Monday, September 15, 2008

The Annotated Fuld

Lehman Brothers stock finished down 94.24% at $0.21 per share after declaring Chapter 11 bankruptcy last night. That is down from over $85 per share in February 2007. The fate of LEH's 28,000 employees is unknown. A few will certainly keep their jobs as the profitable units are sold to other firms, but most will be unemployed.

Now before you start feeling too sorry for these guys, consider this article from last December from Bloomberg news:

Lehman's 2007 Bonus Pool Rises Almost 10% on Higher Revenue

By Christine Harper

Lehman Brothers Holdings Inc.'s 2007 bonus payout, the first reported by a Wall Street firm, rose almost 10 percent from last year as revenue gains through August overcame a fourth-quarter decline.

Compensation, including salaries, benefits and bonuses, climbed 9.5 percent to $9.5 billion from $8.7 billion a year earlier, the New York-based company said today in a statement. Bonuses typically account for about 60 percent of compensation, or $5.7 billion compared with 5.2 billion in 2006...

The company's average pay per employee fell slightly in 2007 as Lehman added workers at a faster rate than it increased compensation. Salary, benefits and bonuses per person dropped to an average $332,470 from $334,246 a year earlier, as the number of employees rose 10 percent to 28,556 from 25,936 a year earlier.
Something tells me their hatred of Fuld is a bit misplaced...

**Update**

Here's the reaction from some former employees. Bitter? I'd say so.

9 comments :

Buying Time said...

Yes, I admit, I have a bit of schadenfreude today. It's a bit difficult for me to muster up sympathy for folks who make an average of 334k a year, and are largely responsible for the chaos that has befallen our economy.

Bryan Gibson said...

I hope they were saving some of that. It's not an easy lifestyle to maintain...

Max said...

I hope they were saving some of that. It's not an easy lifestyle to maintain...

I just updated the post with some reaction of LEH employees. They're mad the Fed didn't bail them out. :)

Patient Renter said...

They're mad the Fed didn't bail them out. :)

I know, they are. That's why bailouts are such an incredible slippery slope.

I caught a segment on NPR where they were interviewing the chief editor of Slate.com's new Money section about the fate of Lehman, AIG, Merrill, etc. He was obviously bitter about Lehman not having been bailed out and argued that the cost to taxpayers would have been "minimal" or "barely noticeable".

Topics of conversation that did not come up:

Is a bailout justified?

Would it serve the greatest good for the American public (as opposed to a small group of wealthy people)?

Would it create a situation where other companies felt entitled to a bailout?

Is it even possible to quanity ahead of time how "minimal" the cost to taxpayers would be?

This is the part of the post where I point out how worthless the media is, as usual.

Max said...

Topics of conversation that did not come up:

That's how we know we're nowhere near a bottom. The bailout mindset is so ingrained that it's not even questioned.

Once again, the blogs are ahead of the game by calling this out. There was question posed on CR about "where we go from here." I think we're starting to see a glimmer of the psychology that was driving this whole thing: a complete sense of entitlement that extends directly into the pockets of faceless "taxpayers." These guys are without shame or remorse: true sociopaths. That's the next step: getting rid of that mindset.

Like him or not, Paulson's line in the sand with Lehman was truly heroic in this age of handouts and bailouts. Lets see if he can keep the streak going...

Patient Renter said...

Paulson's line in the sand with Lehman was truly heroic in this age of handouts and bailouts

I can appreciate the sentiment, but ultimately I think it was all for show and that Lehman was sacrificed simply because they could be. AIG might be one that "cannot" be sacrificed. Later on, certainly the FDIC will be bailed out.

A lot of talk in the media speculating what the government's "policy" on offering "support" to financial instutions is. The talking heads from the industry are doing their best to argue that the financial companies are critical and cannot be sacrified, and the talking heads from the media are doing their best to avoid any serious analysis of how government "support" costs Americans.

It's kind of funny to witness the circus of worry and speculation on what the official "policy" is when clearly there is none.

Patient Renter said...

BTW Max: I saw your comment about a laundered Fed bailout. Pretty funny. I think the laundering is unnecessary though - the Fed has already shown it's not afraid to lend directly to non-banks (random fact, the Fed has even loaned money directly to foreign nations such as Mexico).

Max said...

Pretty funny. I think the laundering is unnecessary though

Well, the rumor was enough to goose the markets. At this point it probably doesn't matter what the Fed does: they're just managing short-term expectations.

There is no long term plan.

Anonymous said...

It's an obvious question, but has anyone tallied up the campaign contributions made from people connected with the companies that did get bailed out, vs. Lehman?

Was Lehman as a company perhaps less of a true believer in the new world order?