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Investment banks shares – crap or fate?

Of course in hindisght it is always easy to make comments in hindsight and we at can be accused in this blog that this is exactly what we are doing. But without these analysis we would not learn from mistakes and of course we would be doomed to repeat them, which is not the wish of our readers I guess.

The reality is that the Lehman Brothers have been really stubborn. The signs that the toxic assets would cause problems were on the market since last year. But the autocratic leader Richard Fuld refused to take the same measures that its risk-averse rival Merril Lynch has taken in 2007 – namely to accept the reality and to divest the loss-making mortgage packages as soon as possible. But this is not the whole story. Richard Fuld has been repeatedly approach by Asian investors in the last months – first by the Bank of Korea, than by the Barclay’s of the US, as has reported previously. And here comes the real Lehman inside, so well surprised lately by Financial Times – the CEO Fuld just refused to believe that the bank cannot cope with the inevitable and refused arrogantly the terms the potential buyers could offer to his bank…

… which is not his own courtyard, but owned by shareholders. And by the 25,000 of employees or so who lost their jobs and who “thanked” Fuld by writing various compliments to their CEO – greed, blindness, arrogance. Lehman Brothers has not failed yet completely, but if it will do it will join the infamous panel of Enron, WorldCom or Ahold. Well, not for financial irregularities (although not accounting for the fair value of the toxic assets is a kind of a Basel I bank accounting rules breaking).

In the meanwhile, Merril Lynch continuous its existence with its employees. It has written down all the losses from the day 1 and humbly accepted the mistakes. It will not be independant in the future, but the proud arm of a more traditional and prudent bank. This is how the history goes on…

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