The End of an era on Wall Street

It is a sad day. The human cost is great.

This is worse than bad. If Lehman is bankrupt all the stock is worthless. Billions of dollars disappears overnight. That includes affects shareholders as well as anyone who worked at Lehman over the poast 5 years. Or anyone who was just handed a severance package with stock in.

But as the mantra has been repeated over and over again... "This will have no effect on NYC REAL ESTATE!!!!!!!!"

Many people live check to check or yearly Bonus. Even if those checks are 20,000 to 50,000 every 2 weeks, they still find ways to live check to check. BOOM! All gone. Did this Wall Street genius really think that in Las Vegas or San diego that was "worth" 165,000 in 2002 really was "worth" 465,000 in 2006. Wall Street did, as they built billions and billions worth of paper. Now you can pick up one of these homes at bi weekly auctions for 110,00-150,000.

Now these 2 million dollar 2 bedroom shoddy illegal labor built glass Condos that have sprung up will be "worth" much much less once Ivar, Boris and Jaco the euro douche close stop spending.

And what about the negative impact on stocks of this uncertainty and the counterparty overhang? Be interesting to see how things trade tommorrow. Lehman not finding a buyer will be horrible for the markets, but ML getting taken out at $29 is very good indeed. We'll have to see what AIG says as well.

The entire culture, swagger, pomp and circumstance of working on Wall Street is gone. This isn't 1987. This isn't 1993. I don't know what this is.

Special_K, from dealbreaker.com re the $29 a share purchase price

"Everyone is perplexed by the premium. But if it is, as some have reported, an all stock deal and BofA shares take a significant hit in the wake of the news, the final price and the premium could be much lower."

80sMan "The entire culture, swagger, pomp and circumstance of working on Wall Street is gone. This isn't 1987. This isn't 1993. I don't know what this is."

It like nothing we have ever seen before. I have been repeating this line for the last year. It's not over. This is a historically terrible day.

As for NYC RE. it's a disaster. How many RE deals do you think were lost on in the last 12 Hours? It going to be very hard on the city of New York. We will begin to see municipal layoff by the beginning of next year. When you see police and fire layoff, that will indicate worst case scenario.

The independent investment bank model is dead. I've said it before. Morgan Stanley will not survive long - how can they compete against BofA? Not even JPM or C can compete against BofA - they will soon have a 50-state branch network (conversion of Merrill Bank and Countrywide offices into branches) and are positioned for international growth. Watch out Canada, Mexico.

What it means for NYC is layoffs. At Merrill, at BofA, do I need to mention LEH? And further consolidation.

And the death of obscene bonuses. Never again, because commercial banks don't and can't pay them: they get their money from government-guaranteed deposits. They are regulated.

Manhattan real estate is about to implode.

Thoughts, spunky?

stevejhx- "Manhattan real estate is about to implode."

How much do you think? My predictions are well documented at 30-40% off the highs.

Stevejhx - Where ARE all those guys that tied to "shut you down" with your predictions of "doom and gloom" on wall street? Haven't seen any of them on the board in the last couple of days!

Holy sh*t, what a weekend. I can't wait to read Paulson and Bernanke's books regarding the last 12 and next 6 months. It is a non stop economic orgasism that is incredibly interesting but, one that you feel slightly guilty about enjoying.

I've never been happier to be a renter.

Have been on with collegues at ML and LEH over the weekend. Let's send the LEH folks good vibes that they will get some severance and other financial coverage for the coming months.

Next issue, AIG... unbelievable.

Well, I have been skeptical of a repeat '80s/'90s R/E crash until this weekend. I think a 20-30% decline in prime Manhattan prices is optimistic now. The new condos will plunge in value and everything will be dragged down, in varying degrees. The stable outer borough middle class neighborhoods aren't going to be immune, but of course 25% of $200,000 is a lot less to lose on paper than 25% or 33% or 50% of a million dollars.

Now that all you Wall Streeters have lost your jobs, most of you Lehman employees wont get any severance, and none of you will be able to find another iBanking or Finance job for the next 5-7 years, do you all still support the McCain/Bush tax cuts for the rich?

lowery- Welcome to the other side. I have said this is a terrible day not just for NYC but America. I don't think that people understand the significance.

Now perhaps some may realize that my "doom and gloom" predictions were not based on a guess. It gives me no pleasure, in knowing that Tens of thousands of people, will be without work, come the holiday season. I wish for a speedy recovery.

