How Lehman Brothers Veered Off Course

The Washington Post reports:

If you want to see what's wrong with Lehman Brothers, the investment bank with a storied name but a troubled present, you need to leave the canyons of Wall Street and head to the flatlands of exurban Bakersfield, Calif., some 120 miles northeast of Los Angeles. That's where you find McAllister Ranch, envisioned as a 6,000-home, multibillion-dollar recreational community.

As you approach the "ranch" after a nearly two-hour drive from L.A., you come across an expanse of rough scrub dotted with tumbleweed, intermittent oil derricks and the odd skittering rodent. You pass a billboard -- "opening soon" -- pitching new homes built around a Greg Norman-designed golf course and promising boating, fishing and a beach club. Finally, you make it to McAllister: 2,070 fenced-in acres, which is more than three square miles. Look past the fence -- you're not allowed inside -- and you see a half-finished clubhouse and a golf course gone to weeds. You don't see any happy homeowners, who were supposed to have started moving in two years ago. You don't even see any homes. All you see is an almost-lunar landscape with no construction going on. So far, this development alone -- part of a major bet on Southern California's Inland Empire -- has cost Lehman $350 million. None of Lehman's peers, such as Merrill Lynch and Morgan Stanley, has this kind of exposure.