Lehman Brothers Went Bankrupt, and Boethius Knows Why!

THE UNHAPPY DOWNFALL OF A GLOBAL FINANCING FIRM:
BOETHIUS’ ANALYSIS OF THE BANKRUPTCY OF LEHMAN BROTHERS

Introduction
A business’s bankruptcy destroys the opportunity for employees and investors to continue their pursuit of happiness, as there is no longer any hope for gains or investments in that entity. The stocks tumble, the employees scramble, and the executives are left with a giant mess of debt and discouragement. Unfortunately for the global finances industry, the business Lehman Brothers filed bankruptcy on September 15, 2008. Lehman had no resources to rescue them from overwhelming debt, so Chief Executive Richard Fuld filed for Chapter 11, that is, permission for reorganization under the bankruptcy laws of the United States. Under the assumption that a bankruptcy ends despondently, one concludes that the employees, executives, and investors of Lehman Brothers have lost happiness. Their hard work in the company ended in shambles, leaving them to wallow in the vanity of their years, and begin to search for a well-paying job to recompense for the years of waste.
On the contrary, if the Roman and Aristotelian Philosopher Anicius Boethius were an employee of Lehman Brothers, his happiness would be intact when the company filed bankruptcy. In his Consolation of Philosophy, he teaches about the unpredictable outcomes of fortune and the proper pursuit of happiness, ideas which may be applied to anyone involved in a bankrupt business. Although being laid-off is not pleasurable, Boethius’ happiness would not decrease as a laid-off employee of Lehman Brothers because he acts well and makes decisions with an eternal perspective. According to Boethius, the happy person considers the purpose of all things, the self-subsistence of happiness, and the practical measures in the pursuit of happiness. Applying these concepts to the story of Lehman Brothers, one may see that Boethius accurately differentiates between the businessman who pursues temporal pleasure, and a truly happy businessman. Boethius further observes that an individual who desires temporal gain rather than the eternal good will begin to take wicked measures to achieve the goal. Lehman Brothers Chief Executive Richard Fuld took imprudent risks in pursuit of temporal gain instead of considering long-term implications and holistic repercussions. Therefore, Boethius would call Fuld an unhappy man in pursuit of the wrong thing, and he would say that his rash actions led to the downfall of the company.
The Story of Lehman Brothers
Henry, Emanuel, and Mayer Lehman founded the global finances entity Lehman Brothers in 1850. A business such as Lehman Brothers is responsible for money management in various forms. Lehman’s various responsibilities include investment banking and management, private equity and banking, research, and stock securities. The mission statement of the company reads: “Our mission is to build unrivaled partnerships with and value for our clients, through the knowledge, creativity, and dedication of our people, leading to superior returns for our shareholders.” Established with high expectations and a promising niche, Lehman Brothers started a journey that would give them a key role in supporting the backbone of the investment economy.
After thirty-four years of being a private company, Lehman Brothers united with American Express in 1984. Richard Fuld became chief executive in 1993, and in 1994 the company separated from American Express to become a public company by selling shares of stock to investors. Over the years, Fuld attempted to gain on investments for the company through several risky short-term investments in mortgages , but the industry was unsuccessful, and his company lost a significant amount of money. Lehman Brothers and Tishman Speyer bought Archstone with $22.2 billion, but this investment proved unprofitable. By June, 2008, Lehman Brothers continued a dangerous downhill slide in finances; they had lost $2.8 billion. They were unable to gain enough support from the government’s Federal Reserve, and no other companies were willing to buy them out to survive their name. Therefore, on September 15, 2008, Lehman Brothers filed for Chapter 11. The congressional system has established “chapters” or codes for the rights of legal business entities. Chapter 11 is the code which allows reorganization proceedings in which the debtor maintains control of the business, unless the Court appoints a trustee.
Some business analysts are beginning to speculate that before the company’s most drastic drops in profit, Fuld was guilty of making fraudulent recordings of the value of his assets. The FBI is currently investigating the company to bring closure to all the internal events of the company. In the end, Fuld comes out of the company as an unhappy failure to his company and to the investment economy.
The Purpose of All Things
In Consolation of Philosophy, Boethius states through the voice of Wisdom, “The desire for true good is… in the minds of men, only error leads them astray toward false good.” He assumes that “the supreme good is happiness;” the motive of all actions, therefore, is to achieve happiness. Individuals often

measure the possession of the good by the amount of enjoyment and delight it brings, convinced that being abandoned to pleasure is the highest form of happiness. Others again confuse ends and means with regard to these things, such as people who desire riches for the sake of money or fame.

