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Brighton whizzkid: "I helped cause the credit crunch"
A Brighton computer whizzkid’s software helped spark the global credit crunch.
Software invented by Jeremy Mabbitt in his Brighton back room helped banks to create the complicated financial instruments that brought the economic system to the edge of self-destruction.
Lehman Brothers collapsed in 2008, sending shockwaves around the world as stocks plunged and investors panicked.
Governments were forced into taxpayer bailouts of the banking system – notably Royal Bank of Scotland, HBOS and Lloyds TSB – as it was widely believed that some institutions could be too big to fail.
Lehman had racked up losses of billions of dollars in the US mortgage market, after being caught out by complicated financial packages called collaterised debt obligations (CDOs) .
In an interview with The Argus, Mr Mabbitt revealed how his company had enabled Lehman and other banks to structure the massive deals.
His Galapagos product was the only software used by giant firms such as JP Morgan and Lehman Brothers to select the CDOs which triggered the financial crisis.
In August 2008 Mr Mabbitt signed a deal with Lehman Brothers to licence the software.
He said: “We must have been one of the last companies paid by Lehman Brothers.
“We usually worked with financial institutions on a fixed fee basis which meant contacts worth seven figures in dollars.
“The relationship with Lehman’s was based on a success fee, so we stood to make many millions of dollars. But the month after we signed the contract Lehman went bust.”
The former University of Sussex graduate and self-confessed geek said he blamed the fund managers, insurance companies and banks for the depth of the crisis.
He said: “I did not make a spectacular amount of money but the software had helped a lot of other people to make a lot of money.
“Galapagos was set up in 2003 and was a major success. I started it from my base in Brighton and by the time I sold it in 2009 we were employing 60 people around the world, with offices in New York and Canary Wharf. I would have made money if the market had continued to boom. We had no reason to think it wouldn’t.
“We were techies. The money men were not expecting the market to go bust, so why should we? It was going great guns.”
He has now launched a smaller computer firm, employing five people in Old Steine, Brighton, called Vidivici, from the Latin meaning “I saw, I conquered”.
The firm is developing packages that allow individuals to weigh up investment opportunities for themselves.
But he added: “It is certainly not my intention to cause a second financial crisis.”