The Day that Shook the World
Last Monday’s, 5th August, financial meltdown reminded me of 2008. Absolute chaos and mayhem!
September 2008, there I was sitting at my desk in front of my 3 big screens, I wasn’t quite as cool or important as the 6 screen guys yet!
All of our senior managers had left that morning to go on a team-building offsite, along the English canals, in the infamous Canal boats. A fellow junior manager and I were effectively left to oversee the whole Equity department. A cool position to be in for a little guy, who had started out his career doing the filing many years before.
Markets are Capitulating
That morning, we rocked up to the office like it was any normal day, although you felt a little freer without your managers being there to oversee things. You know the feeling. Cats away, mice will play!!
THEN……we got the call.
HOLY SMOKES! A call that would shift the world forever and have far reaching ramifications.
Financial implications way bigger than we could ever imagine.
Lehman Brothers, the Investment Bank, had collapsed.
The markets were in free-fall.
A MASSIVE Hit to the Balance Sheet
We were one of Lehman Brothers biggest clients. They were in possession of 2 billion pounds (£) worth of our shares. 2 BILLION!!
This was a client we spoke to numerous times daily, to manage our accounts with them. We were their clients, but we were also friends/family that socialised often.
Their capitulation, was our capitulation.
There was no separation. We were in this together.
This was a process and product I had very little experience in or knowledge about!
I had to call my boss to explain what had happened.
I could actually feel my hands shaking and voice trembling. It’s hard to describe the emotions.
I had to dial a few of their numbers before I eventually got a hold of them.
They were probably on the beers already. LOL. You know us bankers. We never let a good moment go to waste!!
His jovial voice, instantly changed as he realised the consequences and seriousness of what was unfolding…
This is IMPOSSIBLE to do
Months before we had spent $$$A CRAZY BIG AMOUNTS$$$ to do detailed analysis of moving our business away from Lehman’s.
The outcome was; that it would take too long, be too complicated, and cost too much.
So we parked the idea and wrote off the money spent on the analysis.
However, TODAY, things were now different. Very different.
We set-up a task team of various experts, from different departments. We worked ’til 3am that morning.
Got taxi’s home, slept for a couple of hours and were back at 7am the next morning.
This was our new reality, we did it for 21 days straight.
There are No-Winners…
We had no tricks up our sleeve. It felt like a lose-lose situation. We researched, discussed, and made plans to try work out this mess, in this unprecedented scenario.
Remember me saying that the Lehman guys were our friends/family? Well, when you are dealing with a $2bn black hole and lawyers get involved, it becomes tricky to maintain that relationship.
Ultimately, the hot-shot lawyers on our side, found the agreement (loophole!) which showed that Lehman had to own the loss, even though they were ‘our’ shares/stocks.
A painful realisation for them
We managed to re-create (buy) this basket of £2 billion of stocks with a new client. Something we said was impossible from the analysis we did a few months before.
We also bought back in at a 20% discount because the market had dropped.
Crazy times. Lots of emotion. Many lessons.
Never again. Right? Right…?!
LOL – Greediness never learns.