Alexis Sosnovski, Sacha to his friends, was wondering how long he was going to survive. Jobs were disappearing faster than he could keep count with friends disappearing in the carnage of collapsing banks and brokerage firms.
He felt too depressed to eat at his favourite lunch time bar on the ground floor of the Gherkin. The shakeout was having a huge effect on the restaurants, bars and shops across the City, many of them were empty at lunchtime, not to mind evenings when the few financial workers left were too discouraged to work late.
It seemed inevitable the entire London economy would be dragged down by the City. More than a hundred thousand jobs were expected to disappear by the year end, not only highly paid jobs in finance, but also in accounting, law, consulting, advertising and other services. It would be years before the City would recover its form, possibly in time for the 2012 Olympics.
The London economy had experienced an unprecedented boom that had lasted a decade and a half, punctuated by two relatively short setbacks; the dotcom crash and 911 attack, neither of which had any lasting consequence for the real economy. Bankers and financiers now walked in fear of a deep recession or perhaps even worse.
Russians like Roman Abramovich, Alisher Usmanov or Sergei Tarasov had suffered considerable losses after the MICEX plummeted over sixty percent from its peak. In total the leading Russian oligarchs lost over two hundred billion dollars in the calamity. Their country had been hit by a series of disasters, starting with its bellicose invasion of Georgia, the sudden crash of financial markets and the catastrophic fall in oil prices, forcing Vladimir Putin to restrain his bluster.
The Russians were not alone in their misery, high flyers such the Icelandic millionaire, Bjorgolfur Gudmundsson, had lost hundreds of millions in the storm. Newly rich entrepreneurs were facing a cruel reversal of fate, many of whom were seeing their, spectacularly short, reign of power and glory slip out of their grasp forever.
The effects of uninhibited deregulation, leveraging and credit were having a devastating effect on the City’s golden boys. Alexis Sosnovski, a recently blissful trader, was seated at the almost empty bar, desperately looking around for a friendly face. On the point of giving up he spotted a young and recently arrived Russian trainee walk in. Natasha Babkinova’s attention was concentrated on the just cleaned tiled floor, with her ungainly stiletto heels she did not want to slip and break a leg, just when she was beginning to enjoy herself in London, getting the hang of how things worked.
Sosnovski made a sign and she joined him.
‘Hi Sasha, you’re not looking very happy.’
Natasha was direct and her English was excellent.
He had good reason not to be feeling happy, at thirty seven Alexis Sosnovski had enjoyed five years of glowing success since his arrival from Paris to join the Nassau Investment Fund as a trader. After graduating he had spent three years at Société Generale’s office at La Defense in Paris, where he had worked in its trading room. In London his flair was soon earning him a mind boggling salary and at the end of his first full year he was rewarded with a six figure bonus, which rose in leaps and bounds as the markets boomed.
Thanks to his success he owned a fashionable townhouse in Nottinghill Gate, where with his wife Vanessa they hosted regular dinner parties for his City and expatriate friends and their wives. Vanessa was the mistress of the house, caring, with the help of an Estonian nanny, for her two young children. The couple had even bought a magnificent nineteenth century home in the Loire.
Alexis was shrewd, he knew the stakes were high, the key as always was to get the timing right, that went not only for his deals but equally in his personal life. He had no intention of become the victim of a market crash which he knew, as a graduate in economics from a prestigious French school, was the inevitable end of any boom. His goal had been to make as much money as he could before things went sour as they inevitably would.
When Lehman Brothers collapsed he knew the writing was on the wall. He figured Fitzwilliams and his bank, like many others, were just as vulnerable. He had seen what had happened to certain of his friends, suddenly thrown onto the street, losing their homes, then their wives, pulling their kids out of their expensive schools.
The non-doms were pulling out, restaurants and bars were already half empty as the ripple effects were felt across the City. Invitations to dinner parties were few and far between as friends disappeared, returning home humiliated by their failure and reduced situation. For those like Alexis who were still hanging on to their jobs by their finger nails bonus prospects were nil. It was time to make budget cuts starting with his year end ski holiday in an expensive Swiss chalet, besides who could tell what could happen in one’s absence.
The more Alexis thought about it the more he thought the unthinkable could happen as banks all around him collapsed or were taking over by the state. So many of his friends were left reeling by the cold brutality of the collapse, ordered to clear their desks in less than half an hour without notice or explanation.
