Lehman, Merryl Lynch and the crap card game

I remember playing three card brag, where no one was sure of their cards or strategy, and so everyone played blind. The stakes got higher. And yet the ‘bank’ got richer, and the players, too afraid to now open their cards just n case, decided to keep bluffing their way through, and kept adding complex sets of rules and dealing new cards with new rules. By now it looked less and less a game of chance for the new rules gave it an illusion of structured control. And by now no one really wanted to look at each others cards, or their own, for no one could afford to lose. The game was the tiger they hoped they would never would have to get off. Till one had no choice – or lost faith. To find that no one had any cards to speak off –
This reminds me of what is happening with Lehmann, AIG, Merrill Lynch, Fannie and May, Freddie Mac etc – one great card game that no one thought would end.

31 thoughts on “Lehman, Merryl Lynch and the crap card game

  1. Dear Shekhar,
    It is indeed troubling to see these great companies closing down or getting sold off and the last few days have been really hard for the great city that still dictates the pulse of the world financial markets. It is a very difficult situation and I am thankful that the federal govt. did step in and saved AIG although the over leveraged situation couldn’t help Lehman. An analysis was once done in 1950 of the 100 biggest companies in the world and in 2005 less than 40% of then were in business and Lehman lasted 158 yrs and it’s assets and super skilled employees are still worth billions – infact headhunters are already hounding their building to offer them jobs or leads. So is the situation a crisis? – I don’t think so. If you have cash in the bank it is FDIC insured till $100K, If you invest wisely in good stocks they’ll still pay rich dividends over time and DOW/NASDAQ will continue to grow after the hysteria and panic selling ends.
    To see my two most loved cities New Delhi and New York see troubled times in the last few days has been quite painful for me – but both are extremely resilient in their own ways and they’ll both become stronger and better.
    The world of finance will have tumultuous times once in a while – a great crash happened in 1987 but the NYSE was back and higher than the pre-crash level by 1991 and it still rules the world of finance. I feel sad for the people who’ll lose their great jobs and I’m sure life will have better things for them in the future as they are best brains (trained at Wharton and like).
    The true learning for everyone is to manage your personal finances carefully – don’t over-leverage on loans and credit cards and focus on life – you can do well anywhere as the whole world in full of opportunities. I wish everyone well.
    Best Regards,

  2. The sensex is tanking, real money earned in proper nine to five jobs parked in supposedly blue chips, vanishing.
    “Something better around the corner”? I don’t buy that, sorry.

  3. A very apt analogy Shekhar.
    Himanshu read your comment and though my financial acumen is squat, I tend to agree that it was right for the Federal govt. to step in. However, saw a very interesting headline on the subject this morning. ‘Privatising Profit…Socialising Losses’, sums up the picture very well.

  4. Fantastic analogy. Suits perfect.
    But this entire ruckus raises a fundamental question.Take Lehman Brothers for example. This company has the reputation of hiring nothing but the best talent.Fattest pay-packages,only Tier-I B-Schools(only IIMs,and very few IITs only.Not even the next level of B-Schools),creamy layer talent,perks,awesome comfort zone for employees,blah blah blah. Agreed, that all this is for the middle-level management.But to think of it,if they are so damn selective/choosy about middle-level management itself, how choosy they must be about senior management.Now, what did this so called TALENT do? Of what use is all that hi-flying attitude of selecting nothing but the very best? Could they save the organisation? Why couldnt they?

