What were the problem assets?
The commercial real estate portfolio really was the albatross of the firm. Organizations have to balance market volatility with a belief that the portfolio is worth its par value in the long run. The lesson, which is something every good trader or anybody who’s in the risk business knows, is to cut your losses. It’s hard to do that if you think the endgame should be different, but sometimes the market tells you it’s time. Perhaps John Thain was able to cut his losses at Merrill (MER, Fortune 500) because he wasn’t emotionally attached. He had analytical distance. Did Lehman think the Fed would help it? Yes. No one knew what it looked like for a broker-dealer this big and connected to the world economy to go bankrupt. And no one wanted to know. Is this the worst storm you’ve seen on Wall Street? Certainly, and there are a lot of people who have been in the business longer than me who have never seen anything like it. That tells you something about the significance of what’s happening no
