Tuesday, December 16, 2008

Money for free

Today the 'Bernanke helicopter' seems to have landed into uncharted territories. The chairman of Federal Bank who was expected to lower rates by 50 basis points actually reset it to 'ZERO'. Yes this is bizarre headline.  The fed chairman set the fed target rate from  zero to twenty-five basis points, effectively saying that banks will be able to borrow from fed at no price.  If this is not enough to make banks lend, he announced something more, that it will buy mortgage back securities from banks.  

The only other example in history of such low, or rather no interest rates is Japan. The example has not been successful. Money in USA now comes free. But think of this way, what if this does not work. Even if the cost of money is zero, no body wants it. There are two basic problems here

a) Even with money at no price, the banks don't want to lend it furthur. The balance sheets are so messed up that they need a clear head & some time to clean things up. Even in the case of America the previous cuts by the fed have not translated into lower interest rates for the end buyers. 

b) Then there is the gradual unwillingness to spend, the shaken confidence in the system with a lower number every week. Job cuts & threats of job cuts have taken the fun of holiday season and consumption other-wise.

On top of that all this actually reeks of the policy that actually built the bubble from 2002-2007. Isn't  this how the system built so much leverage in the first place. Years of administration policy providing people with easy money.America accounts for 60% of world's consumption and when the American consumer sneezes, no wonder the world catches a cold.  

But to put this in a perspective of time. Monetary policy moves generally take about two quarters (12 to 15 months is the accepted time frame) generally or more to play out. So the affect of these policy moves will be felt at the earliest only, in third quarter of 2009. But the stock markets have already given a thump up sign. The DJIA & S&P 500 & NASDAQ were all up more than 4%.

Another point here is where will fed get the money. Will it keep printing dollars, till it runs out of green ink, as one analyst said. What happens to the exchange rates then ? As of today the European Central bank & central bank of England have both stayed short of both what the Federal Bank has does done. No wonder the dollar fell against both currrencies.

Movie Update : 

'Gran Torino', (Clint Eastwood packs a so much straight forwardness , american-ness and intensity into this movie that even non-americans like me loved it). Read the new york times review here

Slumdog Millionaire  (A great movie, with amazing potraits of everyday life from India packed into a dramatic story) 

Monday, December 01, 2008

British couple says CNN compromised them

Continuing from my last post, here is the official complaint by an British couple that thier safety was compromised by CNN, who broadcasted their cell phone conversatio. Now back home safely, Mrs Shaw says that they were safe till CNN stepped in.

  But the reason I would not want to talk to anyone is because our safety was actually compromised   by CNN, which broadcast where we were. The terrorists were watching CNN and they came down from where they were in a lift after hearing about us on television. For that reason I would appeal to the media to be very careful about what they broadcast. 
The couple's full story in  Walesonline & Huffington Post
Also there is this article in the Hindu citing the one captured terrorist that the goup had a state of the art GPS, several mobile phones & the fact that the Lashkar headquarters remained in touch with the group on a voice-over-internet (VOIP) service 

Saturday, November 29, 2008

Mumbai terror attack - Are there any standards in Journalism ?

A tragedy of epic proportions and an indication how far & deep has terror taken roots in our society. A city hostage for three days. Gunmen out loose at ordinary citizen

The terror attacks in Mumbai took hostages in the city and outside. Guests in the Taj, Oberoi & the Jewish houses, Mumbaikers in the city & Indians in country & the diaspora worldwide, all glued to any communication they could get from anywhere. News channels Indian & those worldwide, newspapers national & international and the Internet & all other media of communication, all hostage to sights of terror.

But as I watched, I wondered how many of those deaths were caused the footage hungry media and common-senseless politicians. Indian home minister Shivraj Patil gave the exact number NSG personal & commandos sent to counter terrorists & also, the exact time when the operation would began. Sorry, but that not called sending men for an operation. Its probably like sending then on a death mission. Don't these politicians have any respect, any concern for men who risk their lives for the country.

