The bulls pull in their horns at Merrill, Lehman
A mixture of shock, anxiety and grim resignation settled over tens of thousands of investment bankers, brokers and other Wall Street employees Monday as they absorbed the news that two of the nation’s major investment banks were vanishing in the turmoil roiling the financial system.
Just hours before the start of the workweek, Lehman Bros. Holdings Inc. said it was filing for bankruptcy protection and Merrill Lynch & Co. announced it had hastily agreed to sell itself to Bank of America Corp. The developments were dizzying to many, even in an industry accustomed to roller coaster shifts. Although reports of Lehman’s potential collapse had begun to surface last week, Merrill Lynch’s unexpected sale left its staff stunned.
“It’s chaos here,” said a broker at Merrill, who did not want his name used because the company had instructed employees not to speak to the media. “People are just flabbergasted.”
Outside Lehman’s Midtown headquarters on Seventh Avenue, stone-faced employees exiting the glass tower during their lunch hour were confronted by a phalanx of television cameras occupying both sides of the street. Most hurried past without speaking, some snarling when approached.
“Oh, it’s unbelievably wonderful. A great day,” a man in a gray suit and blue silk tie barked at a reporter as he crossed the street, a BlackBerry pressed to his ear.
Others were more philosophical.
“I guess if I’m going to be in this business, I better get used to this business, the highs and the lows,” said a 20-something Lehman employee who works in technology and gave his name as Rafe. “Today is really a low, I guess, for sure.”
“I’ve never been a soldier,” added Rafe, wearing a blue oxford shirt, gray slacks and no tie. “Now I feel a little bit like one -- a soldier in the financial world.”
Employees said they had not received any word about layoffs, but most Lehman staffers expected to soon be looking for new jobs, competing with armies of other financial-sector workers laid off this year.
At a news conference Monday morning, Kenneth D. Lewis, Bank of America’s chief executive, said no decisions had been made about job cuts in the wake of the Merrill Lynch deal. But he indicated that staff from the ranks of both companies could face layoffs.
Merrill has about 60,000 employees. Lehman has about 26,000.
Near the entrance to Lehman Bros., two young brokers from rival Morgan Stanley sat on a granite ledge, taking in the scene sympathetically.
“This is not an environment where you want to be young and in business,” one said. “But you’ve got to tough it out.”
The funereal mood contrasted with the bright warmth of the Indian-summer afternoon. Workers crowded walls and benches across Midtown, their faces angled toward the sun. But many were dogged by somber thoughts.
“Really, I’m frozen -- I don’t know what to think,” said a Lehman employee, sitting in front of a waterfall on Sixth Avenue with a J.M. Coetzee novel in her hands.
In a nearby cafe, an older Lehman broker buying a sandwich balked when asked how the day’s events compared with Black Monday in 1987, when the Dow Jones industrial average posted its largest percentage drop in history. On Oct. 19, the index fell 508 points, disgorging almost a quarter of its value.
“It’s one thing to lose your shirt,” he said. “It’s another to lose your job.”
On Sunday evening, as news of Lehman’s bankruptcy was being made public, employees of the investment bank -- casually dressed in polo shirts and jeans, many lugging boxes -- filled Emmett O’Lunney’s, a pub on 50th Street known as the Lehman bar, said Lisa Hickman, a manager at the gathering spot.
“It was very emotional,” she said. “A lot of people hugging, talking quietly.”
On Monday at Merrill Lynch’s headquarters in Lower Manhattan, two blocks from the site where the World Trade Center once stood, there was relief and anxiety as employees tried to figure out how their jobs would be affected by the shotgun marriage with BofA.
“Obviously, people are thinking about their next steps,” said a specialist in corporate mergers. “I’m thinking about whether I want to stick at the firm. No one knows what’s going to happen.”
Merrill Lynch CEO John A. Thain addressed the sales force at 11 a.m., but a Merrill broker said he was too busy talking to frantic clients to attend the meeting.
“I don’t know how John Thain could even think anyone could listen to what he’s saying because the phones are ringing off the hooks,” he said.
The prospect that their institution would soon be owned by a commercial bank was met with gallows humor at Merrill. Some employees joked that those who didn’t bring in enough business under the new regime would become Bank of America tellers.
Still, many within the company were glad they dodged the bullet that hit Lehman.
“What’s happened to Lehman is the worst that can happen to any financial institution,” the merger banker said. “I’m definitely glad we’re not in Lehman’s situation right now.”
Nerves were frayed across Wall Street on Monday. Many people had worked through the weekend, especially traders in credit units trying to gauge their financial exposure to Lehman. Many commuters stayed at hotels overnight rather than return to their suburban homes and were back at their desks hours before the markets opened.
“People have gotten to a certain point where exhaustion takes over,” said Tom di Galoma, head of U.S. government bond trading at investment bank Jefferies & Co. He started his workday at 4 a.m.
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Key economic events this week:
Today: The Federal Open Market Committee meets, and investors will be watching to see whether it lowers its benchmark interest rate. Also: The consumer price index for August is released and Goldman Sachs reports on quarterly earnings.
Wednesday: The Commerce Department reports on August housing starts and building permits; Morgan Stanley reports on quarterly earnings.
Thursday: The Conference Board releases leading economic indicators. The Senate Banking Committee holds a hearing on recent bank failures and regulators’ response.
Friday: The Labor Department releases regional and state unemployment figures.
Source: Times research