The photographs of Lehman Brothers employees leaving the bank's New York headquarters carrying cardboard boxes stuffed with personal items were among the defining images of the 2008 financial crash.
The 32-storey office building just above Times Square in midtown Manhattan was one of the most valuable assets on the bank’s books when the investment bank became the largest bankruptcy case in history on September 15th, 2008, brought down by debts of more than $600 billion.
In fact the property, valued at $960 million, was the most valuable asset in the $1.75 billion purchase price when UK bank Barclays swooped to feed on Lehman's carcass. The bank bought Lehman's investment banking and capital markets businesses in the days after its bankruptcy.
Within 24 hours of the deal being announced, the 157-year-old Lehman’s name was gone. The business was rebranded as Barclays Capital and the New York headquarters flashed the white-and-blue logo of the new owners in a major PR coup for the UK bank.
A former executive who worked for Lehman’s for 20 years, watched with shock at the events in New York that weekend in mid-September 2008 as the US treasury and federal reserve, the country’s central bank, refused to save the investment bank from collapse.
“I always had a question that Lehman’s was making so much money from their real estate division. I couldn’t understand how they could continuously do as well and rely on those earnings,” says the executive, who left the bank in 2009.
"As bad as I thought it was, I didn't think Lehman's would be left for dead as it was. I didn't think they would pull the plug on the bank given that they had saved Bear Stearns. "
Too comfortable with success
The former executive who spoke to The Irish Times on condition of anonymity, lest it damage his career, believes the "arrogance and ignorance of Dick Fuld" – the colourful chief executive of Lehman's at the time of the collapse – left the bank "without a chair when the music stopped". He blames the senior management for getting too comfortable with their success. They became figureheads and lost touch with what was going on in the business.
“There was a tremendous amount of cronyism. Buddies who weren’t always the best people to have in jobs were kept in the jobs because they didn’t challenge the guy up above who should have been challenged. They got a little soft in the underbelly and they got sloppy,” he said.
When the end came, caused by the heavy burden of debts that could not be repaid or rolled over in the paralysed money markets, it all happened too quickly for staff to do anything about it, says the former executive.
"People were astounded. We had had such high-flying success. Everybody had stock that was worth $150 a share and now it was worth nothing. The stock had been deferred so you couldn't sell it. Everybody's stock was locked up for five years. People were pretty
angry and disturbed, and pissed-off."
For many, the failure of the bank didn’t just mean the loss of deferred earnings that had been tied up in worthless shares; it meant the loss of their jobs.
Barclays shed one-third of the 10,000 staff inherited from Lehman’s soon after they were subsumed into the business in 2009. A further 1,600 were cut over the following two years.
Further cuts
After buying the choicest bits of Lehman's, Barclays made an aggressive push to become the world's leading investment bank. However, last year the UK lender's first annual loss in two decades forced it to scale back these plans and announce 3,700 job cuts across its operations.
Five years on, the Manhattan building is still the American home of Barclays Capital. “It’s as if nothing has changed,” says the former executive. “Lehman’s out, Barclay’s in.”
