The bankruptcy for Lehman Brothers gives everyone pause. I have mentioned that I once worked for Lehman in the early 1990’s. I can’t say there is the tie that makes me fret over its demise. I don’t think I know many there these days, I think a few friends from college are there, but I have not caught up in a while to be sure. But for me it brings back other memories. Lehman is (was?) located in the World Financial Center right next to WTC and my commute every day was via a subway stop across the underground concourse at the WTC. When I saw the area post 9/11, there was a chunck out of the WFC tower where Lehman was located near the floor I worked on. It’s all awfully strange to think about to this day.
Locally what does it all mean? The Pittsburgh Business Times ran a headline this afternoon I thought a bit presumptive: “Pittsburgh financial institutions may feel short-term effect from Lehman bankruptcy” . That headline was changed to a more precise and narrower: “BNY Mellon not among Lehman's unsecured creditors”. I can’t imagine the full fallout from Lehman’s bankruptcy is known yet. Lehman might owe certain institutions money, but if their debt defaults what about those creditor firms who then can’t pay their debts. I think this would all be described as a cascade failure. If I were a business editor with some interns around, I would be seeing who in town owns up to large holdings of debt or equity from Lehman or Fannie of Freddie, etc.. etc. It's the 'etc' that is going to bite someone unexpected.
Last thought. How big a drop has wall street endured… another way to look at it is to ask how much growth has there not been on Wall Street for some time. One way to look at the drop today. The level the Dow close at today was first hit in April of 1999. The Nasdaq was nearly twice its current value as far back as 2000. To put that in some perspective, the October 1987 crash put Dow Jones back to where it had been less than a year to a year and a half earlier.
With that I will go back and stick to the knitting.