On September 15, 2008, Lehman Brothers filed for bankruptcy. Not coincidentally, on September 15, 2008, every other bank around the world who was a counterparty of Lehman or creditor of Lehman or had any relationship at all to Lehman began to wind up, to the greatest extent possible, whatever those relationships were, and since Lehman’s people were busy collecting their shoes from under the desks, most of them did it in the most favorable way possible to themselves, and the least favorable way possible to the now-putrefying corpse of a once-proud 158-year-old investment bank. It’s true: There have been lots and lots of lawsuits about it.
Citigroup was among the surviving banks working hard that Monday morning, closing out some 30,000 derivative trades with Lehman, and then deciding to keep $2 billion Lehman had on deposit with the bank to cover its losses (as opposed to its normal practice of handing back collateral and then suing over losses that collateral was supposed to collateralize). This is not at all how Citi usually handled such things, sayeth lawyers for the corpse of Lehman Brothers, who would like that $2 billion back to divide amongst themselves and also Lehman’s creditors. Citi doesn’t really dispute that, pointing out that it doesn’t really have a standard operating procedure for dealing with the collapse of one of its peer Wall Street pillars. Suffice it to say, there’s a lot of yelling involved.
Citigroup, meanwhile, says the fault lies with Lehman and the unprecedented bankruptcy presented the bank with the challenging task of having to close out tens of thousands of trades.
The bank says the way it calculated its bankruptcy claim is reasonable and consistent with how Citigroup normally does business.
On Tuesday, Mr. Archer said the trading floor at Citigroup is about the size of a football field and “when things are happening in the market” the floor is usually peppered with the sound of people shouting and yelling.