Lehman failing was never really contemplated by anyone seriously. Now, the unthinkable has become thinkable.
Over the course of the weekend the rumours that Lehman was in severe financial stress had started to surface. We had a number of very large transactions, one where we represented Lehman, one where we represented a counterparty to Lehman.
People were looking at the Bear Stearns bail-out and thinking that was perhaps precedent. On the flip-side were the people who felt that the government couldn’t bail out every company and they were going to perhaps allow Lehman to fail.
I remember vividly going into that weekend thinking that Lehman was not going to fail, they were simply too big to fail. I was unfortunately surprised by the filing on the Monday. I immediately knew that the world had changed dramatically.
I remember feeling sad because a number of very good friends and some relatives were Lehman employees and I knew what a dramatic impact that would have on them.
Now you need to contemplate the possibility of counterparty failure in any transaction that you do. So that’s become a much more real possibility. I think that means you have to go through a more extensive level of scrutiny about what the consequences of failure by the other side might be, even if you’re dealing with a strong counter-party. And that requires that you think through an additional two or three steps that perhaps previously you didn’t need to think through.