  5. Wall Street Blues, Lehman grounded, Merill lynched….
    US economy was heading south for quite a while now, so who’s surprised?
    Most Indian papers have also, very intelligently, predicted that India too will be impacted.
    I am so scared….
    The surprise element, to me, however is way beyond the craftily balanced-sheets.
    As a matter of fact, I understand zilch of economy or finance.
    So, the less said, the better.
    I’d presume that most of these fallen giants (CITI too, may be) have always had excellent people.
    A simple search, across some haloed social networks will certainly go a long way, to justify my presumption too.
    Why am I so confident about the excellent managers these institutions have (or is it had?)?
    It’s public knowledge that the most brilliant B-School grads prefer to join a certain league of financial companies.
    It’s also well known that the CITIs, Merills, Lehmans, Morgans & Goldmans have historically sucked most of these creams up.
    Some of the masterminds opt for consulting majors, which is a relief though!
    At least it’s some other corporation’s money they will manage to mismanage.
    If we delve a wee bit deeper, we may find that the collective packages, paid to retain such Ivy leaguers, may put many a third world nation’s GDP to shame!
    What a shame!
    With such wisdom on board, with such calibers on the (board-room) tables, how the hell could these institutions go wrong?
    Now don’t tell me that all these fancy people under their bespoke collars were just as greedy & lowly like a regular guy without 3 alphabets behind their names?
    That all they worked hard on was their “personal agendas”?
    Come on now, it costs a fortune to get into the schools they passed out from!
    The parents invest their life savings, Goverments put in biilions of dollars in funding, Lofty corporations sponsor million dollar chairs……
    And only a handful get to set their Jimmy Chooed foots in those hallowed halls, that too after batteries of nerve-wrecking tests!
    It’s a different issue that the tests itself cost more than many country’s per-capita earnings.
    And et tu….?
    So, dear plain vanilla citizens, hope you have filed your tax returns on time?
    We desperately need to build better colleges and produce better managers!
    Be honest…the country needs your complete support after all.
    It has to re-build the economy, for your bloody sake!

  6. Billions of tax dollars will now go into bailing out these unethical lending practices employed by CEOs and such. There was an article recently which said that some of these CEOs are going to walk away with millions. America has been on a downward spiral for sometime, and it almost seems like the fanatic part of the american christians have some kind of a need for doomsday..and its going to take a lot lot more than Obama to reverse that..it would probably need the full power of the Sapta Rishis of Vedic India.
    The virus of greedy materialism coupled with an erratic lifestyle has gripped the society along with side issues as illegal immigration and such..the blame does not fall solely on the corporations and politicians. However, there is a good amount of hearty, balanced americans who might be able to avoid a major fall.
    But, no social model comes close to being utopian as the ancient vedic one.

  7. And all these statisticians and consultants would do well in including the depth of social and cultural variants in their equations while making predictions. They will hardly take into account the fact that alcoholism and substance abuse are on the rise in all levels of society, which dulls the intellect and thereby directly affects productivity and ethical decision-making.

  8. ” ‘Privatising Profit…Socialising Losses'”
    Nail on the head!
    It is the common tax payer who bears the brunt at the end of the day. The guys who have sunk the Titanic have all got life-boats, they will bail out and bounce back. It is the common man that suffers for their greed. The traders who squandred away billions of dollars will take a high powered vacation and come back to fatter pay packets. It is the small frys who will perish in the rough weather.
    Be prepared for some rough weather ahead guys. I don’t know how long my assignment is going to last. And I don’t know how long it will take for me to come back into the market if my job is lost.

  9. “Crap Card Game”……that’s precisely what it was.
    “Privatising Profit…Socialising Losses”……that’s precisely what happened.
    It is totally beyond me how the Managers who mismanaged investors’ funds to such catastrophic proportions are able to walk away with millions of dollars even after having performed so miserably? Why does no one seeks damages from the top management of these Investment Banking firms which are falling like nine pins? What is the difference between these prestigious B-school graduates and a layman? Why do Corporations pay millions of dollars in salaries and bonuses to these bunch of jokers who are, in fact, nothing more than high stakes card-players? And most importantly, why doesn’t anyone fix responsibility on the top-level employees of these Investment Banking companies???
    Those who are invested in good stocks in the Indian market need not worry. They will recover.

