After the collapse of Lehman Brothers in 2008, many of its staff breathed a sigh of relief when they were bought by Barclays. Now Barclays said today that it is cutting 3,700 staffers and shrinking the investment bank, which had grown largely because of the Barclays’ purchase of Lehman. And some of the former Lehman employees at Barclays say they feel like they are back on a roller coaster ride of uncertainty.
Although it’s increasingly a fading memory, the Lehman bankruptcy can still sting for bankers who lived through it. Many of them couldn’t bear to read the account of the financial crisis and Lehman’s demise in Too Big to Fail, or watch the HBO movie version of it. “I lived it and that was painful enough,” said one former Lehman banker now at Barclays. “I don’t need to live through it again.”
The bankers who provide advice on deals or capital markets, or loans to corporations felt doubly burned by Lehman’s collapse since they didn’t participate in the risky behavior that led to the bank’s failure. Lehman increased its leverage by unprecedented ratios, which burned it during the subprime mortgage crisis and led to the largest bankruptcy filing in US history.
After Barclays bought Lehman’s core operations, it seemed that the bank was on the rise, with Barclays management pushing to become one of the global investment banking behemoths. Barclays was able to use its balance sheet, combined with the advisory services of Lehman Brothers, to create a powerful new bank.
But when the interest rate-rigging scandal unfolded in the UK involving Barclays and other European banks, some Lehman alumni felt a bit of deja vu and prepared for the worst. Barclays said it cut investment banking compensation by 15%, and for managing directors, bonuses were deferred this year.
Although Barclays cuts in investment banking don’t go as far as UBS and other competitors, Barclays chief executive Antony Jenkins refused to comment at today’s news conference on the future of investment banking chief Rich Ricci.
The bright spot is that Barclays isn’t in danger of collapsing the way Lehman was. And in these uncertain times, some Lehman alumni are willing to take what they can get.