Notes on a scandal: Marsal on Lehman

The folks over at the Financial Times have gone out of their way to provide analysis of the financial collapse, one year out. Nestled amongst an impressive series of video interviews with some of the chief players in the game (back then, at least), is this gem, a 22-minute segment featuring Bryan Marsal, founding partner of corporate turnaround specialists Alvarez & Marsal, and the man to whom Lehman turned for assistance in facilitating its bankruptcy.

The interview starts out on a pretty light note, with Marsal confessing that he couldn't be reached on the Sunday it all went down because he was locked in his den watching football! From there, though, he proceeds to offer a very matter-of-fact—and deeply intriguing—look behind the scenes at the implosion of the company.

A few choice tidbits:

• • On how he felt when accepting the job: "Scared."


• • On the lack of Fed support for Lehman: "They made a gross miscalculation" about the effects of the bankruptcy on the wider world, but redeemed themselves a little by reconsidering their position on AIG


• • On Lehman CEO Dick Fuld: "When the captain's ship runs aground, the captain bears responsibility for who he put up on the helm. [Fuld] bears responsibility for that."


• • On the mistakes that led to collapse, Marsal notes that what Lehman did was "not uncommon with a lot of financial institutions: too much leverage, too much concentration on assets, certain asset categories, short-term borrowing against long-term assets."


• • So what set Lehman apart? "In Lehman's case…in addition to everything…it just had a very bad liquidity management profile. Lehman didn't run of capital. Lehman ran out of liquidity, which caused the bankruptcy."

Other highlights include a good couple of minutes from 7:30 onwards, where Marsal talks about the challenges and levels of chaos he faced in the days, weeks and months after he took over, and the difficulty in finding anyone willing to "focus on the past" to assist in unwinding the bank following its sale to Barclays.

--Posted by Phil Stott, Vault Staff Writer