However, Boethius rightly enlightens his readers that these goods are transitory in nature. Gains in wealth are temporal events that may achieve pleasure, but not happiness.
Boethius borrows the Aristotelian view of the eternal end. Aristotle discusses happiness as the eternal good unimpeded by temporal events, which allows no excuse for rash decisions. When an individual makes a decision because of their desire for instantaneous gain, he pursues instant gratification rather than a long-term goal. Aristotle labels those who “seem to conceive happiness as pleasure, and hence they also like the life of gratification” as “vulgar.” Momentary pleasures only gratify short-term desires.
In the context of a business situation, Aristotle explains that “the moneymaker’s life is in a way forced on him [not chosen for itself]; and clearly wealth is not the good we are seeking, since it is [merely] useful, [choiceworthy only] for some other end.” Boethius agrees that if a goal is only a mean to gratify a greater desire, it is not the best good. Oftentimes a businessman solely pursues monetary gain. His motive is driven by the desire for the instantaneous gain of money or success. The gains that come from a successful business are a mean to support their lifestyle and obtain goods.
Furthermore, since wealth is subject to the ambiguity of fortune, it is not happiness. If temporal events do not impede happiness, and fortune holds control over temporal events, then happiness cannot be anything under the control of fortune. Wealth is a temporal good and a mean to greater goods, so a wise pursuer of happiness in the business world ought not make rash decisions in pursuit of wealth, without considering the eternal end of all events.
In the case of Lehman Brothers, Chief Executive Fuld made several rash decisions because of his desire for instantaneous gain for his company. He chose to invest in mortgaging through the company Monument Realty, which profits from people’s failure to continue making payments on their homes. As a global finance industry, they understand that in order to profit from investing in a mortgaging company, they are relying on people to take loans in order to purchase realty. If they are investing in mortgaging, they are hoping that people who take out loans to buy realty are unable to continue to make their payments, and therefore must mortgage the home. This way of doing business is a way to pursue wealth for the company, but it is a risky investment of time and money. Lehman has been accused of looking for “a quick turn on their buck.” Taking advantage of financially unstable individuals leads to a greater risk in the whole economy. As the CEO (Chief Executive Officer) of Lehman, Fuld sought monetary gain for the company. He places his and the entire company’s success in the hands of risky investments when the company is already in need of more stable income. Boethius would reprove Fuld for his imprudent pursuit of goods that were not self-subsistent.
Self-Subsisting Happiness
Boethius argues that true happiness is not subject to circumstance, but that it directly corresponds to a person’s good behavior and eternal perspective. Individuals cannot pursue happiness through temporal events; thus the haphazard nature of wealth proves that monetary gain does not make an individual happy. Boethius explains that money, success, power, and respect are temporal in nature because they are not self-subsisting. The occurrence of each of these is contingent upon other circumstances. The true nature of happiness, on the other hand, is self-subsistent.
Boethius argues:
Goodness itself is set as a kind of common reward of human activity. But goodness cannot be removed from those who are good; therefore, goodness never fails to receive its appropriate reward… The wise man’s laurels will never fall away from him or wither away.