As for NYC RE, it's going to get crushed. It will get hit just as hard, as other parts of the country. Job uncertainty is just as destructive, as job lose to RE. New Construction, at this point, has 2 options. Lower prices by at least 20% ( and that's just to start ) or find the banks knocking on the door. It's just that simple. What kind of demand is there for a 2bed/2bath $1M condo in LIC or parts of Brooklyn. As Manhattan drops, these area are going to get crushed. It won't be long, before you start to see, developments going bankrupt.

How in the world are those Brooklyn and LIC waterfront projects going to sell. They are going to face, even bigger problems, once buyers try to close, on contracts signed over a year ago. It's going to be a disaster in those areas.

Look for the biggest project in Brooklyn and watch for the cranes to stop moving. I have been saying, that buying New Construction, is very risky and some are going to learn the hard way.

dco, this is a terrible day. Two of the four largest investment banks collapsed over the weekend. These kind of failures are supposed to be things of the past. Our efficient and orderly markets should have sorted out MER and LEH during trading hours. Banks closing their doors and announcing bankruptcy is out of the 1930's. Nobody knows what other nasty surprises are still out there.

80sman - dont fret there is nothing majorly wrong. The Fundamentals of our economy are still strong. A fe more tax cuts will fix this problem.

Petrfitz -- you are a complete jerk. It makes me sick to hear you rejoicing about the misfortune of hard working people. Good luck to you, karma has a way of coming back around.

Petrfitz - is there one thread you can comment on and not bring your partisan politics to bear? A wise man once told me that everytime you open your mouth, you either gain credibility or lose it. I'll just leave it at that.

For the rest of you, the biggest risk to yet another leg down is AIG/Wamu. AIG in my mind is the more problematic one. I'm not familiar with insurance regulations, but at least with wamu there is FDIC. What happens to the millions of people who have been paying premiums for insurance in the event of a bankruptcy. Think about all those life insurance, annuity, etc investments that the average person has with them. Frightening - AIG is trading at $5 and at this rate by lunch time, looks like it could have a 3 handle.

Just ignore him. I mean, is there ANYTHING this guy hasn't been completely wrong about?

This is the guy who told us to buy Manhattan RE 6 months ago...

Some would say karma has come back indeed - the crazed money grab that fueled the bubble has fallen on top of many who profited from it. Wall Street has been utterly irresponsible. Politics aside, we see America has no free market. We are heavily socialized, but it is indeed socialize the loss, privatize the gain. For those who have not taken part in this, it is hard not to see this collapse as earned. The hard way. Hopefully the big bonuses were not spent but saved. The walls erected after 1929 are not outdated. The idea that deregulation could somehow work now is the crazy thing. Human nature doesn't change. Given the power, people will pollute, swindle, and exploit their way to fortune. Market "corrections" happen only in the minds of the blind. We are an irrational species, barely climbed out of the jungles. We still act like children in so many things. None of this should be surprising. I wonder what we'll learn from it all this time, and for how long we'll remember.

Special_K- Spot on. My biggest concern is WaMu. The biggest threat, to the financial system, is panic at this point. If main street becomes fully aware, of the problems, it cause a run on banks. If people start to lineup out side WaMu branches, all over the country, we will have a panic. The last thing we need, is people pulling billions in deposits, out of banks, that need it to dilute leveraging criteria.

A run on a bank like WaMu could be disastrious, like we need another reason. Cash is king.

Scratch that, AIG has $3 handle and it's not even lunch time....

Closing down Wall Street in NYC is like closing down the movie business in LA. It's was the biggest and most consistent source of money throughout the tri-state area. Real Estate like to think it's independent but RE is just a by product of Wall Street. Love it or hate it, Wall Street was the engine. It will come back but not anytime soon.

NYC10022 - there has been a YOY increase in RE. My advice to buy would have brought you upside. I now think that RE is going to be as bad of an investment as stocks and funds. I think that the economy is not fundamentally strong. I dont think that continuing the economic policies of the 8 years are going to fix the problems caused by those same policies of the last 8 years.

The good news is that either way the election goes I am OK. If the dems win then the country may get fixed and the pople wont get screed again. If McCain wins its OK for me because I am rich, so his policies will continue to screw people like you and make people like me even richer.

What happens to the price of the ubiquitous NYC family-sized apartment? Could some families be in for a multi-million dollar stock loss, job loss and apartment loss simultaneously? And I thought the post-crash 80s were bad!

My advice for dealing with petrfitz: "Ignoring comment by petrfitz."

I do!

