But the House of Lehman is taking a hard fall this week. It's been a slow-motion fall, considering that analysts had been putting Lehman under a microscope since the fall of Bear Sterns in March.

Today, Lehman rushed an estimate of its second quarter results to the public, and held a conference call ahead of its regularly-scheduled June 16th earnings report. During the conference call, Lehman, CFO Erin Callan summarized it as best she could:

All in all, this was an extraordinarily active quarter. From an operating perspective, it was a very challenging market environment - where our practice of utilizing derivatives to significantly hedge our less-liquid market exposures did not provide the benefits we've seen in prior quarters. And our defensive positioning strategies also worked against us. We also experienced a fair amount of volatility early in the quarter, arising from the events in mid-March.

I'm going to attempt to talk out of my ass here, since I know Lehman well. Risk Management has been a cornerstone of the company ever since Dick Fuld took over when the firm went public in 1994. It is something he stresses every quarter to both employees and shareholders. The Firm's magnificent record in managing risk is one of the key components of its growth over the last 14 years. Encountering its first quarterly loss since going public has to be quite a shock.

From Joe Bruno, AP Business writer:

Lehman Brothers, which plans to release full details of its quarterly results on June 16, said it expects revenue to be negative $668 million compared to $5.51 billion a year earlier. Revenue during the quarter suffered from "negative mark to market adjustments and principal trading losses." Like other investment banks, Lehman has been forced to write down the value of investments in mortgage-backed securities that have suffered in the past year.
The company also said it lost money during the quarter because of hedging losses.
"The results were far worse than anyone had anticipated," said Goldman Sachs analyst William Tanona in a report to clients. "Results were plagued by continued write-downs and ineffective hedges."

Ineffective hedges. Not something I thought I'd read in a story about Lehman. But what has been done has been done. The troops need to be rallied, sleeves need to be rolled-up, and normalcy needs to return soon. Or else.

Lehman will continue to deliver its very best to clients. It will continue to hire and retain the very best people. But it is in survival mode. What a difference a year made.

But I still believe it is almost always the 'little people' who get destroyed in a market (crisis) like this. And Lehman is not little.

Lehman might get up off the mat, but can Dickey-Boy?