Given that the 10 year anniversary of Lehman's Chapter 11 filing is (almost ironically) going to fall on a non-trading day I figured I would start the conversation a little early, how did the financial crisis effect you, if at all?
Storytime! (feel free to skip): I know I was a freshman in College, had no knowledge of finance at the outset and remember my mother saying to me on an early campus visit, "it's a financial crisis and I'm still taking my son out to dinner as a single woman," and "only people who cant manage their money and overspend are going to have to deal with all of this." Less than a year later both she and my father (independent of each other having divorced 4 years earlier) are declaring bankruptcy, and hit me with the we cant help you with college anymore. If you've read my comments on sleeping in my car and slumming during my college years, this was the genesis. However I guess knowing all the havoc that it wrecked with my family piqued my interest in finance in general and here I am 10 years later, slightly scarred and skeptical, but far better off. Life is pretty wild that way some times.
I found this post pretty interesting, it's a Vault league table from mid-2007.
1 Goldman Sachs & Company
2 The Blackstone Group
3 Morgan Stanley
4 Lehman Brothers
5 JPMorgan Investment Bank
6 Merrill Lynch
7 Citi Markets & Banking
8 Lazard
9 Credit Suisse Investment Banking Division
10 UBS Investment Bank
11 JPMorgan Chase - Commercial Bank
12 Deutsche Bank
13 Bear Stearns & Co.
14 Citigroup Inc. (Citi)
15 Bank of America
16 Greenhill & Co.
17 Barclays Capital
18 Wachovia Corporation
19 Rothschild
20 Robert W. Baird
21 Houlihan Lokey
22 Nomura
23 Perella Weinberg Partners
24 Wells Fargo
25 Royal Bank of Scotland
26 Evercore Partners
27 Piper Jaffray Companies
28 Thomas Weisel Partners
29 RBC Capital Markets
30 Deloitte & Touche Corporate Finance
31 Dresdner Kleinwort
32 CIBC World Markets
33 Allen & Co.
34 BNP Paribas
35 Bank of New York
36 William Blair & Company LLC
37 Brown Brothers Harriman
38 Keefe, Bruyette & Woods, Inc.
39 Cowen & Company, LLC
40 Raymond James Financial
41 ABN AMRO
42 HSBC 43 KPMG Corporate Finance 44 Gleacher Partners 45 Morgan Keegan 46 U.S. Bancorp 47 Macquarie Group 48 Jefferies 49 FBR Capital Markets 50 A.G. Edwards
That's pretty neat, familiar places familiar spaces I guess.
Bear seems low. Overall prestige I believe they were fourth back then. Goldman Morgan Lehman maybe jp then bear but bear had a scrappy Everyman image.
What happened to kbw. They use to have a great niche reputation. Jefferies sky rocketed but I think they were better than their ranking then.
Finance was actually fun back then.
I have a non-investment banking experience, but still very relevant story arc:
I graduated in December 2007 and - due to not planning my career prospects very well - had to move back home and took a job selling cars for a few months while I got my act together. I was working at the dealership in March 2008 when Bear collapsed and I remember listening to the local radio playing over the loudspeakers all day about the situation but I had no idea what it meant or why it was a big deal.
Later in March, I took a job in Charlotte with a residential RE property management company and was there through the end of the year so I was reading the paper every day in one of the centers of gravity of the crisis. I will never forget reading the article about the former GS guy they brought in to "save/turn around" WFC and how quickly that unraveled and the lunacy of BOA buying Countrywide. I think it was at this moment that my curiosity about finance was piqued because I could not fathom how some guy who'd spent his whole career in NYC doing something else could be brought in as a white knight to save a bank. I just had no understanding of what the operational side of the business was and I really, really wanted to know. Even for a total dummy like me (at the time) it was clear that things were not as they seemed and things were imploding fast. A lot of the tenants we had were low-wage blue collar workers and the slowdown in activity started showing up real fast.
In this context, I brilliantly networked my way into a FLDP program at a big bank based in NC and was in this program during the first half of 2009 when the market bottomed and it was clear that things were getting really dicey. I still didn't really know what all the implications of it were or how/why/what all the bailout money meant even as it was "given" to the bank I worked for.
