Source: New York Times

Until Lehman Brothers collapsed last September, Mr. Walsh was considered the most brilliant real estate financier on Wall Street. In the ’90s, he pioneered the art of lending to office building developers and then slicing up and repackaging the debt for investors. Less risky pieces went to institutional investors; the lower-rated chunks to hedge funds and others hungry for juicier returns. Lehman pocketed a fee every step of the way, and it often retained a risky piece or two to give its own earnings a kick.

“That was one of Lehman’s strengths,” says Brad Hintz, a former chief financial officer at Lehman who is now an analyst at Sanford C. Bernstein. “In fact, a lot of Wall Street firms tried to duplicate Lehman’s commercial real estate strategy.”

Many factors, of course, contributed to Lehman’s demise last fall. Near the end, it carried $25 billion in toxic residential mortgages. It was wildly overleveraged. And the federal government made the fateful decision not to rescue Lehman from its mistakes. But when real estate overheated in the years before Lehman’s implosion, Mr. Walsh made billions of dollars in loans and equity investments that also ultimately helped bring down the bank.


Read Devin Leonard’s full article “How Lehman Brothers Got Its Real Estate Fix” in the New York Times (May 2, 2009).

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