By Li Yuan  (李緣)
Issue 587, Sept 17, 2012
News, cover
Translated by Zhu Na
Original article: [Chinese]

Shi Wenbo (施文博) remembers that Sept 15, 2008 was a very hot day in Hong Kong; it almost felt like a typhoon was coming.  

That day he received a call from a colleague. On the other end, it was very quiet with the gentle sound of documents being shredded in the background.

“The company has gone bankrupt,” the colleague said in Mandarin with a strong Hong Kong accent.

At the time, Shi had just joined Lehman Brothers as a macro-analyst in the investment banking firm’s Hong Kong office. Four years later, Shi explained, “This is the economic cycle. Life goes on.”

The bankruptcy of Lehman set off a global financial tsunami. In the subsequent four years, the global economy has tried to escape the shadow of the collapse. But between talk of new stimulus, soaring inflation, slumping tax revenue and the European debt crisis, the world has yet to break this vicious cycle.

After he heard the news, Shi went straight to the office. When he arrived, he had to squeeze through reporters to get inside.

In the elevator he saw on TV that his colleagues in New York were leaving the company’s headquarters with boxes. Shi remembered that when he’d signed on seven months earlier, Lehman’s shares were around $60. Now they were worth 19 cents and had dragged US stocks down 300 points with them.

He went back to the office after receiving a company email from the IT department director. It said that staff could copy all the documents from the company’s hard drive to take home.

Investment banks emphasize confidentiality and documents usually aren’t allowed to be taken home.  “I can still clearly remember what that fat white IT director looked like,” Shi said. “For research department analysts, the data and documents saved in the company’s hard drive are their entire career. He could have completely deleted all the information, but he didn’t.”

Shi used the word “great” many times to describe the IT director. This was the only positive adjective he used when recalling that period.

That night, almost all staff went back to the office as the media captured scenes of them collecting their belongings and taking files through the windows.

After getting home, Shi logged on to his work email for the last time. He saw that CEO Richard Fuld had sent a message to the 27,000 employees who’d just lost their jobs. It said that the company had declared bankruptcy and was entering the liquidation process. At the end of the letter, Fuld wrote that he knew bankruptcy would make everyone suffer - emotionally and economically. This made him feel horrible.

Shi had heard about Fuld before; that his investment style was aggressive and his management highly efficient.

But at this moment he felt nothing Fuld said was meaningful. He just felt very tired. After a long sleep, he woke up at noon on Sept 16 and watched the Hang Seng index drop 1,300 points and the Shanghai Composite Index plunge 4 percent.

The following month, Lehman’s Asia Pacific business was acquired by Japan’s Nomura Securities. Before he graduated from college, Shi once got a job offer from Nomura, but felt it could hardly compare to a first class Wall Street investment bank. Shi felt fate had played a joke on him.

In early Nov 2008, Shi finally received his new work assignment. It was similar to the previous one, but 70 percent of the research department staff were shifted to Shanghai.

Because of the move, Nomura informed the employees that they were no longer able to receive international standard salaries, so their pay was cut 60 percent.

Shi and his colleagues weren’t happy about this, but only a few people actually resigned.

“We all make a living from the stock market,” Shi said. “Seeing the stock market plunge with staff being laid off everywhere; there was nowhere else to go if we left Nomura.”

On Mar 9, 2009, the Hang Seng index hit its all-time rock bottom at 11,344 points.
The investment banking department of Morgan Stanley cut 10 percent of employees the following day.

At the end of 2009, Shi left Nomura and went to work for a fund company in Beijing. He was the second person on his team to leave, but in the following year, other colleagues began leaving one after another.

The most important asset for investment banks is employees. When Nomura purchased Lehman, it worried about a talent drain. They once offered senior management and other star workers “two year minimum salary protection.” But it didn’t work out very well.

A source named Alex from the investment banking department of Nomura Securities said that it was hard for Japanese and non-Japanese staff to integrate. “Very strangely, people work in the same office building, but when taking elevator, the Japanese staff used one and non-Japanese staff used the other,” he said.

Differing contracts were a major reason for the cold feelings. Alex said that Japanese employees were all offered life-long contracts when entering the company. Regardless of whether the market was good or bad, they wouldn’t need to worry about being laid off. So when the economy started struggling, employees of other nationalities felt especially vulnerable since they didn’t have this protection.

In Aug 2011, the European debt crisis broke out and international banks started to lay off workers again. Within three years, Hong Kong’s investment banks experienced two rounds of large scale layoffs.

Alex said that 20 percent of his Hong Kong office was laid off and that the market has been terribly quiet this year. Even hedge funds have reduced transactions.

On Sept 14, the U.S. Federal Reserve launched QE3 and promised to maintain low interest rates until mid-2015. As part of this initiative, the Fed will purchase $85 billion in new assets every month for the rest of the year.

Coincidentally, almost exactly four years ago, the Treasury and the Federal Reserve decided to spend $85 billion to rescue AIG.