Last Thursday, the Center for Women & Financial Independence (WFI) invited Susan Jansen ’79 to present her insights on the fall of Lehman Brothers. Jansen, a former Lehman Brothers employee, covered the company’s history and regulatory policies before the economic crisis, as well as internal power struggles within management.

Jansen majored in economics at Smith College. After graduation, she worked for a commercial bank, later earning an MBA from Wharton School at the University of Pennsylvania.

Prior to her retirement in June 2008, Jansen served as Managing Director and Global Head of High-Yield and Distressed Research at Lehman Brothers. She was also a senior fixed-income research analyst and a member of the group that approved risk commitments on debt financings.

Jansen started her presentation with a chronological history of the rise and fall of Lehman in the 20th  century. Later, she shared her own story of survival during the Sept. 11 attacks. Lehman Brothers, in turn, not only survived the attack, but also thrived.

“In late 2001 and 2002, Lehman gained a tremendous amount of market share, and it was mostly coming out of the fervor of surviving. So, 9/11 was a very defining moment for the firm,” Jansen said.

The fall of Lehman Brothers began in 2006 when the firm made a strategic shift from the moving mortgage business to the storage business. Such an aggressive change aggregated Lehman’s sub-prime bubble, as “easy money” was given to people who did not have jobs, income or the assets to buy unaffordable houses.  

“It was just crazy,” said Jansen about increasingly risky business practices of the company.

At the same time, the Securities and Exchanges Commission engaged in a trend of deregulating investment banks, which eradicated any regulatory obstacles for Lehman’s bold move. In addition, Lehman’s board of directors did not fulfill their duties as supervisors of management decisions, Jansen explained.

What contributed the most to the fall of Lehman Brothers, Jansen emphasized, was not the prevalence of easy money, SEC deregulation or inaction by Lehman’s board of directors, but management’s ignorance of internal risk at that time.

“Management should have been more connected to the market and more connected to the people who were actually operating the business,” said Jansen. “Management got into an ivory tower, so they did not listen to the people who were in the business who were saying ‘Stop, the market is overheated.’”

Jansen decided to leave the company after the risk was pressed to zero in the firm. She joked that her early retirement was purely lucky, but emphasized the irrationality of the company in its business practices.

The audience had different reactions to the presentation. Some said that it was insightful to hear first-hand stories from an insider.

“I found her stories very useful because they are more truthful than what I have read from newspapers,” said Manzhuang Zheng ’13. “It is also very helpful for me to plan my career as an economics student.”

Others expected more personal stories from Jansen, as she took a crucial role in the management. One audience member commented that she wanted to hear more about the rationale behind Jansen’s resignation three months before Lehman filed bankruptcy.

“It would be more interesting to hear more about the power struggle in the company before the bankruptcy,” said one audience member.

In terms of her Smith career, Jansen emphasized the important lessons she learned as an undergraduate. “Smith taught you that you could do anything you want,” she said.

After retiring, Jansen made a career change. She is currently working on her own start-up, a blow-dry salon, and wants to establish the brand on the east coast.