The Blame Game

As with most things in life, whenever something catastrophic happens there is blame to placed - Black Sunday on Wall Street is no different, so let the games begin...

Stan O'Neal: The obvious choice at ML. A CEO who served the firm for many years before steering the ship, but was often known as having a chip on his shoulder. In businesses like financial services, your employees are the only asset you've got. Stan showed his disdain for them, however, by taking executive elevators to move around the building and, when he needed to take the "common" elevators, shut them down so he could ride in peace. Heaven forbid he actually come face to face with those who made him millions. But that, of course, was the least of our worries. As he piled CDO's and other mortgage-backed assets on Merrill's balance sheet, he began to fire and demote those who told him he was taking on too much risk or refused to buy more CDO's on their bosses' orders. One of John Thain's first order of business upon taking the reins last December? Bringing those very same people back. Perhaps the feelings for Stan are best summed up by Winthrop Smith, Jr., the son of one of those who helped found Merrill:

Maria (CNBC interviewer): How are you feeling?
Winthrop Smith Jr: Angry. I'm feeling a lot of anger. Toward Stan O'Neal.
Maria: When do you think things went wrong?
Winthrop Smith Jr: Day One.

Yup, that pretty much sums that up. (The above was taken from Dealbreaker, a must read to get the best news, the fastest, along with a bit of humor). Does Stan deserve all the bad feelings headed his way? Well, perhaps not, as it takes more than one person to do this much damage, but the fact of the matter is "the buck stops here" - and all this damage piled up on his watch.

Richard Fuld: Oh Dick Fuld, you poor thing. A teeny, tiny sliver of my heart really does go out to Dick. A Wall Street titan and leader of the firm since 1994, Mr. Fuld has seen Lehman through many a storm and proved through this his loyalty and commitment to employees. Yet his pride, assuredness, and some may say, greed, got the best of him. In his quest to write off the inevitable, slowness to shore up his balance sheet with enough capital and what seems an absolute disregard for reality, he drove his coveted firm to where it stands today - bankrupt, trading at 21 cents and making a last ditch effort to have Barclay's buy something, anything, of what is left. He spent years encouraging Lehman employees to trust the firm, invest in it and inspired fierce loyalty - yet he left most of them with pennies through the way he's navigated the rough waters of Wall Street this past year, leaving much anger and blame, rightly so, headed his way. But I feel for Dick because, quite frankly, the man really seemed to believed in his message and loved Lehman Brothers. As of Saturday morning he had lost $650 million of his own wealth, and that was still when LEH was trading near a high price of 3 to 4 bucks. At the end of the day he has lost the firm he loved so much (and started to work at in 1967!), his lasting reputation on Wall Street will be forever changed (and not in a good way), and former employees will forever blame him for this perdicament. The fact that he's hired an extra security detail to keep him safe in the next few weeks does not come as a shock. Last, but not least...

Investors: Yes, investors. While the lack of trust and confidence in Wall Street has many reliable reasons, until they start to support the banks they used to love so much, there will be no bottom to this crisis. So go ahead S&P, downgrade AIG as much as you want. Do a run on Bear Stearns. Take out LEH. When you're done with those two, move on to Mother Merrill and make her feel some pain. Heck, why don't we bring down Goldman's stock 20%, too - no sense in letting everyone else have all the fun. Some of the punishment is called for, but as more banks and companies fail the only thing left to blame will be your shotty nerves and quick, off-the handle reactions to rumors, short-sells and gossip. You make Serena Van der Woodsen's version of the Upper East Side look as boring as nails. Keep up the good work.

"Are they going to take my Blackberry?! Come on, come get it!!!" -- Former Lehman employee, yelling, while at a local watering hole in NYC this past Sunday night

Comments

[Bruce Lewin]

Hi Colleen,

Great piece! I've cited this in a follow up I wrote on Dick Fuld's leadership style. I tried to do a trackback, but I'm not sure if it worked or not, so I thought I'd say hello the old fashioned way!

btw, the piece is up at http://www.fourgroups.com/blog/archives/22/lehman-brothers-ceo-richard-fuld/ if you fancy a read.