A New York Times article today is a sobering reminder and example of why we are in this economic mess. Before Lehman Brothers blew up last September, they were betting heavily on real estate. Their head of the global real estate group, Mark Walsh, made billions of dollars of loans and equity investments, that eventually resulted in $29 billion in commercial mortgage exposure. Plus Lehman had $25 billion in “toxic” residential mortgages. Oh, and they were way overleveraged. And then, the nail in the coffin (hindsight being 20/20) – the government didn’t step in.
For a bunch of really smart guys and gals that were in charge of tens of billions of dollars, this wasn’t really smart.
If that depressed you – here’s some good news. The Dow is up 25% and the S&P almost 30% from their respective lows in less than two months! What does that compute to on an annualized basis?
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Hey, your article was interesting, especially for me. Did you work at the firm? I used to be a VP in the distressed side of things. Basically a vulture. Did you they were actually levered 44:1 in the end. $15 billion of equity, $660 billion of debt.
Hi Lawrence,
I don’t work for Lehman and I didn’t know the overleverage was 44:1. Wow. Good luck with your book.
Andy
The media don’t know the half of it, Andy. Here’s a link to my blog… it will make your hair stand on end! http://tinyurl.com/dyflwl