  10. Hello Mr.Shekar
    You may be partly right in some ways,but there is another angle which Americans already knew and felt crisis beforehand,but the steps to avoid what they feared were futile,its really a disaster by Bush administration.
    U.S.A is presently in the crisis with Mortgage loans ,for which banks and lenders are getting bankrupt and this situation will continue until and unless some body fills the money that is vaccumed.The GDP of U.S.A has fallen ,and much more crisis and worsening situations to be experienced where most of the world markets depend on U.S.A market.So U.S.A is in Recession thats a fact ,and it should some how come back to normal.The Gas prices came down to $99/barrel ,if the markets fall ,again the gas prices will riseup.Situation is worsening.Lehman is a century old company which helped American companies to build up U.S.A as super Power.Even at the time of World Wars.its real a bad ,such a company has filed for bankruptcy.Even then it has more than $600 billion assets.In 2008 its third Quarter results showed 3 to 5 Billion dollars losses so it had to file for Bankruptcy on September 15,2008 ,Government or Banks or Some commpany should help this company so that most of the companies which mainly depend on this company ,dont go bankrupt ,if that happens then there will be a sudden chain reaction.I think U.S.A will sell most of the companies that are nearing to Bankruptcy.There is an increase in companies decreasing the employess and are getting sold to Foriegn companies in U.K Australia,France,India etc.NYSE down to 4% todaY,how bad,it lost 89 points,its the greatest fall after the fall in september 11, 2001.

  11. Shekharji, Signs of tough times ahead, no doubt. Credit crunch and more job cuts! The saving of HBOS thru the Loyds deal may have avoided another Northern rock episode. but the deal has just created a monster!
    whilst world economy is going south.. shri Chidambaram’s confidence about India seems encouraging.. what is ur take on it?

  12. P.S Himanshu… yes this is not a crisis for the traders and investment bankers. They will be lapped up and few months of joblessness will not make much difference to their pockets. But with the financial industry cutting jobs left, right and center jobs in other disciplines are also on a downward spiral. There we are heading for a crisis. We are already feeling the heat in the IT industry. I work for a financial services firm and we have already frozen budgets and are slashing like crazy.
    But you are right, in the long term these kind of cycles in a free market economy are inevitable and one needs to plan and prepare accordingly.
    @ Brahmastra : You disappoint me. No mention of Narendra Modi? I say if Modi had been in place of Richard Fuld, Lehman brothers would have not gone down. What say? 🙂

  13. Hai Mr.Shekar,
    Today fresh & latest news U.S.A has pushed markets positively after their Government put 50 thousand crores into markets to avoid the slump,Japan has invested or brought in $3 trillion to save the markets ,anyway for some time in future everything will be alright ,and there wouldnt be any Bankruptcy of banks and Lenders ,so most of the companies will be saved for the time being.

  14. Dear Ritu,
    This is what is called the “New Normal” where jobs(even industries) will be creted and others closed. This is not the time where you get a job for life – it’s a time where keep training yourself all the time, even changing multiple careers over life – moving through multiple fields if required or do things on your own. In a way there are so many things to do within finance – if you don’t get I banking you go to Private Equity, venture capital, start your own hedge fund, join a bank, do finac consulting, go back to school and get another degree or start anything else. Just the people who want to have a cushy job and relax for long will be hurt the most as such things will disappear. And a small thing like losing a job – Is that a crisis? Maybe if you saved no money and filled life with liabilities. I use the word “crisis” carefully like when you are struggling for your life (like a war is on or no money for daily food) or fighting some terminal condition. It has too be crisis worthy. Just short of some funds and not being able to maintain a certain lifestyle for a while(and also not trying something else) is no crisis in my book. If you don’t get job A, get job B or C – not in this industry, then in something else – even better start something on your own. It’s all out there but not if you are not very couragious.
    Best Regards,

