In Limbo Land at Lehman

by Paige Churchman (New York City)

When your coworker goes into quit-and-stay mode, it’s a drag but you can work around it. Your job gets a little harder when your boss does it. But when your company gets stuck in a holding pattern like that, even for a day or two, well, that’s when people start carrying their wedding pictures, potted orchids and Lucite deal tombstones out the door in cardboard boxes. We can’t stand the not knowing.

The Glass Hammer spoke to a Lehman vice president last Wednesday, the day Barclays Capital snapped up big chunks of her firm at bargain rates. The deal meant that some Lehman employees might keep their jobs. “We’re in a much better position than yesterday morning,” she said and then laughed, “But much worse than last Wednesday.” Last Wednesday was the day Lehman announced its earnings a week early, reporting its largest ever quarterly loss. Though the numbers were accompanied by plans for restructuring, “we didn’t tell the market anything it didn’t already know,” she said. The stock held for much of the day and then tanked.

On Sunday, Lehman’s top guns met with the Fed and heads of other banks in a last-ditch attempt to save the firm either by bailout or by sale. Result: no bailout, no sale, Lehman was bankrupt. It wasn’t just any bankruptcy. Thanks to $613 billion of debt, this was to be the largest filing in history. Employees found out about the bankruptcy the same way we did – through the media. “We came in on Monday not knowing if we had jobs or not,” said our woman on the inside. Work was at a standstill, unless you were on the phone with panicked clients or scrambling to supply financials for the Barclays deal. People watched CNN either on the trading floor TVs or on their computers. The week before, Lehman had suddenly enabled CNN on its intranet. Some people ran it in the background while they worked on their resumes.

Limbo prevailed through Monday and much of Tuesday. Finally, late Tuesday afternoon, there was word from above – an email from CEO Dick Fuld, announcing the Barclays deal. It was an anguished message, most likely his farewell to a company he’d been with since 1969. He acknowledged everyone’s pain and thanked them for working tirelessly through the crisis.

All Lehman employees (26,000 or so before some recent layoffs) will become employees of the British firm Barclays Capital. Then it’s wait-and-see again while Barclays decides who stays and who hits the pavement. They’re projected to keep only 10,000, but after the last two days, this was good news. Someone in Investment Banking described the mood there as “jubilant” after the email. Because even if you’re not one of the lucky ones, at least that’s 10,000 fewer resumes out there for yours to get buried under.

The feelings come and go in crazy, unpredictable swirls. This VP feels sadness and loss, of course, not just for her job but to see a company she respected fail. “It’s a great firm. Great people work here. They’re bright and very professional. They wanted to work with you,” she said. There was a real spirit of putting your personal gain aside for the good of the firm. Now she’s hearing revenge fantasies about what people would do if they were alone in an elevator with Dick Fuld. “People are angry,” she said. “Some feel he chose to go down with nothing rather than swallow his pride and accept a low price.”

But this is much bigger than the story of one man’s hubris. “Look,” she says, “In the good years, we loved the mortgage business. It allowed us to expand the business in ways we wouldn’t have been able to otherwise.” Lehman wasn’t the only firm loving the mortgage business. It was, however, one of the small fry, and that may be why the other players opted not to bail it out. It didn’t quite make the too-big-to-fail cut.

“It’s so crazy it happened to this firm,” she says, and typical of someone in shock, she’s struggling with why. Could the mortgages have been classified wrong so their risk wasn’t apparent? Or maybe some numbers crunchers saw those risks from the start but were afraid to report it? There’s also the possibility that the risk was reported and duly taken in by those steering Lehman, and they made a business decision to hedge the risk.

“Did someone fall asleep at the switch? Someone in this company had to know what our exposure was.” And so, she sits and waits.