The Weekend That Wall Street Died

Today’s Wall Street Journal has an excellent 4,000-word article on the weekend that Wall Street “died.” Personally, I think that’s a bit strong. A certain crucial aspect of Wall Street is no more, but Wall Street is far from dead.
The other issue I have with the article is that it sees the collapse of Lehman as a battle of big personalities. That’s a favorite media take on things, especially when the personalities are big, which is also a Wall Street specialty.
Unfortunately, the Panic of 2008 had causes that are far deeper and more complex. In fact, deeper and more complex than we probably understand right now. There’s no economic theory to explain what happened and why. Some day, there will be, but until then, some ideological humility is needed.
Here’s a snippet from the article:

Mr. Fuld had faced challenges to his firm before. Since taking Lehman’s reins in 1994, he expanded the 158-year-old bond house into lucrative areas such as investment banking and stock trading. Over the years, he had tamped unfounded rumors about the firm’s health and vowed to remain independent. “As long as I am alive this firm will never be sold,” Mr. Fuld said in December 2007, according to a person who spoke with him then. “And if it is sold after I die, I will reach back from the grave and prevent it.”
In the summer of 2008, Mr. Fuld remained confident, particularly given the security of the Fed’s discount window. “We have access to Fed funds,” Mr. Fuld told executives at the time. “We can’t fail now.”

Posted by on December 29th, 2008 at 10:54 am


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