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# The news on Lehman

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Director
Joined: 20 Aug 2007
Posts: 851
Location: Chicago
Schools: Chicago Booth 2011
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Re: The news on Lehman [#permalink]

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21 Sep 2008, 10:13
Anyway, I can't see how banks might be not willing to loan to people who get an admit from such schools, I can't think of a more secure investment.

It's riskier with internationals. There's no guarantee they will stay in the USA to work and could just go back to their home country.
Senior Manager
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Re: The news on Lehman [#permalink]

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21 Sep 2008, 10:44
What is the interest rate on loans provided by schools?
Manager
Joined: 25 Jan 2008
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Re: The news on Lehman [#permalink]

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21 Sep 2008, 10:53
Anyway, I can't see how banks might be not willing to loan to people who get an admit from such schools, I can't think of a more secure investment.

How about a loan that has actual tangible collateral as security, e.g. mortgage (homes), auto loan(cars), corporate bonds(company assets), etc. Student loans are notorious for having high default/low recovery rates. I think your point is a student loan to an M7 MBA student is less risky than most other student loans, I agree. Not trying to be pedantic, but student loans are among the most INsecure investments.
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Re: The news on Lehman [#permalink]

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21 Sep 2008, 11:12
cougarblue wrote:
Not trying to be pedantic, but student loans are among the most INsecure investments.

The interest rates for private loans vary by school. A student going to a for-profit nursing school will have a much higher rate of interest than an MBA student at any of the M7, based on the schools' collective default histories.

Federal loans excepted, of course. Everyone (US citizens and residents) has equal access to Stafford loans.
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Re: The news on Lehman [#permalink]

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21 Sep 2008, 12:45
Cougarblue,

your point of view is interesting, but still I believe that lending to a guy who is going to get a Stanford MBA (we're not talking about an undergrad majoring in Peruvian literature) is more secure than giving money with collaterals like houses (just look what happened with houses in the last 12 months) or cars (that decrease in value over time). Indeed I think that the very admit to one of the top schools is to a large extent proof that someone knows how to manage her/his life and will be good for the money s/he borrows.

In my opinion a top business education (the value of which increases over time) is at the very least as strong a collateral as a real guarantee like the ones you mentioned. I take Soni's point about going away from the US but I don't think this stops banks from getting their money back, and the interest rate is higher anyway.

So let's agree that you didn't create enough wealth in 2007 to warrant $22.1 million. How about you return that money and use it help all the people that will get laid off. So I was to blame for taking out a mortgage I couldn't afford and you're to blame for running this racket. Yet I lose my house and you get richer. I can see it now. When the government needs to look to consultants in the future to figure out the best way to recoup their money who are they going to look to. Bingo, the same guys who screwed it up in the first place. So you make money screwing it up, more money when it fails, and yet more money to sort it out. SVP Joined: 24 Aug 2006 Posts: 2132 Followers: 3 Kudos [?]: 140 [0], given: 0 Re: The news on Lehman [#permalink] ### Show Tags 23 Sep 2008, 11:08 gixxer1000, I think you got the gist of it. The money didn't just disappear into thin air. And the gov't infusion isn't coming from thin air either. Director Joined: 20 Feb 2008 Posts: 797 Location: Texas Schools: Kellogg Class of 2011 Followers: 6 Kudos [?]: 147 [0], given: 9 Re: The news on Lehman [#permalink] ### Show Tags 23 Sep 2008, 11:40 He earned$22.1 million on the way out and he deserved every penny of it. He earned that money in the good times (since people are paid on past performance), but you can take solace in the fact that the majority of his pay was in stock options and restricted shares that are now completely worthless. While he might have failed and cost many people their jobs, people fail all the time and I don't blame Richard Fuld for everything that happened at Lehman. There were plenty of tremendously smart people working for him that also failed to do their job. And it's not like Richard Fuld was an incompetent CEO for 14 years. Please tell me which of you has ever run anything successfully this large and complex? Can you even imagine how hard that job would be if you were suddenly put in the top spot? Would you 'screw it up' to?

If you want to know why I believe he deserves his money, you just need to look at the tens of thousands of employees and countless numbers of investors he made very rich over his 14 years as CEO and during his 30 years on Wall Street. While it may have all come crashing down at the end, the man did a lot of good before the firm went bankrupt. He had 14 good years and one bad summer. Anything similar happen to any one else, or have the last 14 years of your life been absolutely perfect?

So let's not play pile on the Wall Street CEO, his failure will still be greater than most everyone on this planets successes'. He held one of the 100 hardest jobs on this planet for 14 years and did pretty dang well at it.
Re: The news on Lehman   [#permalink] 23 Sep 2008, 11:40

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