Often bonuses had come in the form of shares, which came with a time clause meaning they could not be sold before a certain date, not that it mattered anymore as many of those shares were now next to worthless. Traders’, once the envy of millions, were not only facing a loss of earnings, they were staring unemployment in the face as banks sent cart loads of finance related specialists to their doom almost daily.
Nicolas Daguerre, one of Sasha’s friends at the recently defunct Lehman Brothers likened the New York firm’s downfall to the Titanic as it went down with the orchestra playing on the bridge. Daguerre was still receiving bizarre congratulatory emails from the beyond on his BlackBerry, praising the success of such and such a department or achievement. He had been awoken in the early hours of that fateful Monday morning by a New York colleague calling to inform him of the firm’s bankruptcy and with the news the hope for his two hundred thousand pound annual bonus went out the window.
Daguerre had seen it coming, but like his colleagues had lived in denial, refusing to accept the idea of impending doom, fooled by their solid office tower of steel and concrete sheathed in gleaming glass and polished marble. Seated before an endless arrays of blinking computer screens, he like the other single-minded traders, had focused on his daily task, confident in the firms invulnerability, Lehman’s was simply too big to fail; if the worse came to the worse they would be saved by some kind of shotgun marriage with one of the bank’s peers.
The knife was turned when billions of dollars from Lehman’s London account disappeared into the black hole during that fateful weekend. Each Friday after trading had closed billions were transferred from London to New York to fund US assets over the weekend and every Monday the funds returned; that Monday morning all movements came to a brutal stop, leaving place to a ghostly silence reigned as communications went dead, leaving the dazed London management to its own impecunious means.
As Lehman’s four and a half thousand London ex-employees, clutching their pitiful boxes of personal belongings, said their last goodbyes they could have been excused for thinking Britain’s special relationship with the USA was a one way street, which it was as far as Lehman’s management in New York was concerned.
Alexis remembered reading reports of Lehman’s massive losses in the second quarter. It was at that point banks had started to show the first signs of reticence in their dealings with them. Lehman’s head office in New York had simply ignored the warnings from London with the sibylline reply that staff should wear ties at all times on the trading floor.
After an interminable weekend, their eyes glued to their BlackBerrys in the expectancy of a last minute deal, the shock for the staff of Lehman Brothers at the firm’s London headquarters on Canary Warf was mind numbing. They had expected a saviour to appear with a rescue package like for Bear Stearns. But it was not to be, just before midnight on the Sunday, the CEO of Lehman Brothers Holdings Inc., in New York, Richard Severin Fuld, Jr., filed for bankruptcy, shaking the financial world to its very found
ations.
Alexis consoled his stunned friends who had quit Canary Wharf with nothing more than the small cardboard box filled with a few meagre souvenirs of a recent and happy past. At the same time the City and government ministers struggled to come to terms with the calamity that had struck the country’s entire financial system, deals were hurriedly thrown together in London to save what could be saved of the surviving banks; as for New York Merrill Lynch was swallowed by the Bank of America, and investors unloaded shares with billions of dollars were wiped off stock market prices.
That same Monday in London, HBOS saw its share price drop by almost twenty percent. The next day it was announced in New York that AIG was facing massive losses as a result of the Lehman’s collapse and would need bailing out.
Alexis looked as though the sky was about to fall on his head. The Irish Netherlands Bank stood on the brink and investors rushed to pull money out of the Nassau Investment Fund.
‘A lot of Russians have lost their shirts Alexis, at least you’ve still got your job,’ said Natasha trying to encourage him.
‘For how long?’
‘Don’t be so pessimistic, look at us. Some of our richest businessmen have been forced into asset fire sales.
‘I suppose so. You want something to eat?’
‘Yes, that’s what I’m here for.’
Natasha told him how many of her father’s business friends had borrowed heavily to build their empires using shares in their companies as collateral. Now their collateral no longer covered their debt and they had been forced into assets fire sales.
Russia had been hit hard by the credit crisis with billions leaving the country as rattled investors ran for cover forcing authorities in Moscow to suspend trading on the MICEX after the worst plunge in share prices since the country’s financial crisis ten years earlier.
The only person still smiling was Alosha Demirshian; his capital remained intact in the murky Mafiyosa controlled world of Russian’s underground economy. There were commodities: oil, gas, timber, fertilizers and metals that functioned without the constraints of market rules and controls; arms to fight wars; gold and diamonds to corrupt leaders; drugs to stultify the pain of poverty and despair. His syndicate’s vast war chest was there bail out InterBank if the going got really bad for Sergei Tarasov.
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