Posts filed under “Corporate Management”

10 Things You May Not Have Known About Lehman Brothers

Short list:

1. At the Ira Sohn Investment Research Conference in May 2008, hedge fund manager David Einhorn explained why he believed Lehman Brothers was insolvent. At the time, Lehman was already significantly off its highs but still trading above $40.

2. Lehman’s accounting was especially opaque, even relative to other investment banks (and that’s really saying something). Their Level 3 assets were described as “mark-to-make-believe.” The firm was especially evasive when asked for hard numbers for its liabilities. After the collapse of Bear Stearns they were the next obvious bank to collapse. They were smaller, more heavily leveraged and with greater exposure to the mortgage market. Even a cursory review of Lehman’s books revealed lots of red flags.

3. The WSJ pointed out the complicity of Lehman’s accountants in their collapse. Management chose to “disregard or overrule the firm’s risk controls on a regular basis,” even as the credit and real-estate markets were showing signs of strain. In May 2008, a Lehman Sr VP alerted management about accounting irregularities, a warning ignored by Lehman auditors Ernst & Young.

4. The infamous REPO 105 — a fraudulent accounting gimmick that temporarily removed over $50 billion in securities inventory from its balance sheet — existed for the sole purpose of hiding liabilities from shareholders. By creating a materially misleading picture of the firm’s financial condition in late 2007 and 2008, Lehman’s management and its accountants were engaging in fraud. This also suggests that LEH was much more leveraged and at far greater risk for insolvency than was realized at the time (So, no, short-sellers did not kill Lehman).

5.  Warren Buffett made an offer to Lehman, one that turned out to be more generous than the offer later accepted by Goldman Sachs. (One may surmise that Fuld’s rejection of Buffett’s bid was the last straw as far as the Fed and Treasury were concerned. If they were unwilling to help themselves, why should the taxpayer write another $30 billion check?)

6. Many potential suitors kicked the tires at Lehman – but none could get past their massive liabilities or their opaque accounting. Too many toxic assets on books that were untrustworthy led to no serious buyer appearing.

7. Once Lehman filed for bankruptcy, Barclays scooped up most of the U.S. and U.K. operations—without any of that toxic junk paper to worry about. Nomura Securities took over Lehman’s Asian operations.

8. Neuberger Berman had been bought by Lehman Brothers in the 1990s. Its management purchased the wealth management unit post bankruptcy. They essentially bought themselves back at a huge discount.

9. Lehman Brothers CEO Dick Fuld was wildly over-compensated. A Harvard study calculated that Fuld earned $522.7 million from 2000 to 2007. He garnered $461.2 million of that from selling 12.4 million shares of Lehman. (BusinessWeek)

10.  Lehman Brothers was dissolved 158 years after its founding.

Did I miss any of the lesser known factoids about Lehman Brothers?

Category: Bailouts, Corporate Management

Bill Ackman, CEO of Pershing Square Capital Management.

Category: Corporate Management, Hedge Funds, Video

How Microsoft Lost Its Dominance

  My Sunday Washington Post Business Section column is out. This morning, we look at how Microsoft’s slow decline in What’s behind Microsoft’s fall from dominance?. The short version is this: Once Gates & Co lost its Monopoly, they were unable to generate much in the way of successful new businesses line. Their decline was inevitable…Read More

Category: Apprenticed Investor, Corporate Management, Technology

Activist Shareholders, Supersized

The so-called activist investors flocking to Wall Street are major shareholders with hedge fund money, and they are using their clout to push around companies like Dell, Sony and Apple.

August 30, 2013By Channon Hodge and David Gillen


Category: Corporate Management, Investing, Video

40% of Highest Paid CEOs Were Bailed Out, Booted, or Busted

Nearly 40% of CEOs on the highest-paid lists from the past 20 years were either bailed out, booted, or busted:


Click to enlarge
Source: Executive Excess 2013


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Category: Corporate Management, Crony Capitalists

JP Morgan: $7 Billion in Fines, $16 Billion in Legal Costs

This morning, the NY Times had an article titled: JPMorgan Reveals It Faces Criminal and Civil Inquiries. The timing was funny, because we had been discussing this up in Maine over the weekend. The dollar figures for the fines just since 2011 are pretty astounding: $56 million (April 2011) $153.6 million (June 2011) $229 Million…Read More

Category: Corporate Management, Legal

If Corporate Logos Were Honest

Click to enlarge         Source: Likes

Category: Corporate Management, Think Tank

When Is Your American Express Bill Due?

What date are your bills due on? That is a simple question. I would surmise on any bill you receive — whether its electronic or in the mail — there is a clear date the bill is due. This is important for many American consumers and small businesses, who are balancing their cash flow, trying…Read More

Category: Corporate Management, Credit, Really, really bad calls

60 Minutes: Bill Gates 2.0

For Bill Gates, technology is still the solution. He shows Charlie Rose some inventions he’s working on to help heal the world.

Bill Gates 2.0

July 28, 2013 4:00 PM


Bill Gates speaks with unexpected emotion about his relationship — and rivalry — with the late Steve Jobs; and, he goes back to Lakeside, the Seattle high school where a rummage sale held by the mothers’ club set him on his path to help change the world. Then, Outtakes from a psychology professor’s lab in which children had to choose between fairness and chocolate

60 Minutes Overtime

July 28, 2013 2:45 PM

Category: Corporate Management, Video

The Expanding Irrelevance of Microsoft

The Irrelevance of Microsoft Source: (Benedict Evans)   Benedict Evans writes up this very interesting analysis that sums up the entire Ballmer era of Microsoft (MSFT). From most of the 1990s and 2000s, the vast majority of connected devices had Microsoft operating systems. Even as late as 2009, their share of connected devices were still…Read More

Category: Corporate Management, Economy, Investing, Technology