Lehman Brothers five years on: 'I think we were singled out'

A member of the bank's New York staff recalls the confusion and fear that followed bankruptcy
Staff leaving Lehman Brothers on September 15, 2008.
Staff leaving Lehman Brothers on September 15, 2008. Photograph: Louis Lanzano/AP

Michele Nicoletta was head of "Latin American flow credit trading" at Lehman, overseeing the firm's trading of bonds and credit derivatives in emerging markets. She loved it there. "Lehman was really like a family," she remembers. "The thing that made us such a powerhouse in the products that we traded is that we were aggressive, entrepreneurial people but we all understood that we could do more if we worked together."

The firm was one-third owned by its employees, a fact that many people forgot during the high emotions and recriminations of the financial crisis that followed. "I would have stayed at Lehman Brothers until the end of my career. Until that weekend, everyone was doing their work. I don't remember this sense that people were straying, this sense of imminent doom."

The alarm bells were slow to sound, she says. Lehman was supposed to be sold in a weekend. Instead, on Sunday, Nicoletta and her colleagues heard the firm would be filing for bankruptcy. "We were doing well, ranked number one by all the polls and metrics – and to be sitting on top of a bankruptcy, you think 'what just happened?'"

Nicoletta and her colleagues headed to Lehman's midtown Manhattan headquarters that afternoon to clean out their desks. The news was so fresh that the firm had not provided boxes. The implications of a bankruptcy were bewildering. "We didn't know what it meant: would there be a lock on the door and we couldn't get in?" Nicoletta says.

They gathered that night at Forum, a warehouse-sized sports bar downtown that they chose specifically for its large television screens. Usually those screens showed baseball, American football, and other sports. That Sunday night, all the channels were turned to the news about Lehman. "We were playing pool and watching the events on TV and watching our destiny unfold."

The next day employees showed up again at Lehman headquarters, waiting for directions on what would come next. "On Monday morning, everyone showed up on time in suits at their desks, sitting, waiting to find out what was going on. It was weird, in a way: in hindsight, what were we showing up for? But no one showed up in shorts and flip-flops; we were all in suits. Everyone was just sitting and waiting to see what the outcome was going to be."

On all the floors, groups waited that day for instructions that never came: at a bankrupt firm, there was nothing new to trade, no money to wire. After a day, relief arrived: Barclays sent its executives to do interviews. Many Lehman employees, including Nicoletta, joined the UK bank.

The public recriminations against the firm were difficult to bear, she says, knowing that Lehman was paying the price for the risk-taking culture most veterans considered normal at all Wall Street firms. "I think Lehman was a bit of a scapegoat. It got singled out. There was a lot of speculation as to why Lehman was the chosen one as opposed to anyone else. I don't think Lehman was the house of greed; I think Lehman was made an example of, and it was unfortunate."

Nicoletta now works at Eastern Consolidated, focused on real estate investments. She is still friends with some of her Lehman colleagues. The entire financial system in the US has become more complicated, the costs of compliance more expensive; it is harder for banks to take risks. Creativity on Wall Street, she says, has been stifled. The mortgage crisis, in her eyes, was a result of banks increasing their risks and consumers taking on risk they couldn't afford with oversized mortgages. Nicoletta says now about the risk-taking of that time: "I think the world has changed, and it's hard to see it going back to what it was."