The Lehman Trilogy and the Arc of American Finance

The local Shakespeare Theater’s run of the story of Lehman Brothers family in America incorporates multiple themes.  They are all very much  present in America today.  I believe they  can inform the credit union story.

The play is an adaptation of a novel about the Lehman family. Three actors portray 55 different characters in the 163 years of the family’s timeline.

Although the firm’s $600 billion bankruptcy was the central drama of the 2008 financial crisis, the family had long been absent from any leadership roles when this occurred.

An Immigrant Story

The play is the story of a German Jewish family settling in Montgomery Alabama in 1844.  After first opening a dry goods store, they expand to become  “middle men” in the cotton trade between southern plantation growers and Northern textile mills.

They eventually open a New York office to enhance their trading activity and expand to other commodities post Civil War.  These trades include wheat, coal, iron ore, that is  the raw materials at the center of America’s industrial revolution.

As their trading activities expand they become a “bank” and underwrite the new industries being founded  from railroads to computers and entertainment after WW II.  Eventually these material commodities are supplanted by stock trading which brings the firm close to collapse in 1929.  Outside owners will now control a majority of the firm.

Post WW II trading activity dominates its traditional investments in other industries. These traders buy out the firm’s presiding CEO, Pete Peterson, putting their priority on a strategy that eventually leads  to the 2008 failure.

The story of growing economic wealth is interwoven with the family’s old world religious and family values. Jewish celebrations are initially central to life, but gradually become less so as succeeding generations assimilate into American culture.  Their religious observance is “reformed.”

A Three Part Saga

Part family history, part portrayal of evolving moral values and part the story of how finance becomes central to American enterprise give the play multiple layers of meaning.

As I watched this century and a half saga, many parallels with the present day credit union story come to mind.

Credit unions have largely moved away from their focus on a local group or community to become a diversified mixture of legacy founders and new market expansions.  The values and passion so critical for success in early years have been replaced by professional managers brought in for their expertise.

Growth becomes central to reporting success.  Corporate wealth creation versus member well-being is celebrated.  Instead of open governance, oversight is increasingly concentrated in a few hands where leaders perpetuate their tenures.  Rather than paying their success forward to future generations, incumbents explore options to cash out when their term in leadership is ending by turning control over to other firms.

The Past Is Gone

The Lehman family gradually lost control of their “bank” when market circumstances required new capital.  Evolving  financial trends for their trading skills also changed the firm’s purpose.  Middleman roles gradually evolved from buying and selling actual commodities, to underwriting new businesses and then merely trading pieces of paper, i.e.  stocks.  Ultimately finance became just digital transactions.

In this new world, everything becomes a number.   And everything has a price. Finance becomes just a way to make money, versus investing in tomorrow’s economy.

Buying and selling (acquisitions) become critical skills.  Member/customer trust is eroded because   consumers no longer believe you will be there for them.  Money management becomes the epicenter of success.  All ties to previous values and economic roles are ended.

That in short is the story of Lehman Brothers creation.   Is it an object lesson for credit unions?



One Reply to “The Lehman Trilogy and the Arc of American Finance”

  1. Chip – Thanks for sharing. As you know, I work with both banks and credit unions. I have several family run bank clients whose charters pre-date the credit union act in 1934. Mergers and scale are not on their agenda. Relationships and efficient/effective operations are – it’s their moat in the marketplace and it works – evidenced by a century of independence. My counsel: Find a community bank under $1-2 billion in assets with a charter over 50 years old and study what has made them successful.

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