More On Lehman's Slide To Oblivion

Today's breaking financial service sector news is all about Lehman- again.


This time, the firm announced the departure of its CFO, Erin Callan, and its COO, Joseph Gregory.


Somehow, amidst the firm's turmoil and management mediocrity, CEO Dick Fuld remains untarnished and firmly in place.

As the nearby Yahoo-sourced three-month chart for the embattled investment bank and the S&P500 Index clearly shows, it's been a stunningly-fast decline for the firm's luckless shareholders.

Or, maybe witless shareholders?

In just three months, Fuld and his team have managed to destroy roughly 50% of their shareholder's value, while recapitalizing the firm just three days ago by about 50%, after first saying it was unnecessary.

While Lehman is the smallest and weakest of the four remaining investment banks- Goldman, Merrill and Morgan Stanley being the other three- one wonders why anyone would have bought equity in these firms after January. Especially in Lehman.

Trying to time 'turnarounds' is dicey in the best of circumstances. In financial services, trouble tends to come from excessive, poorly-managed risk. In Lehman's case, this is true in spades.

Being number four doesn't just mean being smaller. When it comes to risk management, judging by the results of the past twelve months, it seems to also mean just being worse at this key financial service firm function.

That said, I would simply re-emphasize the conclusions of my prior posts about Lehman, found here and here.

To repeat David Einhorn's observation, Lehman has added capital it said it didn't need, to offset losses it had earlier denied experiencing, from instruments about which it was less than forthcoming.

Now, the firm has jettisoned its two key members of its own mis-management team.

What trust can possibly be remaining by anyone regarding Lehman? Investors? Debt holders? Eventually, even counterparties and customers will worry about the safety of their assets or trades, and the slide into oblivion will accelerate for Lehman.

This time, though, Hank Paulson & the Fed have recent experience with Bear Stearns on which to draw to manage a less market-affecting end to the smallest public investment bank.