment rates. But being professionals, I guess they can seek jobs elsewhere with relative ease.

Chizmosa said...

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Meaghan Fitzgerald said...

I followed the news yesterday (of course, how could I miss it) and although I don't know anyone in banking in London, was still quite shocked by the scale of the damage. However all of my family is in the states and I was quite interested to hear that for them, it was just another bit of bad news amongst so much else - with the hurricane wreckage still to be cleared, the other collapsed banks, and general economic woes, it's interesting to see the comparison between the UK where this is the first major event to personally effect citizens, and the US where it's a slow but continual downhill spiral.

Here's to hoping it gets better all around.

Raúl y Pablo said...

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SheR. said...

I'm glad I left the financial industry years ago. I couldn't take the constant restructuring in this biz. It's too unstable. One day you are cherished like a king, the next you are reduced to pauper. Sighs.. Now even Lehman Bros are not spared. Wow.. that's scary.. I wonder how's the rest of the investment banks doing? Morgan Stanley and Goldman Sachs? Anyone?
How's Barclay's in London? Missed that place... I used to work there :P

Dutchie said...

Down-sizing has been going on here in every sector of the industries.

Fusions of the banks has made most of their CEO's very wealthy but left their customers with less choice to shop around for mortgages, loans n general service. As of next year, we hv to do all our banking with a card (€ 12,50 per year - we hv 4 bankers to spread the risk, so there goes € 50,00). Any queries will be conducted via toll calls. User-unfriendly as can be. They hv in fact reversed as much costs as possible to their clients while enriching the company. I for one will miss the friendly teller a the counter.

Diane Scott said...

Seeking new jobs isn't going to be an easy thing to do, I don't believe. There is already a glut of educated, unemployed here in the States. I don't know the situation overseas... who knows we may be all coming "home" in the near future if your job markets are better - tongue in cheek sorry. Nasty times, hopefully we all get together and form a usable plan that can be implemented to pull it together again.

C K said...

@Rich Dansereau,
At the end of the day, it doesn't really matter whether the respective finance ministers knew what was going to happen, it's what the people perceive the situation to be.

If confidence in the market is lost, then we are in for some rough times.

You know what? I actually found out about Lehman from Straits Times Interactive. It was my homepage and Lehman's collapse (or impending collapse then) hit me right in the face.

I heard that there were people queuing outside AIA's building to redeem their insurance policies. Is that true?

Hmm... I think it's gonna be harder that we think. 5,000 out in the street in a single day, it's really no joke.

Hi there, thanks for stopping by. Glad that you like the posts. :)

@Meaghan Fitzerald,
Well, it seems that it'll get worse before it gets better. At least that the general sentiments. The headlines of London Lite this evening reads "5,000 jobs axed in an instant", Guardian's reads "Global meltdown continues".

You know what they say... when the States sneeze, the rest of the world catch a cold. I guess it would be like that for this business cycle at least.

@Rauly Pablo,
If only I know what you're talking about. But thanks for stopping by nevertheless. :)

I didn't know that you were with Barclays when you were in London. Being a chef must be therapeutic as compared to slogging it out at a bank.
Barclays is still ok for the time being... everyone is scrambling to ascertain the exposure to Lehman.

You mean you have to PAY for the banking card? Whew... that's tantamount to licenced robbery isn't it? How's the interest for a savings account over there?

Over here in the UK, not only the bank card is free, there's not even a minimum deposit in savings/current account, unlike Singapore, which will charge an admin fee if the balance fall below a certain amount.

@Diane Scott,
Believe me, the glut is everywhere right now.

In fact, I have been cracking my head trying to think of careers that prosper in times of recession... I can't think of any really. Any ideas?

Fëanor said...

CK: I guess you speak truly when you say that not many will mourn the job losses of the Lehman bankers. On the other hand, consider that the average tax that they pay enables the government to hire a nurse or a policeman, and you'll realise that the impact on general society is not inconsiderable. That's the problem, I guess, with the financial services industry providing such a large part of public revenues.

xiaocangshu said...

Yes, now it's AIA. Apparently the shares plummeted.

And today the first few pages of the main section of the Straits Times has the heading (similar to what they did after the Sichuan earthquake and other major news items) "Financial turmoil" and on the page with the Lehman article another heading "Day 2 of the crisis".

SheR. said...

I know what jobs will be great in recession.. Loansharks!!! Or Banks (loans)... :P

Dutchie said...

ck, the bank cards r daylight robbery indeed. Prior to this, it was free. They said that it was an EU directives to streamline the system - crock of ... or what ?

Best rates now is 4% for any amount but must retain 5K (was 20K). Quarterly fixed, any amount yields 1% base n 1,8% bonus. If u make withdrawals, u lose the bonus. Ordinary savings a/c must retain 500 euro - 0,5% interest. Time depo, 25k minimum - 4,3% (3mths), 4,8% (6mths) n 5% (1 yr)

How's r the rates in the UK ?

The minimum amount in Sg savings a/c is 500 right ?

C K said...

I have spoken too soon. I guess all of us will feel the impact indirectly as the slowdown trickes down.

However, I do feel sorry for middle and back office staff (of Lehman) who draw a regular salary during boom times and are asked to go together with the highrollers. Let's hope that we'll be hitting the bottom soon.

A pal of mine just went over to work for AIA and now this happen...

The newspaper headlines truly say it all, don't they? It's 'Terrible Tuesday' over here.

I think the Loans Department will see number of loans reduced due to the drying up of credit available, which will eventual lead to a spike in interest rates. Hmm... I don't think pig's head (a loanshark's accessory) can be easily obtained here in London. :p

Come to think of it, I'm not too sure about the interest rates over here in the UK. But it's definitely better than Singapore's, which hovers around 0.74% for a normal savings account, not to mention its minimum amount required in the account. Yep, it's S$500 the last time I check.

Dollar dude said...

It is really a black Monday in the financial markets.