  15. @ Ritu,
    Well, believe it or not, Modi is exponentially superior to many of these Harvard and other IV league CEOs and politicians. Modi is a vegetarian without any substance-addiction, a hard worker who hasn’t taken even a day off since he assumed office (upon his own admission), has constantly put his people above himself, and has implemented sophisticated improvisation schemes in a country like India where we know how difficult it is to get anything done in government.
    So these pseudo-intellectuals can talk all they want about improving society with numbers and formula, but as long as they exclude the basic formula of having rulers with a pure connection to their inner selves and a good sense of unity consciousnesss, it will be superficial and short-lived. That was the basis of the caste system at the start you see..the Brahmins were not power-hungry and corrupt as in later times. They lived very selfless lives with a disciplined diet and solid spiritual practice..so their intellect reflected that depth which is needed for comprehensive and long-lasting solutions. Well, this might not be practical today except in some places in India because such a concept is totally foreign to the so-called “developed” nations, who let me tell you, at a deeper level are being taught that external gratification and wealth does not equal superiority..but if you want a solution this is it..you have to put spiritually advanced people in power. And accept it or not, even today, genetics rule in favour of the Hindu Brahmins. Now, don’t call me a racist or communal because that is not what i am inferring. If Indians can collectively accept these tough facts for the greater good, things might work out. That is why I support the BJP..because no matter what, they still have the most sophisticated leaders in comparison.
    Well..its easy to get me started 😛

  16. Dear Shekhar:
    The global swap market had reached the staggering sum of over $ 40 trillion, approximately three times the size of the entire U.S. gross national product. The credit default swap market, AIG was insuring, involved to a large degree mortgage bonds that had at their underlying assets the same bloated mortgages of subprime infamy. AIG and the long string of brokers who made insane sums of money with this business were actually residing in large symbolic halls of gambling casinos acting as though they were strutting through the corridors of venerable institutions. There were no laws that had taken all the high paid CEO scoundrels to task. Greed, the modern pied piper, had become a global plague and all followed to its alluring melody.
    Himanshu, you are of course right with your conclusion that a bailout of AIG was the only possible response to this crisis. However, the world of finance must finally learn that by hairs breadth it could have been swallowed up with the force of a black hole. If we like it or not, we are in the throes of a crisis that makes the crash of 1929 look like a walk in the park. The saving grace is the fact that one economy is no longer left to its own devices, other economic powers are stepping in knowing fully well that their own survival would be compromised if they looked the other way. Enormous amounts of assets have been destroyed and to a large degree have wound up in the laps of the very wealthy at the expense of the middle class. The new administration (hopefully Obama/Biden) will have to sort this all out and find a way to stop the hemorrhaging of the middle class and their equity they have worked for so hard and for decades of toil. This stands in sharp contrast to a minority of profiteers that amasses wealth without the toil and I am talking about the Wall Street boys.
    There must come profound changes, because if we dont glean a lesson from all this the next conflagration is pre-programmed and will finally lead to the downfall of a system that will have failed in a spectacular fashion. To believe there is no crisis is a little like turning away from a tsunami thinking that the surf is just a tad louder than usual, nothing to be concerned about. If the world followed the mantra of a certain U.S. presidential candidate that less government will be in the interest of the people think again and think hard.
    A humongous dose of introspection and soul-searching would do wonders for an industry that has so clearly lost its footing and its moral compass.
    Kind regards.

  17. What a great Day!
    It is so great a see the Fed taking such strong and fast actions to get the markets back on track. Putting money where required and banning short selling(that has never happened). Now the poor shorts have to run for cover and open positions have to be closed soon else they’ll have a sqeeze of a lifetime. The fundamentals of the economy are still in place. Like others I also lost a few grand the last few days but more than that came back this morning. It’s very rare that great financial brians in DC can come up with a solution so fast and put it into action. It is a great day and everyone is happy – what a great country America is – today we saw the best of it.
    Best Regards,

