Facing Losses, Lehman Bros. Bank Demotes CFO

Erin Callan, the first woman to reach the top ranks at the investment bank Lehman Brothers, was demoted from her position as chief financial officer Thursday. The investment bank has suffered $2.8 billion in quarterly losses and a drop in its stock.

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Next we'll report on a woman in business who broke through the glass ceiling and is now headed back the other direction. Her name is Erin Callan. She was one of the first women to reach the top ranks at Lehman Brothers, and some speculated she might even one day head the investment bank. Yesterday, though, she was demoted from her position as chief financial officer. NPR's Yuki Noguchi has more.

YUKI NOGUCHI: Blonde, beautiful and outspoken, the spotlight loved Erin Callan. Fortune magazine called her one of four women to watch. The Wall Street Journal dubbed her Lehman's straight shooter. Sheelah Kolhatkar interviewed her for Portfolio Magazine. Callan cut a striking figure in her crochet-style dress, gold dangling earrings and high-heeled boots.

Ms. SHEILA KOLHATKAR (Portfolio Magazine): She was definitely perceived as this very, you know, sort of interesting, glamorous, almost exotic figure on Wall Street. But, I mean, really that just points to the fact that there are so few, you know, other women at her level that, you know, just her presence was really remarkable.

NOGUCHI: Callan was promoted to Lehman's top finance job in December. Soon, the firm was fighting for its life. But Callan projected grace under fire, even as rival Bear Sterns folded and investors worried Lehman could follow. She hit the air repeatedly with interviews, trying to reassure investors. Here she is on CNBC last month, talking about the stability of Lehman's business.

(Soundbite of TV show)

Ms. ERIN CALLAN (Lehman Brothers): We have a great fixed-income business. We always will. It's well diversified in and of itself. But I think there's still been a lack of understanding of how well we've expanded geographically and by business line. And that still needs to be told.

NOGUCHI: Callan is a lawyer by training and previously headed Lehman's hedge fund investment unit, which took companies like Blackstone and Fortress public. But as investment firms sized up the mortgage crisis and wrote down billions in bad loans, some critics said Callan was slow to react.

Portfolio magazine's Kolhatkar.

Ms. KOLHATKAR: There are definitely people out there - investors, short sellers, hedge fund managers - who think that she was perhaps not entirely forthcoming with them about the problems Lehman faced.

NOGUCHI: On Monday, Lehman brought some of those problems to light. It's bracing for a $2.8 billion quarterly loss, an unwelcome surprise for investors. Some say that news shattered Callan's credibility.

Wharton Professor Michael Useem.

Professor MICHAEL USEEM (Wharton University): The game, so to speak, on the street is one in which credibility is vital, especially for financial services. And equity investors, equity analysts pay extraordinary attention to consistency and message, because that's literally almost all they have to go by.

NOGUCHI: Lehman's stock has fallen by about half since she took over six months ago. The firm also replaced its president and chief operating officer, Joseph Gregory, a 30-year veteran at the firm. Gregory joins a long list of ousted bank executives: Charles Prince of Citigroup, Stanley O'Neal of Merrill Lynch, and Zoe Cruz of Morgan Stanley.

As for Callan, Kolhatkar said her tenure will be remembered less for what she did and more for what she represented.

Ms. KOLHATKAR: I think probably she'll be remembered for the fact that she was such an unusual choice, in a way, for that job. And that's not to say that she couldn't have been successful in it. You know, we'll never know, because she really wasn't given time or the right sort of circumstances to grow into it.

NOGUCHI: Lehman declined to make executives available for comment. Callan's replacement is Ian Lowitt, Lehman's current chief administrative officer. The firm said Callan would remain at the company in a position to be determined.

Yuki Noguchi, NPR News.

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