With Lehman Bros. on brink, shudder is felt in Boston
As Boston police investigated a reported run by employees on the local offices of Lehman Brothers last night, Massachusetts Secretary of State William F. Galvin predicted a ripple effect will wash over the country as the investment bank continues to spiral downward.
Expectations that the 158-year-old Lehman Brothers would survive dimmed yesterdayafter Barclays PLC withdrew its bid to buy the investment bank. Barclays and Bank of America were considered front-runners to buy Lehman, which is foundering under the weight of $60 billion in soured real estate holdings.
Potential buyers of Lehman walked away yesterday after the US Treasury refused to budge on its decision not to provide any takeover aid as it had six months ago when Bear Stearns faltered, and again this month when it seized the secondary mortgage giants Fannie Mae and Freddie Mac.
As word of Lehman's crisis and potential bankruptcy spread, Boston police were called at 9:28 p.m. by a security guard from the building on High Street in the Financial District that houses Lehman Brothers' local offices. The guard said there was a "rush of people" trying to enter, said Officer Eddy Chrispin, a spokesman for the Boston Police Department.
Police called the guard back and were told that five people were trying to enter the building.
Police responded and determined that "it was not a situation that warranted police action," Chrispin said. No arrests were made, he said.
Several people leaving the building with boxes last night declined to comment. Calls to Lehman's office were not answered.
In a telephone interview last night, Galvin said he did not know how many employees work locally for Lehman, but he predicted the firm's downfall would have local and national impact.
"I think everyone is concerned about the implications of their future status, based on the fact that they are the fourth-largest investment banking company in the country," he said.
"I think there was a hope that someone would step up and acquire them."
Galvin, whose office licenses and regulates the securities industry in Massachusetts, said he was not aware of a rush on the offices last night.
"Straightening out the financial service sector is important, especially in Massachusetts because of our high number of people employed in that sector. There will be ripple effects no doubt, whatever happens to Lehman's.
"A significant part of that is a confidence issue. It will undermine the confidence that people have in financial companies."
The Associated Press contributed to this report.