With the fifth anniversary of the bankruptcy of Lehman Brothers and the ensuing Great Financial Crash coming up on Sunday, I dug up an over-written book
, A Colossal Failure of Common Sense
, by a Lehman employee named Lawrence G. McDonald. He`s not the best prose stylist in the world, but he sounds like a Wall Street guy, all right. Here`s a description of Lehman in the mid-2000s:
One of these was our corporate president, Joe Gregory, the right-hand man of the reclusive CEO, Dick Fuld. ... But Joe Gregory was a regular, run-of-the-mill, ho-hum financial sycophant, devoted to his master, Richard Fuld, ... Joe’s fixation was a subject called diversity. He was consumed with it. His aim was the mission of inclusion. He had an entire department devoted to it, headed up by a managing director. Great rallies were staged in New York’s auditoriums, with free cocktails and hors d’oeuvres served for up to six hundred people, all listening to Joe or one of his henchmen pontificating. “Inclusion! That must be our aim!” he would yell, as if we were running a friggin’ prayer meeting. ... Which was all very well, but down in the trenches, where a trader might sweat blood to make a couple of million dollars, most of us were a bit tetchy about Joe Gregory going off and spending it on a cocktail party for six hundred people.
... Especially when it emerged that the top dog in diversity was earning well over $2 million a year and that the diversity division had a bigger budget and more people than risk management!
Joe’s mission for diversity drove [Christine Daley, head of distressed-debt research] mad. She had no time for any of it, but Joe Gregory had us all over a barrel: he had major control over our bonus compensation, and he made it clear there would be extra money for those who rallied to his cause. Most of us did not care about the cause, but the prospect of this thirty-first-floor sycophant lopping a couple of hundred thousand off our annual check because we weren’t in there pitching for the cause of the day was seriously irritating. Harsher judges than I considered Joe hid behind his unusual fixation, appearing to fight the world’s woes while staying well clear of the gundeck.
Christine’s view of the market was it was behaving irrationally and almost certainly showing classic signs of a top, with dozens of corporations trading at values far, far beyond reality. She also believed that when the president of a trading investment bank was spending his time staging hugely expensive rallies for minority groups, that might have been the ultimate demonstration of a market peak. There was too much undeserved cash flying around, it was all too easy, and there was too much time to find oddball ways to spend it.