My prediction is for a 50% price decrease in Manhattan real estate. One important thing to remember about this restructuring of Wall Street is that commercial banks can't and don't pay huge bonuses. They can't because they're regulated, and they are financed through government-insured deposits, and the government (when it works) won't let them. They don't because they are conservative by culture.

What has been happening is the demise of an entire business model. But we've reached the bottom - everybody's saying we haven't, but we have. There will be a few more hurdles to overcome, WaMu is the most significant, by they will be taken over by the FDIC as soon as the run starts. Then they'll be sold to JPM, which now desperately needs its branch network to compete with the unstoppable BofA. And BofA will not be paying huge bonuses to Merrill staff - those who survive. Estimate minimum 10,000 layoffs in NYC when these firms combine. Back offices will be combined, and probably outsourced to Charlotte. I sure wouldn't want to be the owner of World Financial Plaza, watching my top lessee move to 1 Bryant Park.

What may happen is that BofA may move its corporate headquarters to NYC, to put it in the big leagues. Keep mortgage lending in Calabasas, California, retail banking in Charlotte, wealth management and investment banking in NYC, which is where the money is. That's why they bought Fleet - low growth rates, but this is where the money is.

Nonetheless, Manhattan real estate is dead for a long time to come.

> NYC10022 - there has been a YOY increase in RE.

And it decreased since you told everyone to buy... and its only the beginning.

> I now think that RE is going to be as bad of an investment as stocks and funds.

Yes, I know... WHOOPS.

Man, did you sure get that wrong.

Gov Paterson on the wire saying AIG employs 6,000 people in NYC... yet more fuel to the fire

we haven't reached the bottom. The Fed's bailout of Fannie, Freddie, Bear and who knows what else is going on under the covers with MER, AIG (I know, the Fed isn't supposed to be involved with insurance companies who are regulated by the States). These "fixes" need to be paid for. The government runs at a deficit. If the Fed prints more money to pay for the bailouts, we get inflation. The other option seems to be to raise taxes. We're getting the train wreck we all knew we coming , what we don't have yet is the long and painful rehabilitation. So that NYC as a economy can walk again.

dco, I'm one of those guys who predicted a R/E crash starting in 2001 and got tired of hearing myself be wrong......

I happened to see something in the paper this morning about a new condo being built in Tribeca, looks stunningly "different," with oddly configured wrap terraces on each floor. Prices begin at $3.5MM.

I dunno, I think it's too late to sell any of those, given today's environment.

I'm sure there will be lots of fingerpointing over this "mortgage mess," but to me it's all about the repackaging of garbage called "collateralized" this-and-that. The idea that no one will ever hurt too much no matter how bad a piece of paper performs because that bad piece of paper is owned in small parts by a huge number of pools of investments each of which is supposedly diversified. This is what I feel is the scam, not the unscrupulous mortgage brokers, risky mortgage lenders, pushy real estate salespeople or unrealistic buyers.

I do think big earnings will come back to Manhattan eventually, but yeah, this could be even worse than the '88-'92 crash. Not a happy day for anyone, lease of all the rank-and-file support staff employees of collapsing iBanks.

"least" not "lease"

The last crash was 88-98, ten years.

This is far, far worse. It is the devastation of the economic engine of New York.

I wouldn't be that dire. I think it's more like the shrinking of fixed income businesses across the street, back to the sizes they were (in aggregate) before the early 2001 big Fed rate cuts happened. Those businesses grew like weeds, and lots of the most-exotic products were created since then.

I mean, yes, it's the worst its been for the bond business in years, but other business lines on the Street should cut back much more modestly, is my guess.

Still plenty of job losses, though, to take the last few years' froth out of Manhattan real estate, though. But not total city decimation, in my view.

PS I've been generally a bear, but I don't call this disaster, in the sense that I don't see a returning to five-year-ago levels as a disaster - - just a return to more traditional long-term growth patterns.

For people who levered way up, and for investors/flippers, they were paying a high-risk game, and yeah, maybe their number is up. (Their number, and the number of the banks who financed them.)

"other business lines on the Street should cut back much more modestly"

Oh, contraire. M&A is dead, fixed income is dead, proprietary trading is scaled back, mortgages are dead, wealth management is now poverty management.

"I don't call this disaster."

Don't call it whatever you don't call it, but let's put it this way: in less than 6 months 3 of the 5 largest investment banks in the country have either gone under or been taken over, and the independence of at least one more - Morgan Stanley - is in doubt simply because it can't compete.

Bear's demise probably cost NYC 10,000 (direct) jobs. Lehman will cost as many. Merrill will cost as many. Citi has cost as many. With the multiplier effect that's about 125,000 high-paying jobs lost. The wealth of Lehman and Bear employees was wiped out, including retirement assets held in their stock.

