It was the first day of the new school year. While a young student was probably insisting on a €1,000 salary during a job interview, a real estate broker was contemplating exponential gains from speculations, and an investment banker was counting the hours before the disaster would hit. The day was 15 September. A day like any other day, but not to be in 2008.
A week of horror on Wall Street, starting with the collapse of the Lehman Brothers investment bank, left many victims among major U.S. financial institutions. With no chance of finding a buyer, and no support from the American government, Lehman filed for bankruptcy first thing Monday, 15 September 2008. American stock markets, which were already registering significant declines, plunged. The downfall of Lehman led to a tsunami of asset sales, at depreciated prices, around the globe. The AIG insurance giant was crushed by its investment division and ran to the U.S. government for an infusion of $85 billion. On that same dark day, Merrill Lynch was taken over by Bank of America, for $50 bln. Morgan Stanley and Goldman Sachs, the only investment banks left standing after the first shock wave, fell into the hands of investors with cash and an appetite for risk, after becoming commercial lenders. This move let them gain access to Federal Reserve funds. For the duration of the following month, the fear that any bank, regardless of its size and country of origin, was at risk of collapse paralyzed markets.
Meanwhile chaos broke out in London with the same intensity: on 18 September, Lloyds TSB took over HBOS, for $22.2 bln. Across the ocean, Morgan Stanley was initiating merger talks with Wachovia. The American President was trying to justify the huge amounts injected by the government to slow the crisis, with the size of figures a first at the global level. Days later, the U.S. government closed Washington Mutual, that very Wa-Mu which promised every American access to his or her own home. Sounds familiar, doesn’t it? While the United Kingdom was injecting GBP 55 bln into its banking system, economies worldwide rushed to institutions that could ease their need for liquidity. The bill for the bankers’ game started at $700 bln from the U.S. government. The same bill in Romania is €20 bln, not including interest.
“No one wanted to take responsibility for any risk, lending to another bank. The most difficult period was that with the greatest short-term uncertainties, in October-December last year. But I should add that this is nothing compared to what we experienced in August 1998 in Russia,” Steven van Groningen, President of Raiffeisen Bank Romania, said.
One year after Lehman Brothers filed for bankruptcy, the Romanian capital market is trying to bounce back, in terms of both the price of shares and liquidity. BET, the index of the top ten most liquid shares traded on the Bucharest Stock Exchange (BVB), is 10 percent lower then the level registered when Lehman collapsed.