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McDonald Lawrence G. - A colossal failure of common sense: the inside story of the collapse of Lehman Brothers

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A colossal failure of common sense: the inside story of the collapse of Lehman Brothers: summary, description and annotation

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What happened at Lehman Brothers and why was it allowed to fail, with aftershocks that rocked the global economy? In this news-making, often astonishing book, a former Lehman Brothers Vice President gives us the straight answers--right from the belly of the beast--arguing that this collapse need not have happened.;A rocky road to Wall Street -- Scaring Morgan Stanley to death -- Only the Bears smiled -- The man in the ivory tower -- A miracle on the waterway -- The day Delta Air Lines went bust -- The tragedy of General Motors -- The mortgage bonanza blows out -- King Richard Thunders forward -- a 100 million dollar crash for subprimes biggest beast -- Wall Street stunned as Kirk quits -- Fuld, defiant to the end.

McDonald Lawrence G.: author's other books


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This book is respectfully dedicated to the many thousands of Lehman employees - photo 1
This book is respectfully dedicated to the many thousands of Lehman employees - photo 2

This book is respectfully dedicated to the many thousands of Lehman employees whose lives were thrown into turmoil when the firm collapsed, and among whom I was privileged to work for the four best years of my life.

Contents

12

Cast of Characters

Lehman Brothers (31st Floor) / Members of the Executive Committee

Richard S. Fuld Jr.: chairman of the board and chief executive officer

Joseph Gregory: president and chief operating officer

David Goldfarb: former chief financial officer; former global head of principal investing; chief strategy officer

Christopher OMeara: chief financial officer, 200507; chief risk officer Erin Callan: managing director and head of hedge fund investment banking; chief financial officer, 200708

George Walker IV: managing director and global head of investment management

Ian Lowitt: chief administrative officer; chief financial officer, 2008

Lehman Brothers (Traders, Investment Bankers, Risktakers, Salespeople)

Michael Gelband: managing director and global head of fixed income; head of capital markets; member of the executive committee

Alex Kirk: managing director and global head of high-yield and leveraged-loan businesses; chief operating officer of fixed income; global head of principal investing

Herbert Bart McDade: managing director and global head of fixed income; global head of equities; president, 2008; member of the executive committee

Eric Felder: managing director and head of global credit products group; global head of fixed income

Dr. Madelyn Antoncic: managing director and chief risk officer; government liaison

Thomas Humphrey: managing director and global head of fixed-income sales

Hugh Skip McGee: managing director and global head of investment banking

Richard Gatward: managing director and global head of convertible trading and sales

Lawrence E. McCarthy: managing director and global head of distressed-debt trading

Joseph Beggans: senior vice president, distressed-debt trading

Peter Schellbach: managing director, distressed-loan trading

Terence Tucker: senior vice president, convertible securities sales

David Gross: senior vice president, convertible securities sales

Jeremiah Stafford: senior vice president, high-yield credit products trading

Lawrence G. McDonald: vice president, distressed-debt and convertible securities trading

Mohammed Mo Grimeh: managing director and global head of emerging markets trading

Steven Berkenfeld: managing director and chairman, investment banking commitments committee

Lehman Brothers (Research and Analysis)

Christine Daley: managing director and head of distressed-debt research

Jane Castle: managing director, distressed-debt research

Peter Hammack: vice president, credit derivatives research

Ashish Shah: managing director and head of credit strategies, derivatives, and research

Karim Babay: associate, convertible securities research

Shrinivas Modukuri: managing director, mortgage-backed securities research

Lehman Brothers (Mortgage and Real Estate)

David N. Sherr: managing director and global head of securitized products

Mark Walsh: managing director and global head of commercial real estate group

Lehman Brothers Family and Former Lehman Brothers Partners

Robert Bobbie Lehman: chairman, 192569, and the last of the brothers to head the firm

Christopher Pettit: president and chief operating officer, 199496

John Cecil: chief administrative officer, chief financial officer, 19942000

Bradley Jack: president and chief operating officer, 200204

Peter G. Peterson: former chief executive officer; former U.S. secretary of commerce; founding partner of the Blackstone Group

Steve Schwarzman: former investment banker; founding partner of the Blackstone Group

Senior Government Officials and Banking/Investment Industry VIPs

Henry M. Paulson Jr.: former CEO of Goldman Sachs; former secretary of the U.S. Treasury

Ben Bernanke: chairman, U.S. Federal Reserve

Timothy F. Geithner: former president, Federal Reserve Bank of New York; secretary of the U.S. Treasury

Jamie Dimon: chief executive officer, JPMorganChase

David Einhorn: founder, Greenlight Capital

John Devaney: chairman and chief executive officer, United Capital Management

Corporate Financial Personnel

Anand Iyer: managing director and global head of convertible securities research, Morgan Stanley

Tony Bosco: managing director, convertible securities trading, Morgan Stanley, acquisitions

Gary Begnaud: Philadelphia branch manager, Merrill Lynch

Family and Friends

Lawrence G. McDonald Sr.: father, investor, golfer

Debbie Towle McDonald OBrien: mother, fashion model

Ed OBrien: stepfather and lawyer

Bob Cousy: family friend; point guard, Boston Celtics

Steve Seefeld: best friend at Falmouth High and Wharton; partner, ConvertBond.com

Kate Bohner: longtime friend and television financial journalist

Jack Corbett: longtime friend and successful retail stockbroker

Fallen Angels

Jeff Skilling: president and chief executive officer, Enron

Angelo R. Mozilo: chairman and chief executive officer, Countrywide Financial

Authors Note

Its been said that there are two distinct groups of people in America: Wall Street and Main Streetthe former composed of people who keep the financial plumbing of the latter in good condition so that everyone will prosper. Wall Street has, however, become increasingly complex and opaque, and many on Main Street have only the most basic notion of what it does. In addition, Wall Street, particularly with the collapse and bankruptcy of Lehman Brothers in September 2008, was the epicenter of the worldwide financial crises that brought the global economy close to a complete collapse. My objective in writing A Colossal Failure of Common Sense was twofold. First, to provide Main Street with a close-up, inside view of how markets really work by someone who was on the trading floor in the years leading up to Lehman Brothers calamitous end. And, second, to give my colleagues on Wall Street as crystal clear an explanation as possible about the real reasons why the legendary Lehman Brothers met with such a swift ending. The lessons therein are important for beginning to understand how we can prevent such disasters in the future and ultimately do a better job of serving Main Street.

Lawrence G. McDonald, July 2009

A house divided against itself cannot stand.

Abraham Lincoln,
June 16, 1858

Prologue

I STILL LIVE

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