Lehman Brothers

  • 20 Feb 2014 at 12:55 PM
  • Banks

Former Bank Gets Extra $3.7 Billion Or So To Play Around With

Lehman Brothers was perhaps not as extremely well-capitalized or strongly liquid as Dick Fuld claimed, but its corpse is looking pretty well-capitalized today. Read more »

Earlier this week, an anonymous veteran of the hedge fund world took to eBay to list the fleeces he’d picked up as an employee of several hedge funds that either have been or will soon be consigned to the scrap heap of corporate history: SAC Capital, SAC subsidiary Sigma Capital, Quadrum Capital, and Stratix. Seller “madinny” started the bidding at $1,500 for the entire lot, and then sat back and waited for the offers to roll in. Unfortunately, it appears that no one, not even the foremost collectors of hedge fund swag among us, would bite. So he did what any guy trying to unload Wall Street memorabilia at an admittedly steep price would do: He rummaged through his closet and came up with a couple items to sweeten the deal. Read more »

  • 18 Sep 2013 at 2:05 PM

Joe Gregory Needs Your Help

Remember Joe Gregory? Former Lehman Brothers president? Used to commute to the office from Long Island via helicopter? Was publicly dressed down by Dick Fuld on at least one occasion for leaving the house wearing a hideous green suit? He voluntarily resigned in June 2008, and since he technically wasn’t on site when the firm bit the big one, felt he was entitled to $233 million in back pay. And yet, despite filing a claim for his money over four years ago, has seen not one dime! Presumably the estate will get to his case soon (Gregory’s claim remains outstanding, so there’s still hope) but in the meantime, Big G’s gotta put food on the table. He put his 15,000-square-foot home on the market last year for $22 million and now is holding a fire sale of all his furniture. Read more »

  • 09 Sep 2013 at 6:58 PM
  • Banks

Uncooperative Laws Kept SEC Off Dick Fuld’s Back

Prosecutors got bored investigating Lehman Brothers pretty fast, but not so the SEC, which persisted until last year in trying to come up with something, anything to throw at Dick Fuld, at great personal risk and to no avail. Some (Mary Schapiro, for one) are still puzzled by this. He has George Canellos to thank. Read more »

Bloomberg has a fantastic article today about how Lehman’s decaying corpse is suing a bunch of former clients, many of them wee and sympathetic nonprofits, who hosed Lehman when they terminated swaps in September 2008. Some of these lawsuits turn on disputes over when those clients, or their consultants, should have valued the swaps for termination purposes, and I was looking forward to reading Bloomberg’s account of which of those customers used the SWPM <go> function on their terminals and on what dates, but for some reason that wasn’t mentioned.

The basic story is that clients had trades with Lehman that were in-the-money to Lehman, and when Lehman went bankrupt the clients terminated the trades and wired Lehman termination payments that Lehman now rather belatedly finds inadequate. You could understand why the clients would want to get out of these trades: for one thing, the trades had moved against the clients (thus being in-the-money to Lehman) and seemed likely to move further against them1; for another, if the trades did move back in the clients’ favor, what were the odds that a freshly bankrupted Lehman would pay the clients what they were owed?

Is Lehman right that the clients underpaid? Oh, I mean, of course. I don’t have the details of the trades but you can reason this out from first principles. Here:

  • It’s September 15, 2008, and Lehman has just filed for bankruptcy.
  • You owe Lehman some money.
  • How much you owe them is a somewhat subjective matter that depends on what termination date you pick, what model you use, whom you ask for a quote, etc.
  • You know, with some certainty, that everyone at Lehman who knows anything about your trade, and also everyone who doesn’t, has bigger things to worry about, like stealing office supplies on their way out the door.
  • You can basically write them a check and enclose a note saying “here’s what we think we owe you,” and see if they write back.
  • How big is the check?

Read more »

Yesterday Citi sued Barclays over an indemnity that Barclays gave Citi during the collapse of Lehman Brothers, and while, yes, the lawsuit is boring in the way that only lawsuits over indemnities can be, I’m nonetheless going to tell you about it under the heading “laugh at Citi doing stupid stuff.” The stupid stuff here is roughly:

  • Citi was the clearing bank for Lehman Brothers FX trades, with gross exposures in the tens of billions of dollars.1
  • Lehman ran into some trouble in September 2008, as you may have heard.
  • On September 9, 2008, one week before Lehman’s bankruptcy filing, Citi decided it might be a good idea to get some security for its Lehman FX clearing exposure, in the form of getting set-off rights against $2 billion that Lehman Brothers Holdings (the public parent company) had on deposit at Citi.
  • On September 15, 2008, after Lehman Brothers Holdings had filed for bankruptcy, Citi decided that it might not be a good idea to continue extending credit to Lehman Brothers Inc. (the non-bankrupt broker-dealer subsidiary) and so terminated its FX clearing arrangement.
  • Lehman Brothers Inc. begged Citi to reconsider, and Citi agreed to provide basically two more days of clearing (through September 17) in exchange for $1 billion of new collateral posted by Lehman.
  • Lehman Brothers Inc. continued to not pay Citi amounts that it owed.
  • So Citi again stopped clearing for Lehman.
  • This time Barclays, which had agreed to purchase the Lehman U.S. broker-dealer operations, begged Citi to reconsider, and Citi agreed to provide basically two more days of clearing (through September 19) in exchange for $700mm in new collateral posted by Barclays.
  • Lehman Brothers Inc. again continued to not pay Citi amounts that it owed, and was placed into SIPC liquidation on September 19.
  • Citi again stopped clearing for Lehman, for real this time, and closed out its positions at a loss of something like $1,260mm.
  • It set off $1bn of these losses against the collateral posted by Lehman.
  • Then Barclays called Citi, in October 2008, and asked if it could have its $700mm of collateral back.
  • Citi said yes!2 Read more »

Creditors of the former investment bank in the U.S. and Europe will get everything back. Creditors in Australia are not so lucky. Read more »