Lehman Bros Almost Shut Down in 1960s
Daniel Drew, 12/2/2014
One person could have prevented your retirement account from being cut in half in the 2008 crash: Roberta Karmel.
In the late 1960s, Karmel was a young attorney at the Securities and Exchange Commission. When Lehman Bros was transitioning from paper files to computer files, they discovered that there was a $128 million discrepancy. That would be noteworthy at a major bank now, but nothing catastrophic. However, back then, it was more than their entire assets of $100 million. It would be like the present day Goldman Sachs saying oops we don't know where that $50 billion went.
Karmel's boss told her to call in Robert Lehman and the other executives for a chat. Then, all of Karmel's senior co-workers bailed out, leaving her to deal with the Lehman bosses. For whatever reason, Karmel didn't shut down the firm. 40 years later, Lehman Bros. did shut down in the largest bankruptcy in history, with $768 billion of debt and $639 billion of assets. This triggered massive selling in markets around the world and was the final push over the edge for the global economy. Most people's retirement accounts suffered losses around 50%.
What were you thinking Karmel? A firm that accidentally loses more than 100% of its assets doesn't deserve to be shut down? Karmel explains herself and her 50 year career in a new book called Life at the Center, which was released on October 29, 2014.
Karmel is currently a professor at Brooklyn Law School. She has mediocre ratings on RateMyProfessor.com. Common complaints include excessive reading assignments. These students won't be surprised when they see that her new book is 1,600 pages and cost $93.
Sounds like Karmel had a lot of explaining to do.