The rest of damage was done by news channels. They have long got over any sense of responsibility to anyone I think. Consider those live accounts of operations, 'the operation is now on this floor', 'this many policemen & commandos coming in with directions'. It was done better than the masterminds of operation would have ever imagined when they were planning this. They relayed coverage with accounts of guest's whereabouts in Taj leading to the killing of more than one. The story was repeated again at the hostage crisis in the Jewish house. 'Yes there are hostages, these are the details of the men hostage & our information on the terrorists inside'. And if that was not all, we were fed with the detail that the Indian police, army & commandos  have decided to tackle the Taj & Oberoi first so the terrorists in Jewish Center could take a nap & rest be fresh before the combat. Of course the media would give them a timely warning before the operation were to begin, complete with the visuals of helicopter dropping of commandos and the exact number.that were coming. 

Imagine being a terrorist inside the building, all that information directly playing on the TV in front of you, or maybe the smart phone with which you watch TV on the Internet or if all that was not possible just a normal phone and someone relaying all that live coverage for you.  When told not to broadcast in live we had a jerk jouralist on NDTV 24X7 tell that the footage is not live as requested by the army. He proudly went on to add that , 'Its delayed by 6 minutes'. 

All this makes me wonder at the standards of Indian journalism. Do these people not know what should be broadcast and what shouldn't ? Or, do we only have men who can talk along and those can take camera footage? All of them without an iota of commonsense.  Or maybe its worse than that. They know all this and they chose to ignore it for high TRPs (viewers ratings). It is eyeball hungry journalism with no regards for the ethics of profession.

Almost 200 people dead & number of those injured varying with accounts as the exact count is unverifiable. 
I feel sorry for all this but most of all I am sorry for the death of morality, ethics & standards in journalism. May it rest in peace. And I worry, for the repeat of all this when a moment of crises comes next, for the someone whose morality is dead, wouldn't even realise when they make the same mistake yet again.

Wednesday, October 15, 2008

What could $ 700 bn do!

 $700 bn is only 14% of the $14 trillion of the Mortgage Debt out in the US market

A huge chunk of the problem is thus out in the open. With about $250 out to capitalise banks, there is not much of money left there. Money goes a long way & you can't really over emphasise the how far can $700,000,000,000 take the world. 
In America you could buy Universal Health Coverage & pay health insurance premiums for all US citizens for six years.

In Africa fight hunger and poverty for 10 years. They only need $72 bn every year in UN funding.

Pay salaries of 22 million american workers for an year.

Finance Germany's annual budget (@$ 420 bn) for more than an year or buy Denmark (GDP less than $350 bn), twice.
This and so many other things that can be done with $ 700 bn are here. But we will end up spending it to pay the price of the asset bubble that has gone burst.

Life is not fair afterall.

End of Capitalism as we know it ?

Ben Bernake addressing the 'The Economic Club' in New York. His statements indicate a shift of long term US policy as we have known it  

a.  Monetary policy has its limits in addresses crises like these and innovative solutions are needed

b.  We need to create systematic authorities to address large non-bank firms that pose systematic risk

c.   We did not have a mechanism;  no body, no authority, no markets for all those securities

d.   There is a problem that these assets do not trade, there is no liquidity and no independent  price discovery. 

If all this retrospection were to be translated into policy talk, he means that policies which let financial firms have there own models to evaluate assets values & risks need to be re-evaluated. The assets should be traded in exchanges & have market determined values. This part of it, to have  a clearing house and an exchange for these assets, is a much agreed view by now.
Statement a evaluates a current situation and, statement c clearly indicates part of the helplessness of the US policy as it was, to prevent this situation and provide a way forward. Probably indication of new separate regulatory bodies for non-banks (unlike a situation earlier where Investment Banking firms had no regulatory authorization)

Now add up c , d & the latest actions of US treasury
1. To take a stake in banks
2. To put conditions like 
           a.  No more golden parachutes .,
            b.  Limits on executive compensation (top 5)
            c.  Limits on risk 
            d.  And, government to have voting rights on matters that affect the investment.  

All this together symbolises a distinct shift in from the free for all market to a more centralised one. The reluctance of the US government, adequately pointed out time & again in various statements underscores the point even more. Total communism as was practised by the erstwhile Soviet Union died long time ago and now is the time of reckoning for complete capitalism and free markets. 

