Lehman Suffers in Subprime Crisis, Dismisses 2

[Jun 16, 2008.]

This Thursday Lehman Bros. Holdings, Inc, a Wall Street financier that has already been receiving a considerable amount of attention following the downfall of Bear Stearns, announced three days ago that it has had to part with $2.8 billion during its second quarter this year. This is the first time, starting from its public opening in 1994, that the company has registered any losses.

The loss is not only hurtful to the finances of the company itself; it is also damaging to the company's public image. Much of the money that the company lost was from assets having to do with mortgages and risky real estate loans, which have all suffered as result of the subprime crisis. The fact that the loss was revealed just now, after the company had by all appearances managed to prevail during the subprime lending crisis, is what hurts Lehman's reputation the most.

Earlier this week, in response to this situation, Lehman has dismissed two of its major officials.

Erin Callan had been finance chief of Lehman Bros. for a prolific six months. During this time, she was the subject of much media speculation due to her outspoken defense of the firms decisions and keen fashion sense. This Thursday, in the wake of Lehman's announcement of its losses, she was dismissed from her position of finance chief. She will be replaced by one of Lehman's chief administrative officers, Ian Lowitt.

At the same time, Lehman has dismissed Joseph Gregory, its president, who had held his post considerably longer than Callan held hers. Gregory will be replaced in his duties by the boss of Lehman's equity division, Herbert McDade II.

The dismissal of Callan was as controversial as the rest of her brief career as Lehman's financial chief. Women's organizations worry if Callan's dismissal isn't indicative of a power imbalance between men and women on Wall Street. Other observers say that Callan's dismissal was logical, in light of what happened to the firm, no matter her gender.

One-time Lehman employee Bruce Foerster argues that Wall Street, though often indeed unfair, is far from sexist: "This is what happens in corporate America... it's not a question of whether it's fair."