Thesun 2009-09-14 Page13 Lehmans Collapse An Insiders View

theSun

13

| MONDAY SEPTEMBER 14 2009

business KL market summary SEPTEMBER 11, 2009 INDICES FBMEMAS FBMKLCI INDUSTRIAL CONSUMER IND-PROD CONSTRUCTN TRAD/SERV FINANCE PROPERTIES PLANTATION MINING FBMSHA FBMACE TECHNOLOGY 1

CHANGE 8122.77 1208.28 2639.67 365.83 89.83 232.40 158.25 9849.89 787.08 5954.38 334.36 8330.64 4079.74 6.28

+34.70 +7.00 +5.29 +0.78 -0.08 +0.09 -0.38 +147.67 +3.00 +1.86 +4.05 +0.39 -39.82 -0.10

TURNOVER

VALUE

516.926mil

925.940mil

KL shares to move within tight range SHARE prices on Bursa Malaysia is likely to move within a tight range this week ahead of the Hari Raya Aidilfitri public holiday. The main index is expected to undergo a small correction after rising significantly to a 14-month high this week, dealers said. The local bourse went through a bullish phase last week with the benchmark FBM KLCI breaching the psychological level of 1,200 points aided by firm buying of blue chips. But, mild profit taking at the 1,210 points level limited gains. “The key index will see a small correction mainly in the form of profit taking but it will be healthy as investors’ sentiment improve on the back of positive signs of a global eco-

Lehman’s collapse – an insider’s view WASHINGTON: A chill runs down the spine of Lawrence McDonald every time he drives past the Wall Street building of collapsed investment bank Lehman Brothers, where he was one of the most profitable bond traders. “The big takeaway is that the fate of 20,000 souls was determined in that building, especially on the 31st floor,” McDonald, 43, told AFP in an interview ahead of the first anniversary tomorrow of Lehman’s collapse. The 158-year-old Lehman filed for bankruptcy protection on Sept 15 last year, in the largest US bankruptcy filing in history, leaving the future of 25,000 staff in jeopardy and sending a financial tsunami across the globe that continues to reverberate today. But McDonald thinks Lehman, which collapsed under the weight of hundreds of billions of dollars in risky mortgage-backed securities, could have been saved had the bosses heeded a number of clear early warnings. The top Lehman leadership, housed on the bank building’s 31st floor, “drove us at 162 miles (261km) an hour ... right into the biggest subprime iceberg ever seen”. Bank chief executive Richard Fuld and president Joe Gregory heard warnings beginning in

2005 that the property market, on which they were “betting the ranch,” was on the verge of collapse but turned their backs each time, McDonald charged. “It was 24,992 people making money and eight guys losing it,” said the man who rose from a humble pork chop salesman to top-notch Wall Street trader – once his team made US$250 million (RM875 million) in a single day. Lehman was heavily overleveraged at the top of the market in 2007 – its net tangible equity was US$17 billion (RM59.5 billion) but its total investment was US$750 billion (RM2.62 trillion) – a good chunk of it in mortage-backed securities that turned “toxic”. “Inside Lehman, some really weird things were going on ... the 31st floor was one of those mysterious places on Wall Street because we had incredibly talented risk-takers that were politically outmanoeuvred and squashed like grapes,” said a fuming McDonald. “They didn’t just rule with an iron fist, they wore brass knuckles.” Asked if he had personally raised the issue with the top brass, McDonald said he had no access to them, but his immediate bosses had raised the alarm. “It would be complete suicide if

