By John Kaponi Editor-in-chief at Lehman Brothers HQ Canary Wharf
This could never happen surely? The fourth largest bank in the world  has collapsed in an unprecedented fashion, leaving over 25,000 employees globally redundant and in London 5,000 packing their bags.

- Losses estimated at $613 billion or to me and you £342 billion 

Only last year Richard Fuld CEO of Lehmans was celebrating his massive $22 million bonus, today in contrast staff were seen carrying boxes protected by security staff from the press pack waiting to take photo's.

But how could this happen, and what else is round the corner?  It all stems from the reckless lending of Lehman money to the so called sub-prime housing market in the US which as we now know has been absolutely battered like hurricane Ike hitting the Texas coastline, leaving nothing to the imagination, total destruction. 

Defaults,defaults was the order of the day when individuals and companies could not keep up with the large loans they had taken out.

Underlying the poor investment strategy by Lehman Brothers was the failure by its CEO Richard Fuld to iron out a deal with Barclays, or
other suitors like the Bank of America and the Koreans earlier in the month.  Fuld simply wanted more money, which was never going to be put on the table.  The Fed allowed Lehmans to collapse, leaving in the words of Tony Lomas of PWC the administrators for Lehmans an "exceptionally complex process" and in contrast to other corporate failures like Enron and Rover, this is on a different level and "is larger and more competitive" for the PWC team.

Moreover the size and speed of the failure is the most troubling element; we are living in a twilight zone when large colossal banks ike Lehmans, Bear Stearns and Merrill Lynch either collapse, have to run for cover to competitors all because they got their sums all wrong. In London the scene outside and inside the offices of the US giant Lehmans can only be described as surreal.  Entering the Lehman offices you sense that something has happened but it cannot be real, surely Lehmans has not gone under.  Yes it has and the reality is stark with Lehman staff taking personal belongings home with them not sure if they will  receive any money or have a job to goto again. 

Wages are due to be paid to London Lehman staff this week but PWC administrators have stressed that there will definitely be job losses and a "downsizing". A new banking facility has been agreed with Lehmans banks to provide some liquidity during the period of administration
and cover certain liabilities. But without key Lehman staff prepared to stay at the bank, the asset stripping that will take place to recover the money for the banks creditors, this will largely fail to recoup significant cash. 

The liabilities of the banks as was put by Lomas of PWC will run "into many billions of dollars".  And it is not "clear if wages will be met this week".

Who else might be the next Lehmans?  Well if you listen to these overpaid bankers they all know who has messed up but they won't say in case the "confidence" in the market is totally shattered.  One thing is for sure someone had made some massive mistakes and we are all going to pay for them, with our homes being repossessed and our jobs taken from us. 

As David Buik said today "brace yourself we are in recession".

photo credit: London Daily News all rights reserved