After Lehman: What did we learn?
An employee of Lehman Brothers Seoul office walk past at their office September 16, 2008 in Seoul, South Korea.
We've been covering the collapse of Lehman Brothers this week, looking back over the last five years.
"I think it really changed Wall Street as we know it; Wall Street used to be this area of broad shoulders -- now those shoulders are slumped," says The Guardian's Heidi Moore. "A lot of people talk about how Wall Street has worked against regulation -- and that is absolutely true -- Dodd-Frank is not a strong law. But the truth is that it's not just Congress that doesn't know what Wall Street needs to look like; it's also Wall Street itself. They're just in a zombie state. They're feeling their way through this new world where they're just a pastiche of businesses that were cobbled together by bailouts and acquisitions, and they don't really know how to fit together and they don't really know what the future's going to look like."
"I think the arrogance that was there beforehand, we've had a bit of a return of that, but it's nowhere near where it was in 2007," says CNBC's John Carney. "These guys really do now at least know that it's possible for them to fail. It hadn't happened in generations -- it had gone away, they thought they had mastered capitalism -- and now they know that markets are much more complex than they realized."
For more on the financial crisis, Moore and Carney have offered some weekend longreads on the subject. Here's what they chose:
All my longreads this week are about Dick Fuld, the CEO of Lehman Brothers. As a reporter, I met Fuld many times, once in an elevator when he had heard I was doing a feature on the firm's "extreme makeover" into a powerhouse firm back in 2004. At the time, Lehman was making a strong push into the top tiers of investment banking, a standing it retained until its demise. Fuld surprised me; rather than being gruff or bossy, as was often rumored, he smiled shyly and politely, clearly worried about how his firm, so precious to him, would be portrayed in the press. The story of Lehman Brothers could be told through the story of Dick Fuld; he was a protective force for years, and he was emblematic of its tough-love culture: aggressive, but loyal in the end. When the firm started to collapse, many loyalists attributed it to Fuld being less involved and having passed on management to someone else. The infamous micromanager, who swaggered through the trading floors, had let go of power in early 2008 and to the minds of many at Lehman, he paid the price in September that year. Many are still angry at him - not for driving the firm into the ground, but for being unable to stop its fall.
So all of my longreads this week are about the culture of Lehman and the fall of Dick Fuld -- as a memorial, and also as a lesson that, whatever happens on Wall Street, it's never really about the numbers. It's about the people.
- In 2008, the anger against Fuld was overwhelming. This Reuters piece revisits the depth of the outrage.
- In 2009, Fuld was still a pariah, getting hate mail and making persistent apologies.
- Also in 2009, Fuld greeted a Reuters reporter who tracked him down to his Idaho ranch with the crisp, "You don't have a gun; that's good."
- Vicky Ward's 2010 Vanity Fair feature about the Desperate Housewives of Lehman shows an insight into the demands of Lehman culture from those who married into it. "Dick Fuld expects his executives to get married and stay married," the magazine writes.
- In the present day, Fuld is working in his advisory firm in midtown Manhattan; he has pitched big deals, Bloomberg Businessweek writes, but he has not won them.
- Phillip Swagel, a professor at the School of Public Policy at the University of Maryland who was assistant secretary for economic policy at the Treasury Department from 2006 to 2009, explains why no one in government had the legal authority to rescue Lehman. Treasury couldn't do it because it had no statutory authorization to use funds to do it. The Fed didn't believe Lehman had adequate collateral to back a loan.
- Matt Taibbi's half-crazed screed against Goldman deserves a place on any crisis reading list. It's a thrill ride of a read and a great antidote to the reporting by financial journalists who are often too close to their subjects to realize how insane of a place Wall Street really is.
- Earlier this year, I explained why the new capital requirements actually create risk. I hope someone starts paying attention to this before the world implodes again.