September 14, 2013

Lehman Brothers +5

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. 

22 comments:

Anonymous said...

Was his program because of easy money, or political cover for the gangsterism Lehman, et al practiced on a daily basis? Diversity is a convenient means to show everyone how socially responsible you are, when you are a sociopathic enterprise.

David said...

Joe Gregory sounds like one of my former bosses, a neurosurgeon who lectured staff repeatedly on (I kid you not) "the coming world" of "more people of color" and how "staffing decisions must acknowledge this." The upshot of which was a strongly implied threat to the jobs of whites on staff, a threat eventually fulfilled more than once. He was nudged by a division chief who was the spitting image of Lenin.

Joe Gregory also reminds me of another boss, a little guy named Marty, who promoted a literacy-challenged black female over me and let me go, to the consternation of his senior people. They later told me she washed out after two months.

Joe Gregory also reminds me of a hospital's chief accountant, also a little guy named Marty, who worked obsessively (it was his only project; his young assistant, Josh, did everything else) to bring dozens of nurses from the Philippines to Florida. He put them up in cheap hotels, they worked for $9/hr, and we were periodically encouraged to donate canned food to them. They replaced nurses earning a traditional $50/hr in the ICU. Marty was clearly a fighter for the hospital's "commitment to the highest quality of patient care" - uh, I mean to "fiscal responsibility to shareholders" and "diversity." It was hard to tell which of those two turned Marty's crank the most; they were about equal to him. (This is the guy I've mentioned before who was visibly in a cold sweat all the time.)

Joe Gregory also reminds me of every instigator of programs of "diversity training" that I've had to suffer through.

Silver said...

The most worrying thing about all this is that Joe Gregory may have been a true believer. Googling his pic, he does have the pleasant, easygoing appearance of a diversity-thumping softy. It's alarming to think these kooks have managed to penetrate the halls of hard-nosed realism that are the financial world. It'd be so much more reassuring to learn that Joe Gregory didn't believe a word of his drivel, that he was only doing it as a ruse to fend off attacks from anti-finance leftist sickos. He'd still be mistaken, of course, but mistakes like that are much easier to correct.

dearieme said...

Maybe he couldn't spell diversification?

Anonymous said...

http://www.theimaginativeconservative.org/2012/03/concerning-charles-murray-real-education.html

countenance said...

This is why I place equal culpability on the "private" firms and government.

Anonymous said...

Diversity is strength!

Its also bankruptcy! At least for Lehman Brothers.

Clark Kent said...

During his love affair with diversity, Joe Gregory was living in a neighborhood that was 92% white, 1% black, and 3% Hispanic. I won't give the Asian total since we know Asians don't actually exist in the eyes of diversicrats.

Sources:
http://www.businessinsider.com/joseph-gregory-long-island-home-2012-7
http://projects.nytimes.com/census/2010/map

Anonymous said...

Steve, thanks for the post. My IQ just went up by 8%

We all knew that Mexicans and blacks were the ones that brought down Wall Street in 2009. Its a tragedy how the poor Scottish Irish are always being blamed for everything. But I guess its always good to set the record straight.

peterike said...

Given Gregory's diversity obsession, I wonder if he was Jewish at that very Jewish firm, Lehman. Dick Fuld was Jewish enough to marry a Catholic who converted to marry him.

Anyway, if you want some dish on Lehman wives (hey, big spenders...) Vanity Fair had it some time ago.

http://www.vanityfair.com/business/features/2010/04/lehman-wives-201004

And pity poor Joe Gregory, as he's had to sell his mansions. Both of them.

http://www.businessinsider.com/lehman-brothers-where-are-they-now-2012-8?op=1

Anonymous said...

The inflationary / expanding credit mindset is so entrenched that these people honestly don't perceive any risk to having a firm with 30x leverage on equity.

General Casey Has Struck Out said...

As great of a tragedy as the global economic collapse was, if a lack of focus on diversity was the casualty instead... well, that would have been even worse.

Anonymous said...

peterike -

The last member of the Lehman family to be a partner in the firm died in 1969. In the early 1970's Pete Peterson, the son of Greek immigrants, was CEO. From 1984 to 1994, Lehman Brothers was owned by American Express. In other words, it may have been founded as a Jewish family firm in the 19th century but had moved a long way from those roots by the late 20th century.

Daniel said...

It wasn't diversity that brought down Lehman, Bear and Merrill. It wasn't the vibrants who pilfered and are still pilfering the American people. It was white men like Lawrence G. McDonald, who did all this and more. White men.

Anonymous said...

The most worrying thing about all this is that Joe Gregory may have been a true believer.

True believer? I don't know. Like Lawrence McDonald writes, he was just a typical corporate sycophant.

Sycophants of course like to appear busy and like they're really doing work without actually doing any, and giving lame pep talks at diversity rallies with cocktails and hors d'oeuvres sounds like a great way to pretend to be doing work without actually doing any. Without diversity, sycophants like Joe Gregory who are ubiquitous in the corporate world would find some other way of appearing busy while not actually doing any work.

Anonymous said...

"The last member of the Lehman family to be a partner in the firm died in 1969. In the early 1970's Pete Peterson, the son of Greek immigrants, was CEO. From 1984 to 1994, Lehman Brothers was owned by American Express. In other words, it may have been founded as a Jewish family firm in the 19th century but had moved a long way from those roots by the late 20th century."

The Jewish legacy remained to a non-trivial extent, however. Don't have firsthand knowledge, but I'd guess what, 50%+ of management and non-entry level front office was Jewish. It's high, but doesn't seem as extreme as the Hollywood studios.

I'd put Goldman in the same ballpark, with JP Morgan, Citi, and Morgan Stanley, & Citi at lower rates.

Anonymous said...

50%+ of management and non-entry level front office was Jewish. It's high, but doesn't seem as extreme as the Hollywood studios.

If that was the case, then despite all the noise about "diversity" the company made, it wasn't diverse in the slightest.

50%+ is obviously "extreme" by any reasonable definition. Hollywood is just extremely, extreme.

Anonymous said...

-"If that was the case, then despite all the noise about "diversity" the company made, it wasn't diverse in the slightest."

I know, right!

-"50%+ is obviously 'extreme' by any reasonable definition. Hollywood is just extremely, extreme."

You're not (correctly) contradicting my statement here. Mere 'extreme' is indeed not as extreme as 'extremely, extreme.'

Anonymous said...

Anonymous 9/14/13, 8:22 PM -

Did you neglect to read that the commenter you responded to admitted he didn't have firsthand knowledge of Lehman Brothers staffing? He's just guessing.

Mr. Anon said...

"David said...

....a little guy named Marty, who worked obsessively (it was his only project; his young assistant, Josh, did everything else) to bring dozens of nurses from the Philippines to Florida. He put them up in cheap hotels, they worked for $9/hr, and we were periodically encouraged to donate canned food to them. They replaced nurses earning a traditional $50/hr in the ICU. Marty was clearly a fighter for the hospital's "commitment to the highest quality of patient care" - uh, I mean to "fiscal responsibility to shareholders" and "diversity." It was hard to tell which of those two turned Marty's crank the most......"

Maybe it was the fillipino nurses who were turning his crank.

Anonymous said...

Pushing diversity? Huh? Whatever happened to the idea that a financial firm was supposed to be about making money for its clients?

Too bad we can't test this. Firm A has lots of diversity and averages an 8% return on its investments for its clients. Firm B has zero diversity and makes 14%. Which firm would get your money?

Anonymous said...

Merril was run by the marvelous golfer Stan O'Neal who could give Obama a run for his money.