Looking back at the Lehman Brothers collapse of 2008, it’s amazing how quickly it all happened. In hindsight there were a few early-warning signs, but the true scale of the disaster publicly unfolded only in the final moments before it became apparent that Lehman was doomed.
First, for purposes of drawing a parallel, let’s re-cap the events of 2007-2008:
There were few early indicators of Lehman’s plight. Insiders however, were well aware: In late 2007, Goldman Sachs placed a massive proprietary bet against Lehman which would be known internally as the “Big Short”. (It’s a bet that would later profit from during the crisis).
In the summer 2007 subprime loans were beginning to perform poorly in the marketplace. By August of 2007, the commercial paper market saw liquidity evaporating quickly and funding for all types of asset-backed security was drying up.
But still — even in late 2007, there was little public indication that Lehman was circling the drain.
Probably the first public indication that things were heading downhill for Lehman wasn’t until June 9th, 2008, when Fitch Ratings cut Lehman’s rating to AA-minus, outlook negative. (ironically, 7 years to the day before S&P would cut DB)
Continue reading “Is Deutsche Bank The Next Lehman?”
