Tag Archives: Professor Kreimer

Lehman Brothers revisited

Lehman Brothers revisitedSo much has been written about the collapse of Lehman Brothers and the incredible story behind it. Last year, I read “The Devil’s Casino” by Vicky Ward. It portrays how ridiculous an organisational culture can get and can survive this way for so long when misuses of power and money dictate. Other books have been written, including “A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers” by Lawrence G. McDonald and Patrick Robinson. (I have not read this book, but in a beautifully written guest blog by McDonald, who is one of the authors, he tells of how the collapse was preventable, of the incredible talent at Lehman Brothers, of the rotting at the head and more).

I recently read a paper entitled “Lehman Brothers: Accounting Magic – Deleveraging, Manipulation & Moral Hazard” by Professor A.J Kreimer of Temple University. Yet more shocking details were unravelled here. Very creative accounting was used in which assets were sold just before year-end and repurchased just after year-end to give an appearance of a less leveraged balance sheet.

To most of us, all this is incredibly difficult to fathom. It would seem that regulations, boards, audits, all diminish in effectiveness when power and money come into play. I wonder how much more readily avoidable such a saga would be today?