This is the system that they have moved to back home in India,  there are markets and there are regulatory bodies - some government owned and quite a few self regulatory ones like AMFI. We decided to move away from the socialist view of Nehrus after about four decades of being independent, leading to about a decade and half of higher growth but we have still maintained a hold on things. The risk taken are far lower. The banks have a minimum capital ratio of 9% stipulated by RBI unlike the US banks where the minimum is only 4% and a bank is supposed to be well capitalised at above 6%. And none of this applied to Investment Banks, a institution category that no longer exists in the US financial system.  This is also the thought shared by some of those European & Asian economies for who moved from extremes on either side to the centralised point of view. 

Sunday, October 12, 2008

Are any assets classes worth anything anymore

Am trying to make sense of the events of the last few weeks. First the housing bubble burst - real estate was not worth too much anymore (specially if had bought anything in the last few years); then the real estate based securities - the CDO (Collateralised Debt Obligations) lost value ;  then the Stock market - not just companies that had anything to do with housing or related securities even all those which had nothing to do with them. Stocks as an asset class are not worth too much, nor are mutual funds. And then everything together, commodities , crude & Gold. Nothing seems to be worth anything anymore. Yes we all know cash is King,  the big problem, we are not too sure of the bank where we keep this cash anymore. 

If you are an ordinary citizen of the world, who is a little aware of financial planning & diversification of wealth into asset classes, the question is where do you keep networth, (whatever is left of it) to preserve it ? Not to mention the inflation rate back home in India has been in the 11- 12% for a while, meaning wealth has been eroding for those who have been cash heavy at a rate more than -10% every year.

The big question is knowing all this what am I going to do.  The answer precious nothing. I am planning to ride it out & wait for a financial scene, when the behaviour of people and hence assets is saner, something I can comprehend.

Wednesday, October 01, 2008

Global Financial Crisis : Coach Buffet, politicians & accounting

By the looks of it Warren Buffet is playing the role of saviour, an angel investor in quite a few big companies today. 

The Washington Post article compared Buffet to the man who saved the Wall Street in 1893 & 1907 & also loaned Gold to the US government, J P Morgan.  The world's richest man (Buffet) provided $ 3 billion as new capital to GE (now it strikes me GE was actually founded by JP Morgan) on ofcourse very sweet terms. He earlier showed his faith in Goldman Sachs. Interestingly the article also mentions the Buffet as the coach, guiding the US treasury secretary Henry 'Hank' Paulson. Buffet also backed the  $700 bn mentioning that it was such a great deal, he wants one percent of it, provided the troubled securities are bought at market price.

Think he puts 'the words' to assuage the concern and the take care the interest of ordinary tax payer. If you could convince (& ensure the corresponding action) that the troubled assets would be bought at right price, this proposed 'Bailout'-please-call-it-by-other-name actually becomes the great investment of 'American tax payer money'. All consequences of the 'bailouts-please-call-it-by-other-name then actually look good. Financial institutions are ready do business with each other and the with the consumers. Companies, banks & individuals are able to borrow money at reasonable rates for short periods (not at current levels which probably are the highest in decades). Government & taxpayer make money while we have liquity in this system. Lets face it we are used to faith & trust and the use of a currency. To think of going back to the barter system is just not possible.

This brings to me another of the much debated 'MTM'  rule.  Quite a few of politicians want me to believe that the 'mark to market rule' is the cause of all failure. That all problems of the world will go away if we pretended that they weren't there. Just ask financial institutions to showcase their assets through some tinted lens that makes them look healthier. If only we could make all of them sit in a Finance & Economy class. Ok its difficult to mark assets to market when there is no market but the fact of matter is an accounting 'fix' will furthur deepen the crisis of trust. It will send the institutions deeper into our current credit contraction because the balance sheets will be even farther from the truth than they are today.

As a matter of fact, financial institutions hold a lot of their assets for investment and hence do not mark them to market. The percentage varies for example in the case of failed Washington Mutual ,  75% of the assets were not marked to market. A WSJ article this morning analyses this well but the online content is only accessible through a subscription. Hence not posting here.