nomic recovery,” said one dealer. The better-than-expected Industrial Production Index and high export numbers for July helped lift local sentiment. “ The global market environment is actually seeing a lot of improvement. A remark from the US Treasury Secretary Timothy Geithner supported optimism for a true recovery,” another dealer said. Geithner commented that a surprisingly strong industrial output and other economic data from China underscored optimism that the global economy was pulling out of a slump. He the US economy was in a far better shape now, than a year ago, when it was on the verge of collapse. – Bernama I were to go to the top management,” he said. McDonald is now managing director of Pangea Capital Management and has co-authored a top-selling book, A Colossal Failure of Common Sense: The Incredible Inside Story of the Collapse of Lehman Brothers. The book, published in July, squarely points the finger of blame at Fuld and his board, accusing them of taking dangerous risks in pursuit of short-term profits. “I spoke to 150 people, 45 managing directors, members of the risk committee who were my best friends, and members of the executive committee. This is incredible access,” he said. Fuld was so perturbed about McDonald’s book that he angrily phoned a pair of former Lehman traders he believed secretly had helped to contribute to the account of the bank’s stunning collapse, the New York Post reported last week. He said he felt “horrible” over the bank’s demise when he testified to the US Congress in October, one month after the bank’s collapse, to explain the events leading to the disaster. “What has happened is an absolute tragedy,” Fuld said. “I take full responsibility for the decisions I made and for the actions I took.” Fuld also told lawmakers that if he could turn back the clock, he would do many things differently but lawmakers took turns to castigate him. One of them held up a chart suggesting that Fuld’s personal remuneration totalled RM480 million (RM1.68 billion) over eight years but Fuld said the figure was exaggerated and that the majority of the compensation came in stock, most of which had not been paid to him at the point of Lehman’s bankruptcy. McDonald said the lessons from Lehman’s collapse were important – “not just to warn of such disasters in the future but ultimately to provide a beacon to help us serve Main Street better”. – AFP

EXCHANGE RATES 1 US Dollar 1 Australian Dollar 1 Brunei Dollar 1 Canadian Dollar 1 Euro 1 New Zealand Dollar 1 Papua N Guinea Kina 1 Singapore Dollar 1 Sterling Pound 1 Swiss Franc 100 Arab Emirates Dirham 100 Bangladesh Taka 100 Hongkong Dollar 100 Indian Rupee 100 Indonesian Rupiah 100 Japanese Yen 100 Pakistan Rupee 100 Philippine Peso 100 Saudi Riyal 100 Sri Lanka Rupee 100 Thai Baht

September 11, 2009

3.5260 3.0770 2.4840 3.2810 5.1560 2.5090 1.4330 2.4835 5.8900 3.4060 97.7000 5.3400 46.3000 7.5400 0.0370 3.8600 4.3800 7.4600 95.480 3.1700 11.1200

3.4610 2.9420 2.4220 3.2010 5.0310 2.3990 1.1930 2.4220 5.7470 3.3220 92.5300 5.2100 43.8500 6.9300 0.0314 3.7660 4.1000 6.9900 90.820 2.9100 9.4300

3.4510 2.9260 2.4140 3.1890 5.0110 2.3830 1.1770 2.4140 5.7270 3.3070 92.3300 5.0100 43.6500 6.7300 0.0264 3.7560 3.9000 6.7900 90.620 2.7100 9.0300

Source: Malayan Banking Berhad

Magna wants to cut 10,500 jobs, 4,500 in Germany: Report BERLIN: Canadian auto parts maker Magna and its Russian finance partner plan to cut 10,500 jobs in Europe when taking over car makers Opel and Vauxhall, 4,500 of them in Germany, a German newspaper reported. The Frankfurter Allgemeine Sonntagszeitung (FAS), in its weekly edition which appeared yesterday, reported the number of anticipated job cuts citing a spokesman for Magna. Meanwhile, weekly Der Spiegel, in its edition to appear today, put the job losses at Opel in Germany at 4,100, with the buyers of a controlling stake in General Motors’ European units planning “to eliminate 3,000 jobs in production and 1,100 in administration”. Both reported figures are higher than previous estimates of job losses. Germany’s Economy Minister KarlTheodor zu Guttenberg also said that there could be more job cuts than originally expected. – AFP