This was the bleak prophecy of a former Lehman Brothers employee in London yesterday as the 5,000 UK workers were sent home with their belongings boxed up and the heavy burden of uncertainty on their shoulders. For them, this month’s pay, as well as their careers, hangs in the balance.

 

For the rest of us, it’s a worrying situation to be faced with just as the City began to feel tentatively hopeful about global financial markets once more. Now, a global financial meltdown is feared.

 

Lehman Brothers, as the fourth largest investment bank in the US, is the world’s biggest bankruptcy and the shock announcement has sent markets into turmoil. By yesterday afternoon, the effects had clearly been felt with shares plunging worldwide. In London the FTSE 100 index dropped more than 4 per cent and the Bank of England hastily pumped £5 billion of emergency lending into money markets.

 

Debate rages as to whether the US Treasury should have stepped in to save the 158 year old bank. After swooping in to rescue the struggling Bear Stearns in March, and the US government bailing out main mortgage suppliers Fannie Mae and Freddie Mac, not to mention Merril Lynch recently being bought for $50 billion by Bank of America, it appears that Lehman Brothers was left to handle its own affairs.

 

Hit by Q3 losses of £2.2 billion, plans by Barclays and Bank of America to salvage the historic bank were abandoned and Lehman Brothers was forced to file for Chapter 11 bankruptcy protection.

 

Now what’s left to see is how the UK financial markets will recover. To what extent will we be affected by the folding of this major US bank? Has our burgeoning progress been halted? Are we doomed to follow a financial pattern of 3 steps forward, 4 steps back? 

 

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