  18. Dear Himanshu,
    What you say is true to a degree. Yes, the era of cushy govt. type jobs is long gone. Since I was raised in a family whose previous generation were basically beauracrats, I rue the demise of that cushy way of life. I am a lazy bum. I prefer that security to this constant state of motion :). My IT job makes it even tougher because even when the economy is booming you need to keep ahead of things or you are obsolete after 2 years. I have learnt to chill out about these things. I can afford to be chilled out because I am single and have no financial liabilities. I have choices.
    But this is not about people who have choices. It is about people who don’t have choices. People are not limited only by desire to make an effort but also by the lack of ability to tap the high paying jobs. At a given point in time an average human being doesnt have 100 choices. You might have only two or three. Some might have only one. You cannot start a hedge fund of your own not because you don’t want to make the effort for it, but because you don’t have the ability to do it. You ask me, I don’t think I have the brains to be an investment banker. It’s beyond my ken. People work very hard to secure the job that is the best paying job for their abilities. The loss of that job means a lot more to them.
    There are enough hard-working people who live pay-check to pay-check in this country. I know many such people and am tuned in to their struggles. They are not shirkers. They are just limited by their abilities. They have mortgage payments, school fees, families to run. They face the heat when such down swings happen. It eats into their savings. And it is far easier said than done to say pick up a new career. One needs investment of time and money to change careers as well. Not everyone can afford that.
    And I disagree that the future lies in changing your orientation frequently. On the contrary, if you are a finance person. Hang in there, make hay while the sun shines and then ride out the bad times and get back to the same thing. Career growth needs to be well planned. This is the era of specializations. You will not get far jumping vocations.
    Essentially, the point is that the bright, sharp or privileged people have it well in all kind of circumstances. But the average and lower rung people are far more vulnerable to these economy swings and things for them are not as easy as you make them out to be.
    That is my two anna worth of thought

  19. Brahmastraji,
    What makes you think the wall street CEOs are stoned out shirkers who spend their free time loading up?
    Vegetarianism and abstinence is a very ‘in’ concept these days so our Modiji is going to lose that edge very soon.
    The rest we shall continue to merrily debate 🙂

  20. Dear Ritu,
    The future lies in changing orientation frequently not because it is helpful but because it is a necessity. Suppose you are a film editor and highly trained in cutting and splicing film the old fashioned way and then everything goes digital, then you’ll have to learn the software even if you don’t like it or have been doing it the old way for 30-40 years. It doesn’t mean that you have to leave the field all together but if the old way is no longer available you’ll have to change. The same is true for all fields and technology is making it much easier to switch fields if you like. The specialization you have may not been hot after a few years and then you’ll have to do something else and specialize again – that’s what I am talking about. Building your life around a core skillset will definitely reap hege benefits, just those core skills will have to be constantly modified, expanded, and updated.
    I think that makes life a lot more exciting and beautiful as you can live many lives in one.
    Best Regards,

  21. USA rebuilds and stand up again n again …
    Power of people, people, people …
    Remember DOT COM Burst …
    The Outstanding Public Debt as of 19 Sep 2008 at 06:17:16 PM GMT is: $ 9 , 6 5 0 , 4 7 1 , 6 1 2 , 2 0 6 . 7 0
    The estimated population of the United States is 304,757,316
    so each citizen’s share of this debt is $31,666.09.
    The National Debt has continued to increase an average of
    $1.80 billion per day since September 28, 2007!
    Human Greed is the cause
    Hard work pays but human nature is greedy …
    Sorry, but it appears worst is yet to come …
    I remember 11-20-2007, 07:11 PM writing
    USA – Slow Down ?
    USA for Major Slow Down
    What went wrong this Year ?
    People are interested to take away from people, nature, existence, hence the life retaliates.
    Hope humanity can learn to pay back what they take away…

  22. @ Ritu
    “What makes you think the wall street CEOs are stoned out shirkers who spend their free time loading up?”
    Even though you meant that with a comic element, it is a growing reality. But its not just about substance abuse..it is also the diet that matters. The power of a vegetarian diet has been grossly underestimated by the peace-mongering idealists. Eating pigs, cows, goats, etc. will surely lead to collective greed and such emotions. LOL..this whole thing about “developed” nations is such a farce. All these high-rise glass buildings, over spending and layers upon layers of ego have to be resolved at some point. And that is where reincarnation comes into play..it’ll secure a spot in a higher standard..which could very well be in one of the “under-developed” places..fabulous design ain’t it?

