A local man who commutes each day to his job as an executive at Lehman Brothers says that the country’s financial crisis, particularly the recent bankruptcy of his firm, is hitting the little people and not just the “banker types.”
“There are people who come in my office crying,” said the executive, who wanted to remain anonymous, last week. “Most people [affected] aren’t the superstars. Of the 26,000 employees, there’s a big swing in salaries.”
Lehman Brothers, an investment banking firm with $600 billion in assets, filed for bankruptcy on Monday and is still trying to sell off its many of its business divisions. Its capital management business was scooped up for $1.75 billion by the British bank Barclays last week, which may result in 10,000 jobs being saved.
Lehman has two offices in Jersey City and one in Hoboken – not to mention lots of local employees who may be affected.
The local executive blames the CEO of Lehman – “He was stupid and arrogant” – and the Secretary of the Treasury, Henry Paulsen, who is a former CEO of Goldman Sachs, a major competitor of Lehman.
“Paulsen put Lehman Brothers out of business,” he said, claiming that as secretary he wasn’t even forced to cash out his shares in Goldman and could stand to profit from the closing.
He said people in the firm are now getting angry at senior management and especially the government for executing what he called “subjective” bailouts for firms like Bear Stearns and AIG, among others.
The current financial crisis has been blamed on lenders giving “subprime” mortgages to risky consumers who could not afford to pay.
Keeping the jobs
With Hoboken and Jersey City lying across the river from midtown Manhattan and Wall Street, many residents work for these companies or invest in them.
Lehman’s offices in Jersey City, 70 Hudson St. and 110 Hudson St., are technical call centers, according to employees. The local branch in Hoboken, LibertyView Capital Management, at 111 River St., became a subsidiary of Lehman as a result of a 2003 acquisition. Employees there said last week that the Hoboken office had been suspended from operations recently, before the bankruptcy filing.
AIG, the world’s largest insurance agency with $1 trillion in assets and 100,000 employees, was nationalized by the U.S. government last week in an attempt to sidestep a complete economic meltdown. AIG has a division building in Jersey City at 101 Hudson St.
Jersey City Mayor Jerremiah Healy said last week the fallout could be “terrible and dramatic.”
“There’s nothing we can do. It’s not like we’re in the driver’s seat.”
– Venkat Subramini
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“We’re doing what we can to make sure these jobs stay here,” Healy said, expecting that the worst possible scenario would be a loss of around 2,000 jobs.
He pointed out that job loss doesn’t only affect those losing their livelihood, but also the service professionals who make money off of a robust economic center.
“The lunch trucks, the stores, the diners, the taverns, the restaurants” could be feeling the crunch, he said.
Nonetheless, Jersey City still remains an attractable place for industry, he said, because of its proximity to New York City, its many mass transportation options, and its “world-class” office space.
Hoboken Mayor David Roberts said he has faith in a “resilient economy,” but is also worried for the “several thousand [Hoboken] residents associated with the financial market in New York City.”
“The rippling effects of these events are going to be felt in the next month or so,” he said, when the unemployed are struggling to find funds for their mortgage payments.
“Then it’s only a matter of time until they move to a more affordable area,” Roberts said. But he said he hopes the city can still be affordable to their “young people who are living in their first homes.”
Roberts expects that people will be more selective with their disposable income, having fewer dinners out and fewer vacations.
He said he agrees with the sentiments of New York City Mayor Michael Bloomberg, who implored people not to withdraw from the stock market out of fear.
Jersey City Councilman Steven Fulop has worked on Wall Street for a decade and said the bottom may not have been reached yet.
“It’s the craziest I’ve ever seen it,” he said last week. “I’m sure there are going to be a lot of casualties here.”
He said many investors, professional and otherwise, are still waiting for “some sort of certainty” to jump back in.
“It’s had a catastrophic impact on the market,” Fulop said, adding that there will certainly be many governmental changes, namely increased regulation and scrutiny.
He said the government has already responded by limiting short sales, or betting against the success of a particular stock.
Fulop foresees problems locally for businesses seeking construction loans and for people who may end up defaulting on credit card payments.
“The impact on Jersey City is going to be astronomical,” he said.
‘Wait and watch’
Jersey City resident Venkat Subramini, who has worked at Lehman’s Jersey City technical center for five years, said last week that he and other employees only know what they hear from the news right now.
“We’re kind of in limbo,” he said, calling the situation a “reality of the market.”
“There’s nothing we can do. It’s not like we’re in the driver’s seat,” Subramini said. “We’re in the passenger’s seat.”
He said he’s not nervous about his future prospects, but hopes Barclays will keep the employees on board.
He said some employees at the Jersey City location have been actively seeking other work since the news has broken.
Much like the rest of the world and Hudson County, Subramini said he’ll take the “wait and watch” approach.
Jersey City resident and Manhattan investment advisor John Maloney said the effects will be felt by the average American, whether by trying to attain credit for a home, condo, or business.
He cited the “multiplier effect,” which holds that for every one job lost on Wall Street, four jobs are lost in middle-to-low income positions.
He said banks will go from being “drunken sailors” as it pertains to lending to “the most sober guy on the street.”
The trickle-down effect, Maloney said, will slow all types of business development, decrease the number of jobs available as a result, and the country could see a steep hike in unemployment.
Jersey City and Hoboken, two cities that rely heavily on the banking industry, had been floating above market woes before this collapse – but Maloney thinks this could change for the worse.
For questions or comments on this story, e-mail tcarroll@hudsonreporter.com.