GossipDuck

2009 As I Saw It

December 22, 2009 - 3 Comments

by Azie

As we near the end of 2009, and I am writing my first blog post, I thought it would be appropriate to look back on the financial landscape over the last year or so through an insiders lens. While Ben Bernanke has just been named Time’s “Man of the Year” for averting a second depression, the unemployment rate tops double digits, and the big financial houses continue to pay out record bonuses, I find myself being named “Redundant” by one of those same houses, and may soon be joining the ranks of the unemployed as a direct result of this financial crisis. In the Fall of 2008 I was an Analyst at Barclays Global Investors when the global financial system nearly came to a grinding halt. Bear Sterns had gone down earlier in the year and Lehman Brothers was now in collapse and looking for buyers. Barclays, an old English bank, was viewed as one of the strongest private financial institutions and was included in the discussions with the U.S. Treasury Department from the start. Eventually Barclays would buy the investment banking business of Lehman for a fraction of its worth. That was just the beginning of a year long odyssey through a textbook of financial crisis and business cases.

For those of you with doubts about how serious it all was or how close we were to a collapse, as someone who was pretty close to the front lines, let me assure you that without the swift actions taken by the government including the TARP fund, your credit cards, ATMs, and just about all commerce would have come to a halt. When Lehman went under in days, all of the world’s big financial players, Banks, Governments, and Investors suddenly questioned themselves and each other. A relatively unglamorous concept that probably received a a half day lecture in business school called “counterparty risk” became the neutron bomb that might destroy our financial system. What it meant was that my bank didn’t trust your bank to honor its debts. In a system based on confidence, confidence that if you say you have $100B it means you can come up with the cash when needed, all confidence was lost. Not many could really come up with the cash. It was all cross invested in each others products or overleveraged and no one was sure who held what. As it turned out, there just wasn’t as much money in the world as the experts thought. The various world governments looked at the books of the banks and tried to assess their ability to come up with the cash. For those that couldn’t the governments just printed enough to cover the gap and loaned it to them. It worked. Everyone now knew that the other guy could pay or had government backing and the wheels were greased again. While the immediacy of the collapse has been averted, the fundamental problems that led to the collapse of Lehman, AIG and others haven’t been dealt with, and the debt for all the money that never really existed has just been transferred to the governments. It can and probably will all happen again only this time there won’t be anyone to step in with a bailout because we are already in the safety net.

By the beginning of 2009 Barclays had been examined and it was determined that it didn’t need any government money, but that it did need to actually raise the cash. They acted rightly. They did what banks are supposed to do when they need to raise cash, they sold something of value. It turns out that something was me. Or at least my division of the company. After a round of general jobs cuts in January, they put the Exchange Traded Funds division on sale in March. As an analyst during the next few months, I would spend a considerable part of my time responding to due diligence requests from Accounting and Consulting firms working on the deal. Some of them real contenders to buy us, others just competitors taking the opportunity to pour over our books. BlackRock liked what they saw and won the auction in June.

Michael Jackson, Healthcare, Townhallers, missing children found, Yankees win the series, and the lull of normal perma-crisis in America returns. The financial community is already lobbying against any kind of reform. Since the sale to BlackRock had been announced in the summer, I was working on analysis and information gathering related to closing the deal, closing the books on our company and preparing to transfer our business to another set of books. The hallway whispers and rumors of “synergy targets” and overlap and how the inevitable staff reductions will play out dominate the office for months.

In November, Veterans Day to be exact, I was informed that my position had been deemed to be redundant in the new company and that the day before Thanksgiving was the last day my services would be required. I was given the paperwork on Friday the 13th to complete the trifecta. It is now December and the governments of Dubai and Greece have already shown signs of defaulting on their debt. The rips in the safety net are beginning.

If I give the impression that it’s all doom and gloom and that life as we know it is coming to an end, then I may be understating the case. I see a long and bumpy economic recovery ahead and waves of financial crisis. In 2010 I’d like to use this blog to discuss the financial matters of our times. How to prepare for and navigate through crisis, invest, build and protect wealth, and general topics of finance and public policy. I’d like to share some of the insights I’ve gained over the years working for one of the biggest and best asset managers, and alongside some of the best minds in the world of finance. I also reserve the right to post about life generally in Northern California, or any other random musings.

–Azie

Full Disclosure: As of this posting I am still technically an employee of BlackRock Inc and bound by Confidentiality Agreements, and Non-Disclosure Statements concerning the terms of my pending separation. The views and opinions expressed here are strictly my own and in no way reflect the views or interests of BlackRock Inc, Barclays Global Investors or any of its concerns. I also want to be clear that I am not a licensed or certified Financial Planner or Financial Advisor and did not have any direct client facing responsibilities in my capacity at BlackRock or BGI.

Tags: 2009, banking, finance, government, Great Recession, unemployment

Category: Azie, Business, Finance