Lehmans' bothers...

(Blog n°7)

  

As presented in the documentary The last days of Lehman Brothers, common people hate bankers. The narrator tries to find a reason for that. He speaks about success, money, but finally cannot find an answer relevant enough. At first, because all those answers are right, and the reputation of arrogance and mediocrity can also be added on the list of those people’s defaults. At least, on the list established by the common sense.

The characters presented by this documentary-fiction do not contrast with that vision. Only, they introduce new aspects of this world. Strategy, such as presented by the “rescue” of Merrill Lynch by Bank of America, but most and foremost, lie. Lie and cheating funded the final bankruptcy of Lehman Brothers. By using debt repurchase agreement, LB hided his financial situation and blinded the market. When the actual gearing appeared, the market purely destroyed the share price of the organization.

This kind of behavior is perhaps why we, as student in finance, have a class dedicated to the understanding of companies’ annual reports… with an emphasis on impression management. The saddest is certainly that this is maybe one of the most relevant observation about finance world: as every business, money business is based on appearance and fool’s games.

For the market at least (considering a long-term point of view). However as said in the documentary, this financial crisis leaded to an economic, a political and a social crisis. Economic because it initiated a global recession. Political because a huge questioning about the financial structure and the role of the states has been raised. Social because millions of people lose their jobs during the recession. What happened in Iceland is perhaps one of the most impressive effects of that crisis.

In Latin the word fortuna has a meaning related to the idea of luck. During the crisis, when shareholders were losing their fortunes, people all around the world were losing their luck, and what was once the center of their lives. This only because a lack of ethic from some people.

Here is the center of the subject, in every crisis the lack of ethic of some people is pointed out. During the Tulipomania, the Great Depression, the Subprime crisis, the system found culprits. Finding them is easy, avoid the apparition of new ones is more difficult. It requires a questioning concerning the whole system, more rules, more verifications, more trials, more scandals.

However, one thing can be noticed. Just an idea, an historical data. Technically, bankers and financiers are merchants. Very simply, merchants were people buying goods where there were inexpensive and selling them where there were expensive. Imagine the caravans crossing deserts and forests, climbing mountains to move tons of materials from a place to another. They were people whose work was to make money by creating nothing, so considered as abject. Ironically, these merchants still do not produce anything but have the power to create and destroy value in a flash.