That Very Bad Monday At Lehman Brothers

By Cyril Tuohy

Renilde Zug left her investment bank in Manhattan for a three-month paid maternity leave on June 27, 2008. Her firm was Lehman Brothers. Her return date was Sept. 15.

That was the morning Lehman filed for the largest bankruptcy in Wall Street history, becoming one of the biggest institutions lost in the the financial crisis that swept the country 10 years ago.

“It felt unreal,” said Zug, a derivatives contracts specialist who worked in Lehman’s legal department. “Many of us had felt secure, completely oblivious to the rumors just a few months ago and now we knew some of us would lose their jobs. Life changed overnight and for many of us, it would never be the same again.”

Zug, who commuted 90 minutes each way to Lehman’s Midtown Manhattan offices three times a week from her home in Yardley, Pa., had heard the rumors.

Yes, parts of the housing market appeared to be in trouble and Lehman might be among the institutions that had exposure to toxic mortgages. Those were only rumors like all the others that swarmed Wall Street each day. Lehman, after all, was a 158-year-old powerhouse with $600 billion in assets.

It was only as Zug started reconnecting with colleagues and calling her bosses in mid-August that she had an inkling that her employer might be next. Unless people were high-level managers, or on the trading desk or in collateral management, they had little reason to believe Lehman was going to implode.

“We had no idea things were going to get as bad as they did because out day-to-day work didn’t change,” Zug said.

She was spending her last vacation day at the beach and saw on TV that Lehman was going to file for bankruptcy the next morning. Zug returned to work Sept. 15 and stepped out onto an empty 25th floor.

She and her colleagues worked across the street from the company’s main headquarters at 50th Street and 7th Avenue. So they were spared the searing media images of police and departing employees with their belongings.

For eight years until that moment, life was good. More business kept her and her 20 colleagues busier than ever. Her household had doubled to four people. The family had a mortgage and car loans and now her family was staring at the possibility of getting by on one income for a while.

Another 25,000 Lehman employees were asking themselves the same question: What now?

A last-minute deal with Barclays saved some Lehman jobs, but it was rough. Zug was competing with friends for jobs. And many jobs were temporary as unemployment grew.

She was lucky and was hired by Barclays, where she ended up for about a year before jumping ship for the French bank BNP Paribas, where she’s been ever since. Her 401(k) was rolled over from Lehman to Barclays but not so an additional savings plan held in Lehman stock.

The also held Lehman stock. In the spring of 2008, she and her husband Dave bought more of it thinking it was a good deal – which it was until the company filed for bankruptcy and their shares evaporated in a blink.

Gone were their shares, along with Lehman's camaraderie as well as an entrepreneurial spirit.

Looking back, Zug said changes to banking regulations, accounting rules, capital requirements and bank holding company structures have made the environment more resilient than a decade ago. But as the administration seeks roll back some regulation, the onus is on the nation’s top bank executives to exert restraint, she said.

If Lehman wasn’t immune to bankruptcy, “then no one is safe,” said Zug. “We still need to be cautious and not to have too much deregulation.”

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].