New York, United States:
The bankruptcy of Lehman Brothers, a major catalyst for the 2008 global financial crisis, still resonates for those who lived through it. Here are the stories of three who were there.
Paolo Battaglia, novice banker
After an internship in the summer of 2007, the young Italian felt particularly excited in July 2008 when he got a job at Lehman’s private equity division in London.
“It was the start of a new adventure, my first job out of school,” Battaglia recalls. “At the time, Lehman was a prestigious and rewarding place to work.”
“Of course I was aware that this was not an easy moment for the industry and for Lehman in particular, but until the very last day no one expected Chapter 11 as a realistic outcome,” he said, referring to bankruptcy protection proceedings.
When it became clear that Lehman would not survive as a standalone entity, the thought was that it would be taken over by another heavyweight such as Bank of America or Barclays.
But on Monday, September 15, 2008, Battaglia and other employees arrived at the office to find trustee PWC handing out flyers in the lobby, “basically instructing employees to stop engaging in transactions,” he recalled.
Everything changed overnight.
“It was a surprise that things stopped so abruptly,” said Battaglia, who considered himself fortunate to have worked in a division better protected from the layoffs.
He worked until mid-2010 for a fund bought by Lehman colleagues before moving to Goldman Sachs, where he still works.
“I got the best I could have in a very unfortunate situation. The options were very limited.”
“I am confident that the events were thoroughly investigated and that if no one was charged it was because no crime was committed,” he said. “We tend to associate bankruptcies with crime, but it was just another business that went bad.”
Battaglia sees the recent crises that have hit Credit Suisse and a slew of regional banks in the US as completely different, saying: “There are many more policy tools and experienced knowledge from regulators and markets to manage these types of situations than there were fifteen years ago. “
William Dudley, troubled supervisor
William Dudley had a full schedule the weekend before Lehman Brothers’ bankruptcy Monday morning: first a conference at Princeton University, then a friend’s wedding attended by finance executives.
Dudley, then vice president of the Federal Reserve Bank of New York, continued these events.
“You can’t really start canceling things because that makes people even more nervous about what’s going on,” he said. “It was very strange to go to the wedding and act like nothing much was going on.”
Dudley had spent the early part of Saturday morning working on a plan to save Lehman.
“In reality, for me, the story starts a little earlier, because Dick Fuld was on the board of governors of the New York Federal Reserve, so I had some interactions with him in 2007 and 2008,” Dudley said of Fuld, who led Lehman from 1994 until its demise in 2008.
“I was quite concerned that Fuld was denying the risks facing the economy, the financial system in general and Lehman Brothers in particular.”
Dudley shared his thoughts with colleagues in the summer of 2008, but “my memo ended with thunderous silence,” Dudley said.
When Lehman filed for bankruptcy protection, the initial reaction was “not that bad,” Dudley recalls.
But the situation quickly turned into a contagion as investors rushed to withdraw money and cover their exposure.
Could Lehman have been saved?
“Right behind Lehman were other groups in trouble, like AIG,” Dudley said.
“Maybe I should have been more forceful,” he said. “But maybe it was already too late.”
But recent banking problems are more visible than in 2008, Dudley said. “You actually knew why the companies were getting into trouble.”
Oliver Budde, whistleblower
Oliver Budde resigned from Lehman Brothers in 2006, plagued by business practices. But the lawyer was back at Lehman on the fateful morning when the company filed for bankruptcy protection.
“I was in the building on Monday morning when pandemonium broke out, as everyone started walking out with their stuff,” he recalls.
There was “a lot of sadness, an ‘I can’t believe this is happening’ kind of shock,” he said.
Early in the afternoon, Budde saw Fuld ‘sneak out the back door and leave with his own driver in his black Mercedes limousine.
“I took a picture,” he said. “It’s a souvenir for me.”
Budde, who lived in Vermont at the time, spent the evening commiserating with former colleagues.
“I had seen that these men were not to be trusted,” he said. “In a way, I was vindicated by Lehman’s bankruptcy.”
Budde had left his job as vice president and assistant general counsel in 2006, troubled by what he saw as tricks top executives used to inflate their compensation and not disclose it to investors.
The company made no changes even after regulators revamped rules in 2008 to improve transparency.
“It was still hidden,” he said. “I thought it was scandalous. That’s why I became a whistleblower.”
Between April and September 2008, Budde sent five emails to US authorities, copying Lehman’s board and legal staff.
“No one ever contacted me, even afterward,” Budde said.
“I’m quite proud of my actions. I did the right thing by reporting my concerns to the authorities.”
Lehman could have been saved by a managed sale to Barclays, but the British company “got a much better price” for the large Lehman assets it acquired during the bankruptcy proceedings.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)