Editors letter: The last days of independence?
Euromoney Limited, Registered in England & Wales, Company number 15236090
4 Bouverie Street, London, EC4Y 8AX
Copyright © Euromoney Limited 2024
Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Editors letter: The last days of independence?

We could be living through the last days of the independent investment banks.

How close did Lehman come to disaster in June?

Senior insiders say that not for a single moment did they fear the worst, such a mountain of cash and near-cash securities is the firm sitting on, so far out has it lengthened the maturities of borrowing that supports its trading activity and so much has it reduced leverage.

Maybe so. Unfortunately, Lehman officials have insisted before that the firm was invulnerable, only to be forced last month into diluting shareholders with a heavily discounted new equity issue as part of a $6 billion capital-raising to cover the bank’s first quarterly loss since going public in 1994.

Even strong capitalization and abundant unencumbered collateral can’t save you, if either your counterparties simply lose confidence and won’t deal with you, or you cannot immediately turn all those near-cash securities into actual cash.

Just ask Bear Stearns.

It never quite threatened to go that far for Lehman. But Wall Street was buzzing at the start of June with talk about losses and capital-raising, and the firm made clear mistakes. It mishandled communication, appearing to disclose losses, deny plans to raise capital, reveal plans to raise capital and then buy in shares all in a confused few days of dizzying volatility in the firm’s stock.

Gift this article