The Washington Post articles are here & here

Back home, there was a run on ICICI Bank's stock & the chairman KV Kamath, RBI , Indian finance minister quickly moved to control the damage after the stock fell 22% in one week to reach the price at which it issued equity almost three years ago. The interview by KV Kamath in Mint is here. ICICI BANK - Kamath sees agenda, says bank is safe

Books Update : 1984 by George Orwell 

Thursday, September 25, 2008

Compensation - The Strategy Finance debate

One of the most debated aspects of the bailouts (whosoever gets bailed out) is a cap/supervision of Executive pay in companies opting to sell their bad assets to the government.

Reminds me of the discussion on the subject in finance & strategy classes. Proff Mohanty had quite a few times shown us in those Merger valuations that real beneficiary of the terms of merger was the company's management and not shareholders.

Proff Ganesh Prabhu on the other hand defended higher compensation for managements. My own post on one of the class discussions is here.

Today when the jury worldwide has taken a call on the fact that basing executive pay on short term - this quarter's or this year's - profits partly lead to crisis and such huge risk taking, life has taught me a lesson, live.

Of sarees & kimonos

Ask most women or young girls around they would tell you that they find the saree a difficult garment to carry. Six metres of cloth wound over a drawstring skirt on your waist , then an edge pulled up across your chest , pinned up at the shoulder with one end handing loose at your back. All this and not a single stich. Don't contest that it looks nice, even sensuous if worn properly and in the context of Indian culture, draws respect in religious, family and even formal meetings. Infact in b-school saree was the de-facto dress for placements, worn by most if not all.

Personally I keep little more than an hour to dress whenever I have to wear a saree. But then random clicks and I know that someone from Japanese culture here in USA keeps 1.5 hours for dressing up in a Kimono. This sounds even more complicated.

A complete kimono outfit has three main garments: the undergarment (basically an undershirt and slip), the nagajuban -- the silk robe layered just over the undergarment -- and the outer robe. But in between and around those robes are nine ties and sashes, all of which must be secured at certain spots around the torso using particular knots. All 12 pieces must be properly arranged if you want to be comfortable and keep the robes from falling open.

However saree & Kimono are different you discover.
The key to the undershirt is to get rid of body curves. Unlike many dresses, kimonos are intended to hide a woman's shape rather than accentuate it. For slender women, that means padding the waistline; for full-figured women, flattening the chest -- either by wrapping it in a piece of cloth or by wearing a special, chest-reducing kimono bra.

The complete article from Wall Street Journal is here.
The thirteen step guide to dressing up in a kimono. Slideshow here

Am bored of to & fro. Bailout, no bailout, whose bailout, debate or no debate and all other things related to that. But i you are working on developing the sequence of events & consequences as a case study for classes, let me know and I will participate. There is such here organization culture, negotiation politics, economics over realms of finance. I so want to document all that I am reading.

Friday, September 19, 2008

The rescue all plan : Print more dollars or what ?

Have been following the US or rather now the global financial crisis closely. To lubricate the financial machinery US central bank and later others seem to have decided to provided the much needed oil, money. Am just wondering how much they think they can pump in and the medium long time effects. USA has the GDP of about a $14 trillion.

A US government decided to put its 'billions of dollars' as per the estimate of its Treasury Secretary on stake to take the risky illiquid assets off the balance sheets of Financial institutions.
The total cost of all the measures in last few weeks is expected to be dollar one trillion.

With a GDP of about $ 14 trillion with deficit of $500 bn which because of these and other measures would increase $650 billion in 2009. The bloomberg article with all the numbers.

I just hope they have a better plan to manage this than buying better and faster printing machines to print more dollars.

Here is funny stuff from the web

Businessweek article on how things would look on the first anniversary of the event with a real innovative idea on what to do about the unsold home inventory, pay people to destroy it for the next shooting Armageddon sequel :)

This shoe site for example has a page on US economy because 'someone has to educate the people in this corporate takeover of media' :)

PS : Over with the book. Hannibal Lector is a real gentleman

Tuesday, September 16, 2008

Places of Worship

Wondering whats happening to our places of worship. They are performing every other function than the one they are meant to do, to provide that close connection/ proximity to the supernatural power. Instead, they are becoming tourist centers with economies surviving on pilgrims. They are crowded, mis-managed and to add insult to injury you can buy a costlier ticket to an earlier/ faster/ closer 'darshan' (look) of God.

