market folly

A few weeks ago we posted up a great interview with Lawrence McDonald, the author of New York Times Bestseller book, A Colossal Failure of Common Snese: The Insider Story of the Collapse of Lehman Brothers. Our buddy Misstrade interviewed Larry regarding his background and his experience during Lehman's demise. Today we have the follow-up interview where Larry gives us insight as to how things operated at Lehman on a day to day basis with a focus on the trading floors. (You can check out the first interview here). And now embedded below is the second interview courtesy of Misstrade.

(RSS & Email readers come to the blog to view the video interview):



A quote from Lawrence McDonald from the interview stuck with us. He says, "The story of Lehman Brothers comes down to this one sentence: There's 24,992 people making money and 8 guys losing it." This just goes to highlight how eight people can run amuck and go crazy with credit and ultimately lead to the demise of the firm. Lehman Brothers survived the Civil War, numerous World Wars, 9/11 and then was brought down by a combination of a poor board of directors, leverage, and a lack of risk understanding by CEO Dick Fuld, claims Larry in his book.

Very interesting stuff as we get to see how Lehman operated in its day to day operations. The shocking thing here is that at one point they had almost 40% of their net tangible assets in essentially 3 commercial real estate transactions. They had essentially become a hedge fund and private equity firm that was running 40:1 leverage at one point. For more in-depth insight, of course make sure you check out Lawrence's excellent book, A Colossal Failure of Common Sense: The Insider Story of the Collapse of Lehman Brothers. This is definitely a great inside look at what went down as Lehman went down.