It was fascinating, listening to Tony Lomas and Steven Pearson from accountants PWC, give an account on the BBC of events a year ago inside Lehman Brothers Europe, at the moment that the rug was pulled so-to-speak. Messrs Lomas and Pearson now control the
winding up process of what some say was the world's largest ever insolvency
Two observations came to mind in listening to their interview.
One - how quickly a year has gone by and how dramatically the world's financial situation has changed in these past twelve months. Who of us could have thought just two years ago, in the waning summer of 2007, of what the persistent liquidity problems
that were being experienced then, were portending. Just one year later, in September 2008, the impossible became reality; when the almost ageless axiom "too big to fail" was shown to be a lie and the iconic Lehman Brothers was allowed to go to the wall (well,
the European part).
Two - according to Tony Lomas and Steven Pearson, even now, a year on, many of the Lehman Brothers Europe positions have still not been agreed with many of Lehman's former counterparties.
It is this second point that I find really frightening. For it is in this fact alone that the immense reality and horror of the precariousness of the operations of the financial system is revealed.
Just look at the facts - the operations of Lehman Brothers Europe was frozen at a moment in time - 15 September 2008. Now, a year later, those frozen operations are still, in some cases, in dispute. Just given this fact alone, will someone please explain
to me how Lehman Brothers or any other investment bank, or bank was (and still is) able to manage its day-to-day operations and positions?
My own logic has a simple answer for this. Financial institutions didn't have a clue where they stood and by a simple logical extension of this thought they still don't.