In the last 9 months I have made three trips. First to Shirdi in December 07, the second to Vaishno Devi in April 08 & the last one to Salasar in July 08. On all instances I was left with a bad taste. Huge crowd, loud, pandas/pandits or other people approaching you for special pujas, darshans and prashads, long lines, security & noise all around. There are cameras for security & also for beaming you the picture of inside sacred hall so that you don't spend too much time there.

I don't know if I am the only one here, but I would like my religious visits to be quiet, those rare opportunities to connect with my spiritual side. These visits leave me more tired and disturbed than provide inner peace

Btw : I left my phone & contact list in India. Yes yet again. Don't blame if I haven't called you if you haven't given me your number in the last few weeks

Books Update : Hannibal by Thomas Harris of the 'Silence of the Lambs' (Work in Progress)
Movie Update : Tropical Thunder (Genre : Comedy, Rating : Average). Ben Stiller is good and I did not recognise 'Tom Cruise' till the credits.

Posted by Picasa

Monday, September 15, 2008

Weekend Casualities : The Historical Credit Crisis

The Wall Street Journal headline this morning

Crisis on Wall Street as Lehman Totters, Merrill Is Sold, AIG Seeks to Raise Cash

For an investment banking firm thats more than 150 years old & survived the great depression that history in the making. Recording Lehman's history from its website, not sure how long the website would continue henceon,

All the material below has been taken from Lehman's official website here. The content is here just for record. And I guess another tab would be added on .

September 15, 2008
Lehman Brothers Holdings Inc. Announces It Intends to File Chapter 11 Bankruptcy Petition; No Other Lehman Brothers' U.S. Subsidiaries or Affiliates, Including Its Broker-Dealer and Investment Management Subsidiaries, Are Included in the Filing.

The history of Lehman Brothers parallels the growth of the United States and its energetic drive toward prosperity and international prominence. What would evolve into a global financial entity began as a general store in the American South. Henry Lehman, an immigrant from Germany, opened his small shop in the city of Montgomery, Alabama in 1844. Six years later, he was joined by brothers Emanuel and Mayer, and they named the business Lehman Brothers

Henry, Emanuel and Mayer Lehman founded the Firm in Montgomery, Alabama.

Cotton was the cash crop of the time, and the Lehmans accepted it from the local farmers as currency to settle accounts. The brothers traded the cotton for cash or merchandise, becoming brokers for buyers and sellers of the crop. In 1858, they opened an office in New York, which was the commodity trading center of the country.

Read more

The Civil War disrupted the Lehmans' business. When hostilities ended, the brothers moved north and concentrated their operations in New York, where they helped establish the Cotton Exchange.

The post-war period witnessed the rapid growth of railroads, sparking the transformation of the nation from an agrarian to an industrial economy. At the time, Lehman Brothers' future merger partner, Kuhn, Loeb, was underwriting much of the financing for railroad construction. Railroad bonds represented a significant advance in the development of capital markets. Their affordable price attracted a great number of individual investors and Lehman Brothers, recognizing a trend, expanded its commodities business to include the sale and trading of securities. The Firm also moved into the area of financial advisory, which provided the foundation for underwriting expertise.

During the vigorous economic expansion of the second half of the 19th century, Lehman Brothers broadened its expertise beyond commodities brokerage to merchant banking. Building a securities trading business, they became members of the New York Stock Exchange in 1887. Setting the stage for future global growth, Jacob Schiff, a Kuhn, Loeb partner, led the Firm to establish investment-banking relationships in Europe and Japan

The Firm acquires a seat on the New York Stock Exchange

Lehman Brothers underwrites its first stock offering

At the turn of the century, Lehman Brothers was a founding financier of emerging retailers, including Sears, Roebuck & Company, F.W. Woolworth Company, May Department Stores Company, Gimbel Brothers, Inc. and R.H. Macy & Company.

