While “Before the Fall: Lehman Brothers 2008” is a Harvard Business School case, it features several lengthy direct quotes from Erin Callan, the CFO of Lehman Brothers. The case contains the direct responses given by Callan during a CNBC interview in April, 2008. Callan faced questions regarding Lehman’s need to raise additional capital that spring following the acquisition of Bear Stearns by JP Morgan a month before. The reason Lehman needed to raise capital was that they were facing a liquidity crisis as the housing bubble began to burst. There was balance sheet was loaded with mortgage-backed securities and CDOs, which were now failing as a result of the subprime mortgage crisis.
Callan’s responses during the interview further drive home the fact that Lehman was seriously in trouble. In hindsight, its clear that the prestigious firm was falling hard in the wrong direction. However, at the time Lehman’s struggles were looked at more as a bump in the road, not the tip of the iceberg of the Great Recession. The interview supports my argument that Lehman was facing a serious crisis, which was caused by extremely risky mortgage investments.
The information is certainly reliable, as it comes directly from the transcript of Callan’s CNBC interview. It emphasizes the severity of Lehman’s situation, foreshadowing the end of the firm that would come just 5 short months later.
Rose, Clayton S., and Anand Ahuja. “Before the Fall: Lehman Brothers 2008.” Harvard Business School (2011)