CFO and COO fired today, firm goes on selling block
(I really did not think I would be writing this post....I actually had faith in Callan but I guess I was wrong)
Another iBank bit the dust....this time it was the once-mighty Lehman Brothers. But before that news broke the CFO Erin Callan that everyone spoke so highly of got the axe first thing this morning. Just one quarter ago she proclaimed LEH fit for the enviornment and their balance sheet flush with cash. Unfortunately she was wrong on both fronts. Evidently, she hardly knew what was going on with the firm. Is that bad? Maybe but it's not really her fault.
With the advent of complex derivatives and hybrid structures on the CDO desks, not even a room full of Harvard PhDs could unpeel the potential losses that the firm has on the books.
I don't blame her, I don't blame derivatives, I don't blame corruption nor do I blame overzealous investment bankers. I simply blame one simple metric: EPS. The past few years we have seen iBanks making money hand over fist and everyone wanted a piece of the action. Both CEOs and shareholders, alike, wanted equity growth through higher revenues and stronger EPS figures. Increase prop trading, do a another deal here, another deal there and then BAM - money for everyone. Well they got what they wanted however at the cost of unintended consequences.
O'Neal at Merrill did it this same thing and so did Cayne at Bear. The push for higher revenues and EPS really is the reason for the over-reaching risktaking. Nothing more, nothing less.
Within the next few days, Lehman as we have known it for all of these years will be Lehman no more. And for us followers of Wall Street and the ever so interesting subplots of the these titan firms will be closing out another chapter.
More on this later....
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