Happiness, to Boethius, is equated with the reward for right human behavior. A happy person pursues goodness in all things, and the result of such excellent behavior is self-subsistent happiness.
The events that are changeable through the ambiguity of fortune are not self-subsistent. Although power and wealth are pleasurable events, they are only controllable to a certain extent. In the business economy, one of the most common methods of obtaining wealth is stock or bond investments and real estate. Depending upon the consistency of profits of public companies, people determine whether the investment will be long-term or short-term. A long-term investment may include bonds, real estate, or a stock in a consistently profit-raising company. Short-term investments include stocks in inconsistent companies, or investments in any mortgaging industry. Whatever kind of wealth is being pursued, the pursuer is using investments to obtain wealth to obtain some other greater goods. Investments are high-risk methods of achieving wealth; consequently the investor’s wealth is not a self-subsistent good.
Fuld’s method of attaining wealth for Lehman Brothers consisted of partnerships with mortgaging companies like Archstone-Smith and Monument Realty. Upon acquisition of these organizations, they were not fortunate enough to pay off shareholders. Furthermore, Lehman had contributed approximately $620 million to Monument Realty since 2001, and because of their bankruptcy, they were unable to continue funding Monument’s portfolio of realty projects. Boethian ideas echo what Aristotle says about happiness: “We regard something as self-sufficient when all by itself it makes a life choiceworthy and lacking nothing; and that is what we think happiness does,” implying that Fuld was not pursuing happiness.
As investments began to decline sharply in March, 2008, Lehman’s shares in stock rose significantly. This appeared to begin a turnaround to the overall declining economy, but skeptical strategists claimed that the company was using inaccurate recordings to increase the value of their shares. By June, only three months later, the company lost $2.8 billion dollars. Analysts discovered that Lehman Brothers traded assets for far less than the value that had been recording. Moreover, Fuld had cashed-in on close to $500 million of his investments in his company over the past eight years, even during the teetering times of financial distress for the company. Although an investor is entitled to collect gains on investments, Fuld placed himself in a precarious position because of the high risk of his mortgage-related and other securities. If the CEO of the company decides to put big investments in high-risk companies, then cashes in for half a billion dollars in personal gain, one may infer that the good which the company solicited came from the earnings of short-term gains. The company is therefore not pursuing true happiness, since the ends which they desire are not self-subsistent.
True happiness is not impacted by the changes in fortunate events. While Fuld pursued happiness through the fortune of his mortgage investments and the company’s share prices, the hypothetical employee Boethius would pursue happiness through virtuous action. The goods which Boethius pursues are not measured by wealth, power, or status. Boethius maintains an eternal perspective for the end which he pursues. Although he would be willing to have position in a company and do well in his career, vocational success and wealth would not be the ends for him. He would not do everything merely for monetary return, and he would not take any imprudent risks to obtain such temporal goods. In Consolation of Philosophy, Boethius remembers that fortune events are haphazard, and that they ought not deter the pursuit of happiness. The consistency of Boethius’ search is not composed of monetary means; he learns through Wisdom that “happiness is a state made perfect by the presence of everything that is good, a state, which… all mortal men are striving to reach though by different paths.” Rather than utilizing temporal resources such as investments and partnerships to gain access to happiness, Boethius views all events as a means to the eternal end, thus he maintains his eternitarian view of the purpose of all things.
Practical Measures in the Pursuit of Happiness
The Boethian pursuit of happiness requires consistently reasonable and virtuous actions. In a business environment, investors must diagnose situations logically and take risks prudently. The virtue of the individual pursuing happiness must remain intact, which necessitates prudent decision-making that investigates the long-term repercussions of each decision. If the individual makes rash decisions purely for short-term gain, meanwhile ruining opportunity to recover from future struggles, he is proved to be an irrational pleasure-seeker.
Fortunate success cannot predict the success of the future. Additionally, fortune cannot enlighten an investor to the eternal form of happiness. The truly happy man seeks after the intangible goods of eternity rather than the changeable successes that are subject to fortune. Boethius as the hypothetical employee of Lehman Brothers would need to weigh the benefits of remaining under an imprudent executive with the benefits of working somewhere else. After seeing Fuld’s greedy cashing-in, he would catch the scent of the mad rush for riches that would leave the company gasping for breath. Fuld did not try to hide the profit he gained from his investment in the company, but he cashed-out hundreds of millions of dollars during years that the entity was financially struggling and share prices were decreasing. By the end of 2007, Lehman earned more than the predicted amount, but as the mortgage market struggled, everyone could see that the company would be suffering in 2008. The gains made in 2007 would not predict continued fortune for the mortgage-investing, and no temporal end can be completely predicted by fortunate signs.
Boethius teaches that there is a transcendent providential plan that guides fortunate events and purposeful actions to one goal. What hope have mortal men, subject to change and fortune, to find the eternal happiness? If one denies the necessity of eternal providence, there are no immediate repercussions. Boethius comments about the fickle mental abilities of humans who attempt to consider the eternal providence of God. Boethius reminds the reader that humans are free to make plans, as he explains at the end of his book:
You can alter your plan, but that since this is possible, and since whether you do so or in what way you change it is visible to Providence that ever present and true, you cannot escape divine foreknowledge, just as you cannot escape the sight of an eye that is present to watch, though of your own free will you may turn to a variety of actions.”

Every human decision thus ought to be made with the presupposition that providence knows the best end. One may choose to resist the future, but the future is inevitable, and it will repay the individual according to the type of investment placed. When only short-term monetary investments are made, the benefits will be short-term, and the remainder of time would be left to fortune. Such recompense is the natural justice paid to all actions. Fuld, in all his short-term risk decision-making, should expect to crumble under the weight of justice. Boethius would see it coming. Boethius, the wise, eternally-minded employee, would do his job, and probably have started job-searching years earlier.
Conclusion
Fuld could have learned from Boethius’ saying, “A wise direction spares the man whom adversity might affect for the worse.” This fact does not excuse unrighteous acts, but encourages all people of every personality and background to pursue the eternal good in a righteous manner. One may assume that the hypothetical employee Boethius would act virtuously in the workplace, and he would pursue happiness by maintaining his eternal perspective. Boethius’ happiness would remain intact, despite the nature of Fuld’s pursuit for temporal gain leading to the bankruptcy of the firm.
For Boethius, it is evident that one who pursues happiness ought to consider the intangible purpose of all things, the self-preserved nature of true happiness, and virtuous decision-making. If the businessman does not utilize these thoughts to act prudently, the long-term effects will be terminal to the quest for a happy life. The temptation of moneymakers overtook Richard Fuld’s mindset as he made imprudent decisions to achieve financial gain.

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