In the 1920s, Robert Lehman perceived dynamic changes occurring in the nation's economy, and focused the company on rapidly developing consumer industries such as retailing, airlines and communications. Lehman Brothers was a strong supporter of the entertainment sector and advised on the consolidation of major movie theater chains. Start-up ventures, including film studios RKO, Paramount and 20th Century Fox, benefited from financing arranged by the Firm. Triggered by the stock market crash of 1929, the Depression placed tremendous pressure on the availability of capital. Lehman Brothers was one of the pioneers of innovative financing techniques such as private placements, arranging loans between blue-chip borrowers and private lenders. These loans offered strict safeguards and solid returns for lenders, while enabling borrowers to raise much-needed capital

The Lehman Corporation is created, a prominent closed-end investment company

The 1930s witnessed the explosive growth of radio and experimentation with a developing technology called television. Lehman Brothers underwrote the initial public offering for DuMont, the first television manufacturer, and helped fund the Radio Corporation of America, known as RCA. Beginning in the 1930s, the increasing demand for oil set off waves of wildcat drilling in search of the resource. Companies like Halliburton and Kerr-McGee relied on Lehman Brothers for capital to fund their activities

The end of World War II ignited an unprecedented era of prosperity, fueling the growth of consumer industries such as home appliances and auto manufacturing. Lehman Brothers became an important financial advisor and underwriter for many growing companies and established a number of long-term relationships that are still active today.

The Firm establishes its 10 Uncommon Values® Portfolio

Economic expansion accelerated in the 1950s with the dawn of the Electronics Age, and Lehman Brothers arranged start-up financing for companies such as Litton Industries. The Firm also lent its expertise and advisory skills to Burlington Mills, Schenley Industries and American Export Lines.
This period was also the beginning of the computer era, and Lehman Brothers provided IPO underwriting for industry pioneer Digital Equipment. The Firm later arranged the acquisition of Digital by Compaq. The travel industry benefited from the sustained economic growth of the period, and Lehman Brothers sponsored the IPO of Hertz Rent-a-Car. The focus on transportation and travel continued into the 1960s, with Lehman Brothers advising Ford Motor Company, TWA, American Airlines and Continental Airlines.

The Firm acquires Abraham & Co.

In the 1980s, Lehman Brothers played an important role in the dawn of the Information Age, helping fund such companies as Intel and new technology businesses of the period, which later became the leading players in the high-tech revolution. During the robust merger and acquisition activity of the 1980s, Lehman Brothers advised companies such as Chrysler, American Motors, General Foods, Philip Morris and Hoffman-LaRoche on expanding domestic and international operations. In the mid-1980s, breakthrough research in the life sciences introduced the biotech era, revolutionizing the healthcare industry. Lehman Brothers assisted a number of new businesses in obtaining the capital needed to fund research and development. A leading advisor to the healthcare sector, the Firm worked with major pharmaceutical companies during the international consolidation and globalization of the industry.

American Express acquires Lehman Brothers and merges the Firm with Shearson.

American Express divested Shearson in 1993, and the independent Firm once again became known solely as Lehman Brothers

The Firm becomes independent through a public stock offering and Lehman Brothers Holding Inc. common stock commences trading on the New York & Pacific stock exchanges. Lehman Brothers opens an office in Tel Aviv, Israel, building upon its long-term presence in that country. At this time, consumer-driven companies such as General Foods, Campbell Soup and Philip Morris turned to Lehman Brothers to help finance the growth necessary to satisfy burgeoning demand for their products.

The Firm earns recognition as "Global Bond House of the Year" by International Finance Review.

Lehman Brothers joins the S&P 500 Index and establishes its 10 Uncommon EuroValues portfolio

Lehman Brothers establishes its first venture capital fund and celebrates the 50th year of its 10 Uncommon Values® portfolio. Lehman Brothers establishes an alliance with Bank of Tokyo-Mitsubishi for Japanese M&A.
The Firm passes the $1 billion mark in annual net income for the first time.

Lehman Brothers celebrates its 150th year anniversary. The Firm joins the S&P 100 Index and its stock price hits $100 for the first time. Lehman Brothers becomes the first firm to underwrite corporate debt on the Internet. The Firm launches LehmanLive®, a Web site that offers clients around the globe access to a vast array of services and proprietary information 24 hours a day.

