I remember reading that thread as I had just finished as a 3rd year analyst at Citi and was going on vacation for several weeks before starting a job at a boutique in Denver. I had been working in financial sponsors coverage, and the amount of leverage put on PE deals in late 2006/early 2007 was clearly not sustainable. Everyone knew it, but people had to do what others in the market were doing to win deals. I was glad to be moving down market and away from deals that were debt dependent.

 

DickFuld have you watched HBO's "Too Big to Fail"? In the movie its depicted that you were the reason the Koreans left negotiations for a deal with Lehman. How much of this was true?

Also in hindsight would you have taken a deal from Buffet or no?

 

Been there done that. My favorite cartoon from that week (9/15-9/20) was bank buildings crashing into each other like dominoes, with Lehman crashing into ML and MS next. My favorite was when nobody in trading showed up to work on Monday even though we all still had some post-BK responsibilities.

Every 10-20 years a major bank goes under in a spectacular fashion. Today MS's assets/equity ratio is 1/2 what most banks were in 2008, but we can never forget Lehman and Bear, nor Enron, nor Drexel Burnham, EF Hutton, or Continental Illinois before that.

A solid, well-run bank today can easily turn into a basket case in a matter of 2-3 years or less. (EF Hutton actually pulled off the feat overnight during the crash of '87 when, supposedly, a specialist on the floor of the NYSE misinterpreted maintaining orderly markets and went on a crazy buying spree)

 

While we're on this topic what were the strengths of Lehman Brothers and Bear Stearns? I didn't care for nor did I follow IBs back when the crisis was going on (late high school to Freshman in college).

I'm assuming Lehman was big in S&T with perhaps Bear being the same? How did they fare compared to others in M&A and deal flow on the other side of IB?

 

My uncle was on a fixed-income desk at Lehman for various mbs products and said they were a mortgage powerhouse while it lasted.

I've heard but can't confirm that Bear was a better, or even the best, place to be for mortgages..

 
RedRage:

While we're on this topic what were the strengths of Lehman Brothers and Bear Stearns? I didn't care for nor did I follow IBs back when the crisis was going on (late high school to Freshman in college).

I'm assuming Lehman was big in S&T with perhaps Bear being the same? How did they fare compared to others in M&A and deal flow on the other side of IB?

Lehman was strong in investment banking as well as fixed income in general-- Capital Markets ( debt issuance), S&T, and Research/Analytics. This strength spanned all non-commoditized fixed income products-- from corporate bonds to MBS to CDS to Munis.

In fixed income, Lehman was stronger than MS, and on par with JPM and GS. (I may be biased)

I worked in the part of the bank that generated the risk numbers and analytics for corporates on the Lehman Aggregate Bond Index. To this day most banks still lack the capability to do what we were doing, and when the analytic coverage we overlapped with Bloomberg disagreed, we were right a bit more than half the time (it's always a good feeling when you can catch and fix a bad number in Bloomberg because someone fatfingered a call schedule). And we were far from the strongest part of the firm.

 

2008 is still the worst case benchmark for all our sensitivity testing. A veritable landmark in financial history.

Those who can, do. Those who can't, post threads about how to do it on WSO.
 

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