Tag Archives: Lehman
Everyone is petrified of losing even more money than they already have. Yes, I mean even more, because I do not think that that there is anyone out there who has not lost something in this crazy whirlwind of stock market yo-yo-ing lately. And by anyone, I mean the average Joe out there…I am not referring to ex Lehman folks who have lost all of what they worked for these last several years, or the Morgan Stanley/Goldman Sachs folks who seem to be following in footsteps of their cousins at Lehman.
Investment banks have financed themselves for the good times rather than bad. So they depend excessively on short-term funding and high leverage. While this might have generated high returns in good times (supporting large payouts for employees and shareholders), in bad times this kind of capital structure has come back to haunt the firms. Given Lehman’s collapse, the only choice for the remaining investment banks might just be acquisition by commercial banks with large, stable deposit bases. 2008 has seen it happen with Bear Sterns-J.P.Morgan, Merrill Lynch-Bank of America and now with Lehman Brothers-Barclays. All three deals create universal banks that are better positioned to weather market turmoil. Will this be the way for Morgan and Goldman? Or will they change their strategies to actually weather the storm of the credit crunch?