Seven Red

The spiralling financial crisis hit another benchmark today, as evidenced by the panic of the Lehman Brothers collapse. There’s a very good story in the New York Times detailing the “fear” on Wall Street today – a Sunday. This morning, she showed me a wedding announcement in the Times; the groom’s father was a managing director at Lehman. We hypothesized that perhaps the impending bankruptcy of the fourth largest investment bank may put a damper on the joyous event. Quelle dommage.

Fear and greed are the stuff that Wall Street is made of. But inside the great banking houses, those high temples of capitalism, fear came to the fore this weekend.

As Lehman Brothers, one of oldest names on Wall Street, appeared to unravel on Sunday, anxiety over the bank’s fate — and over what might happen next — gripped the nation’s financial industry. By late afternoon, Merrill Lynch, under mounting pressure, entered into talks to sell itself to Bank of America.

Dinner parties were canceled. Weekend getaways were postponed. All of Wall Street, it seemed, was on high alert.

In skyscrapers across Manhattan, banking executives were holed up inside their headquarters, within cocoons of soft rugs and wood-paneled walls, desperately trying to assess their company’s exposure to the stricken Lehman. It was, by all accounts, a day unlike anything Wall Street had ever seen.

Sounds like a lot of fun. I remember working on election day, 2000. We were closing a deal for Allegheny Power, some selling off of generation assets and releasing of transmission assets under a bond, I don’t really remember the details. It all seemed vaguely pomo to me, that you would get rid of the energy production business and get into the energy movement business. In any case, we were in the conference room and on the phone with the in-house lawyer for Allegheny, and the lawyer I was working with asked “So, who do you like for the election?” The Allegheny guy said “Well, I guess Bush would be good for us in the medium short-term as far as dereg, but…” And then he stopped. The lawyer on our side (a good friend of mine still) just laughed. Yeah, he said. I know. We shook our heads, and could practically hear the Allegheny guy shaking his. And so here you have it. Bear Stearns, vanished. Lehman poised for bankruptcy. Merrill Lynch peddling itself to any taker whatsoever, desperate to fend off the short sellers. What a monumental mess.

But I think back to election day 2000, the World Trade Center still standing less than a quarter mile behind me, doomed the moment later that night when NBC took Florida out of the Gore column, and our view of New York harbor from the conference room, and the lawyer for Allegheny Energy who knew, but couldn’t say, that a Bush-Cheney administration was a deeply, deeply stupid idea. I often say that the American people – whatever that is – got it right that day. Yes, we often forget, but they did get it right, by 500,000 votes. Bush received fewer votes than Gore by a long shot; there’s something striking and fundamentally appropriate about that, something that usually goes unsaid. It kind of hangs in the air with each disaster that has afflicted us since then. People rejected the cruelty and instability of the Bush-Cheney program that day. It’s often forgotten, and bears repeating. But now I also think of all the neo-cons, free marketers, and Friedmanites at Bear and at Lehman who no doubt thought the same: good for us in the medium short-term. Well, the medium short-term is over, and I hope they relished it.

It’s true that schadenfreude is an unattractive posture, especially when the financial services industry is a route to the middle class for many of the people I grew up with, for so many in the Outer Boroughs and the poor neighborhoods of New York, Chicago, Boston, Los Angeles. Yes. And as we well know here at Seven Red. It ain’t all fat cats and neo-cons. Like all groups, it is made up mostly of the decent. So schadenfreude is usually unattractive, sure. But only usually. Sometimes, it’s all that’s left.

On edit: The “guy” who was getting married this weekend was not just any guy, but Theodore Roosevelt V (that is, the fifth). His dad, Theodore Roosevelt IV, is the managing director at Lehman.

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