Fast forward to the beginning of 2010 and the full impact and scale of the ungodly fucking fire raining down from above starts to hit Main Street where my bank operated and it was a complete and total PANIC. It built and built for months in the bank and I kinda watched it from the sidelines until they realized it was well and truly out of control and they start pulling EVERY SINGLE warm body they could out of the usual course of business and threw them at the problem loan portfolio and I got my baptism by fire into finance and found my calling.
I was the lowest of the low in terms of rank and experience, but found I was still better prepared and knowledgeable than guys with decades of experience in solving these problems. Me and my group of young Turks were working 12-14 hour days most of the week trying to sort through everything and document our credit files and satisfy the regulators who were (I learned later from people close to the situation) putting their fingers on the scale and threatening the bank with the alphabet soup of acronyms in bank regulation (MRA/PCA/MOU/etc) if we didn't get our shit together. There were 6-10 am conference calls every Saturday morning (I know, this is small potatoes compared to IB, but for a junior commercial banker this was heavy) to debrief what we'd done during the week and what we needed to do in the coming week. I had to wear so many different hats to get things done and had to become an "expert" in so many different fields every week to cure our problems its incredible to reflect on. Was SO much fun.
This went on and on for months and months until early 2011 when I had a chance to get out of the corporate HQ and move back home into a production-type role. I learned so much in so short a period of time and built my street cred during those hell months that I kinda catapulted me on the path I was on and for that I am very grateful. I know everything I know about the business of running a bank from that experience and I confess to being somewhat excited about the chance to work through problem credits again in the next cycle (though I truly hope it isn't as crazy, I really did see a LOT of people have their entire livelihoods flushed completely away... but I also got to play hardball with a lot of jerkfaces who decided they didnt want to honor their obligations because it would have flushed their wealth away. [Pro tip: as an individual, don't go toe to toe on a defaulted loan with a determined banker no matter how well off you are. You're bound to encounter somebody like me who will find a way to massacre you Les Grossman-style]).
Since you asked, that's my story in broad strokes and how the collapse impacted me directly. Fortunately, all that happened to me personally was my parents portfolio took a hit like everybody else's but my dad is a financial professional too and he rode it out and bought more when the market bottomed so we were fine. I myself had no investments or cash since I was just starting out.
(PS: AMA about problem laon war stories or memorable workout situations)
Any interesting businesses or loans that you could have scooped up on your own while going through the problem loan book?
If I'd had the capital, balls, and experience to do it - yes. Of course, I had none of those at the time. This next time around, though, I'm going to seriously consider it - particularly for RE assets.
In terms of C&I operating businesses, there were a handful but I wouldn't say that any of them were "interesting" in the sense of them being unique or pathbreaking. The ones you'd have wanted to buy out of the portfolio would just be for plain vanilla operating businesses that were just undercapitalized.
The bank itself almost bought one business because it was an advanced recycling provider and its end products were nearly pure aluminum, silver, gold, et al - the types of metals that you'd get after processing a bunch of [specialty single use product]. They had all this stuff in physical bulk form, but their customers stopped buying because they couldn't unload it downstream. Our collateral was all this commodity metal which had a "value" exceeding our loan balance - but it wasn't marketable and its not like we could just haul it in a truck up to the CME and hawk it at spot prices. Eventually figured out a solution but those were some interesting phone calls to commodity brokers and inventory appraisers.
yea other than my parents direct loss of houses, I personally was for better or for worse blissfully ignorant of the macro goings on. I couldn't imagine having the worry of losing my job as a new grad with student loans, or even worse being about to retire and having my nest egg crushed.
My folks were retired and it was nerve-wracking to be sure. A real test of that investing mantra about "what do you do when the market is down?" Sit tight, sell, or buy more? My dad had the fortitude to ride it out, buy more along the way down, and rebalanced into a less aggressive posture once prices recovered.
The financial crisis feels like something I just read in a book. I was starting college shortly after so no need for a job and the crisis left Texas largely unaffected.
https://www.nytimes.com/2008/09/15/business/15lehman.html
There's the Times article about that fateful day. It's an interesting little read.
Nice find, nicer handle.
Written by the god himself, Andrew Sorkin
bump now that I'm in competition with DickFuld.
Graduated in 2010 top of my class (summa cum laude from non target). No relevant internships - no interviews anywhere. Had to get an MSF to reopen recruiting. Uphill battle ever since.
That sucks, what was your plan initially coming out of college with no internships (even without being balls deep on a financial crisis?)
Good question man. I was absolutely clueless. Thought a 4.0 GPA from a shit school with a degree in economics would open many doors.
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