Meltdown part 2

One version of the inside story I heard today.

Friday we had $70b in liquidity/cash available so no worries. CEO says shit we can live 6 months if nobody trades w/ us so screw you bastards. Then suddenly counterparties stop paying us on and we are out of cash because in the biz, you owe billions and billions are owed you by various banks like JPM and GS. So they stopped paying because they weren't sure anymore if we would pay back. So saturday rolls in and we are now in dire straights and out of cash.

CEO says we are screwed, need bailout. BAC was interested as were others, so the famous meeting happens to bail us out of this mess... but surprise surprise..

Treasury secretary is known in the industry as a mortal enemy of our CEO. So of course Paulson decides not to back the deals w/ an govt money, despite implying that they'd not let banks fail after the Bear disaster and after bailing everyone else out. Without backing nobody wants any part of this deal, but smart guys like Merril's Thain realize holy shit, that dumbass Paulson is going to let them go bankrupt, is he mad? This is going to cause a ripple that is going to crush any bank in trouble including mine, thus he engineers the deal w/ BoA (BAC). Good move they were about to go down as was Morgan Stanley.

The fallout is immense. The WSJ article says it.. and the hindsight is that you could have put $30b up to back the deal, and saved yourself a huge costs unwinding us and $billions in loses by counterparties who are all screwed now in a $600b bankruptcy, and $700b bailout. Add the horrific fear in the markets.

Inside the walls of the offices people were definitely in shock that you could wake up Weds, stock price shoot down 50% each on Thus and Fri, then be forced to enter the weekend looking for a buyer, and start Monday in bankruptcy.

People in the trenches gave their hearts to this org, the culture was really great in many ways. I really liked the people I've met so its sad for the 10, 12, 15yr veterans that really built this place up. These guys for good and bad leveraged their lives in this place.. its sad to see it go away due to some circumstances.

The Monday of the bankruptcy was a holiday in TK but people came in to pack their things up not knowing if liquidators would come in or what the heck would happen. Tuesday people were instructed to come in, but people were standing around doing nothing, the e-mail systems were almost crashing due to the amount of people 1) emailing code/files out to their personal acounts, 2) people sending resumess out, 3) people sending "here's my contact info keep in touch"... even out division head said people please keep in touch, since the inevitable is near... but in all this, no word from the CEO, wasn't till like Weds or Thurs night that he spoke up in a lame email.

First week was full of shock. Later in the week got worse for Asia as BarCap only decided to buy only the US business/operations. Things looked really bleak, people weren't sure we'd make payroll this month so we maybe were working for free. But Friday the Asia CEO on Friday gave a rousing speech stating payroll would be made, and that the Asia business has value and will be sold.

I was on vacation at this time but kept in touch and got the news as it came. I guess it was best not to be there. Way too much time and anxiety in the office to deal with. Its bad enough now.