Does Bankruptcy Save Jobs?

Remember all those pictures of dejected Lehman bankers walking out of their offices with cardboard boxes full of personal possessions? Well, it seems they might have acted rather prematurely. In fact, there seems to be a good chance that there will be fewer job losses at Lehman than there were at Bear Stearns, which didn't declare bankruptcy. Likewise, JP Morgan will likely keep on many more of WaMu's employees after buying the bank out of bankruptcy than it would have done if it had had to shoulder a large chunk of WaMu's debts.

Barclays, which bought the US operations of Lehman Brothers, has given every indication that it wants most of its new employees to stay on. Meanwhile, Nomura, which just bought Lehman's European operations for $2 after spending $225 million on the Asian franchise, is, my sources tell me, telling key Lehman employees (the highest-paid ones) in both Europe and Asia that they will be paid at least as much money in 2008 and 2009 as they earned in 2007.

In other words, it looks very much as though when bondholders lose money, there's magically more money available to pay employees. Maybe employees at Wachovia should be rooting for a bankruptcy filing, rather than a sale. They might lose on their stock holdings, but those have been mostly wiped out anyway. And they'd have a higher probability of keeping their jobs.