In 2001 no firm went under.

There hasn't been anything like this since the Depression.

Our housing correction here will be worse than in the rest of the country, because it went up farther and faster, and the new stock is all aimed at the same audience: investment bankers who no longer have jobs.

In terms of what I recall of the 80s, this is a disaster beyond that. That Merrill, Lehman, Bear are essentially gone, Citi on the brink, and UBS leaving much of the market, to me this is pretty much what those imeginary doomsday scenarios look like.

dco - wamu counterparty credit risk just cut to junk (BB-/B) from investment grade by S&P.

I was too young to recall the 80's, but it seems to me that back then markets and the economy were affected across the board. This time around certain institutions are affected more than others, but those that are hit go down badly.

Not sure what's actually worse, but today, the fact that banks can go under, deposit insurance can kick in any minute and that using Fed's discount window is regarded as a good sign tells me that the foundations of our financial system are shakier than ever. Federal authorities are doing what they can to address the situation, but after all is done there needs to be a major overhaul of the regulatory system.

Just found this:

"So far this year, the financial-services sector has already cut around 103,000 workers, according to Challenger, Gray & Christmas Inc., a global outplacement consultancy that tracks job-cut announcements daily. In August alone, financial firms announced 2,182 layoffs.... Given the turmoil in the sector, job cuts in 2008 could surpass the 2007 record total of 153,105, said John A. Challenger, chief executive of Challenger, Gray & Christmas."

http://money.cnn.com/news/newsfeeds/articles/djf500/200809151604DOWJONESDJONLINE000703_FORTUNE5.htm

There are few things left to rationalize this as being less painful than the 80s...

Also note that HP announced it is cutting 25,000 jobs today. This isn't just Wall Street.

nyc10022

to be fair, HP's cuts were expected since they purchased EDS

Not sure about "expected", both sides denied there would be layoffs up to July 31...

I'm not disputing that its related, but you would definitely not have seen 25k layoffs without the market crisis... guess which industry employs a whole lot of data integrators...

who needs Lehman, Bear and Merril when we are gonna have Palin! Sarah is going to be able to reform Wall Street and bring about the golden years like we had under Clinton!

The fundamentals of this economy are strong. No need to do anything drastic.

The perfitz rule... when you've been shown to be completely incorrect, change the subject...

The problem now is fear of the unknown. Good reports from Goldman, MS tomorrow could help. A rate cut would definitely help. Financing for AIG (which is what caused today's fall) would help. A buyer for WaMu would help.

The world economy is not that bad. Cooling off to prevent inflation, but not that bad. All oversold.

I think Drexel Burnham Lambert was the biggest investment house to fall during the 80's. Most of the others lingered around until the 90's when they were taken over (FirstBoston, Banker's Trust, Alex Brown). The sales guys were re-tread as derivatives salespeople. The traders who could use a mouse were kept on board. Those who were cut found jobs in dot-com boiler rooms, real estate or insurance. This is not like the 80's or the 90's. There is no industry sitting around waiting to scoop up 100,000 raring to get back to work go-getters. Except for the Armed Forces.

petrfitz - of all the many (and I do mean MANY) faults you can find in McCain and even more-so, Palin, the fact that they believe our economy to be fundamentally strong shouldn't be one of them. It *is* fundamentally strong. And yes, I agree that it could get even stronger under Obama.

You should stop. You're grasping for straws which makes your argument (and your candidate) appear weak. The fact that you have to grasp for straws when attacking Sarah Palin is just ludicrous. Stop making Obama look bad.

"There is no industry sitting around waiting to scoop up 100,000 raring to get back to work go-getters. Except for the Armed Forces."

You got it. Now.... recent college and MBA grads (to say nothing of law school grads) coming to NYC this fall and next fall.... what jobs will they be looking for? Better said, which jobs will they accept? I have been hearing different numbers tossed around here on streeteasy for layoffs, but now I'm hearing numbers in the news... Lehman 10-12K, AIG 8,500 (not 6,000), etc., etc. It's worse than Drexel evaporating. Maybe the reason so many have had a hard time getting our minds around this crisis is that it's not something you can follow in a simple metric like the oft-quoted DJIA. There's no bar graph splashed on our TV screens every night saying, "Today the credit crisis made the value of all CMOs in the United States decrease by 143.7 points. That's the way it is. Goodnight, Chet."

Lets not forget that Drexel also had a good chunk of LA employees...