The Firm resumes fixed income trading two days after Sept. 11 and equity trading when U.S. markets open.
Lehman Brothers brings the first IPO, Given Imaging, to market after Sept. 11. The Firm buys 745 Seventh Ave. for its new global headquarters in Midtown Manhattan and purchases additional space in New York City and New Jersey. Lehman Brothers becomes a member of the Amsterdam Stock Exchange.

Lehman Brothers moves into its new global headquarters in Midtown Manhattan. The Firm establishes the Wealth and Asset Management Division*. Lehman Brothers executes the largest financial services IPO in history for CIT Group, and the largest European leveraged buyout in history for KKR and Wendel Investissement. The Firm lead-manages the largest-ever U.S. dollar denominated debt issue for GECC.
Lehman Brothers acquires Lincoln Capital Management's fixed income business*. * In 2005, the Wealth and Asset Management Division was renamed the Investment Management Division and Lincoln Capital Fixed Income Management Company, LLC was renamed Lehman Brothers Asset Management LLC.

Lehman Brothers acquires Neuberger Berman, positioning the Firm as an industry leader in the wealth and asset management business. The Firm moves to its new European headquarters at 25 Bank Street in Canary Wharf. Lehman Brothers acquires The Crossroads Group*, expanding the Firm's private equity fund investment management business. Moody's Investors Service raises the Firm's long-term credit rating to A1 and the LBI broker-dealer credit rating to Aa3, representing the third ratings upgrade in the last four years.
* In 2005, Lehman Crossroads Investment Advisers, LP (d/b/a The Crossroads Group) was renamed Lehman Brothers Private Fund Advisers, LP

Lehman Brothers moves to its new Asia headquarters in Tokyo's Roppongi Hills. The Firm advises on two of the top five announced Mergers & Acquisitions transactions worldwide: Cingular Wireless' acquisition of AT&T Wireless Services; and Sprint's acquisition of Nextel Communications. Lehman Brothers executes the largest capital markets transaction in the history of the U.S. utility industry for Pacific Gas & Electric and the largest IPO globally in 2004 for Belgacom SA. The Firm posts record financial results, including best-ever net revenue, net income, and earnings per share. The Firm increases its dividend by 33%. Assets under management at the Firm's Investment Management Division rise to a record $137 billion.

Lehman Brothers achieves record net revenues, net income and earnings per share for the third consecutive year based on record results across all business segments and regions. Ranks #1 in the Barron's 500 annual survey of corporate performance for the largest companies in the U.S. and Canada. #1 dealer on the London Stock Exchange by trading volume. Advises clients on the three largest global M&A deals announced in 2006: AT&T's acquisition of BellSouth; Gaz de France's merger with Suez* (pending); Endesa's defense mandate resulting from E.ON's takeover offer** (withdrawn). The Lehman Brothers Centre for Women in Business officially launches at the London Business School. All transactions appear as a matter of record only.Source: Thomson Financial, 1 Jan 2006 - 31 Dec 2006* Advisor to the Republic of France, Gaz de France's majority shareholder** Also acted as advisor to Endesa on a consortium's (Enel and Acciona) subsequent takeover offer in 2007

Lehman Brothers ranks #1 "Most Admired Securities Firm" by Fortune. Achieves record net revenues, net income and earnings per common share (diluted) for the fourth consecutive year based on record results in all three business segments. Acts as financial advisor on largest-ever M&A transaction in financial institutions sector: $98 billion acquisition of ABN AMRO by a consortium of the Royal Bank of Scotland, Santander and Fortis.* #1 dealer on the London Stock Exchange by annual trading volume for the third year in a row.
Creates the Lehman Brothers Center for Global Finance and Economic Development at Spelman College, the #1 ranked institution among historically black colleges and universities by U.S. News & World Report.
Establishes the Council on Climate Change to bring together leaders from industry, policy and academia to facilitate constructive dialogue regarding climate change policy formulation and its impact on business.
*Financial advisor to ABN AMRO