  23. Sir,
    I wonder in this great card game what were the front pictures showing? RUSSIA PAKISTAN IRAN ?
    Whats Next? DOLL – A – R?
    vinod Agarwal – Better Safe than Sorry.

  24. Ritu Chandra:
    Your comment: “@ Brahmastra : You disappoint me. No mention of Narendra Modi? I say if Modi had been in place of Richard Fuld, Lehman brothers would have not gone down. What say? :)”
    Couldnt help laughing! because i was about to post the same, exactly the same..verbatim. Because i am yet to come across a post/comments in which he does not speak about Modi/BJP :).Look at this.The post is about financial institutions and the discussion is being led to non-vegetarianism, alcoholism and even reincarnation. Very funny. and i was totally stumped by this quote – “That is why I support the BJP..because no matter what, they still have the most sophisticated leaders in comparison.” Yawn!!i dont even like to argue.

  25. @ Aakarsh,
    “The post is about financial institutions and the discussion is being led to non-vegetarianism, alcoholism and even reincarnation.”
    Well, correction..the post is about the doom of financial institutions and the overall failure of government in avoiding that. The link between all this is simple yet in-depth at the same time. What has happened is Indian Hindu youth have been half-converted into brown sahibs through convent education and such..and as per the greener grass syndrome, they also seem to lack confidence about the priceless stuff they sit on. I’ve gone full-circle mate..and am just making it easier for you beginners. Just remember to vote for Modi..LOLOL

  26. @ Aakarsh : It is called OCD, when we were in our teenage we also called it infatuation. It happens when you get besotted with something. You just cannot help but bring the object of your interest into every conversation. :).
    Ofcourse, Brahmastraji, you have made things much easier for the unevolved blokes like me. After seeing what going a full circle means, I have quite begun to enjoy my state of ignorance.

  27. P.S – I was just thinking. ‘Gyan’ in itself is so limitless. The expanse of knowledge then should expand one’s mind. As we get exposed to more epxeriences, more thoughts, more ideas and more knowledge we should become more and more accepting. After all the greatest learning of life is that there are no black and whites only different shades of grey. We should learn to see different perspectives and the good in each perspective. It just seems to be the most logical outcome of the process of maturing.
    Yet I see, that as people progress in life and in age, as they gather more knowledge more experience they become more and more intolerant. Instead travelling down different paths it becomes an issue of ‘My way or the highway’. ‘My country is the best’, ‘my religion is the best’ which is not too different from the ‘my daddy is the best’ syndrome. Why is it accepted that older people are more rigid. Shouldn’t they be more flexible? Shouldn’t years of ‘gyan’ have made them more malleable?
    The world is an oyester today. So much more information is available to so many more people. the yet the intolerence grows.

  28. @ Ritu,
    Rest assured that i’m at a much higher place than you, it is needed to show pseudo-intellectuals and wannabes like you that your lack of indepth wisdom is a camouflaged form of intolerance and rigidity that you are so complacent in equating to the wide spectrum of my posts here. I’ve been articulate in my arguments..and when you have no likewise responses, you say things like disgusting, OCD, etc. Go through all my posts in the various topics here, and tell me one which is off topic 😛

  29. Brahmastraji, if you genuinely think your posts on this thread are on topic, I rest my case. Wish you luck in your Modi Bhakti!

  30. Rituji
    Please do take the time to read my first post here, and then your following post where you needled me about Modi which triggered the rest..even then, i have managed to stay on topic because all this is very simple you see..you don’t need fancy formulae and theories to figure this out. Actually everything is perfect as is..but if you need solutions they are only at the root levels. Where i’m at, the solutions all narrow down, and from where you are at, this may seem like OCD..LOL

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