Ten years on the Feds failings on Lehman Brothers are all too

first_imgOpinion 2 3 Facebook Facebook piloui Report Last modified on Tue 4 Sep 2018 08.45 EDT aganuin 33 34 Share via Email Maclon 6 7 Facebook Reply Jiri | Pick Share on Twitter Share on Twitter Freddie Mac and Fannie Mae Report Facebook ‘According to Paulson, the firms rescued by the Fed had enough collateral for the loans they needed, and Lehman Brothers did not.’ Photograph: Alex Wong/Getty Images HarryFlashman Ten years after the financial crash, the timid left should be full of regrets 3 4 Report 3 Sep 2018 17:30 JonS78 Share on Facebook Facebook Admittedly, accountants are pretty stupid even if they are academically clever. Just look at the weekly scandals that occurs globally. Reply aganuin Financial crisis Banking Twitter Facebook Bitter worked in a poetic fashion, 2 3 Facebook 0 1 Share Share via Email 3 Sep 2018 18:02 raphanus 4 Sep 2018 0:00 eezysqueezy Show 2 more replies Michael Callahan Report Yes, because every single middle class family that lost their home, kids college funds or pensions in 2008 got their government bailout paid in full, but those poor investment bankers only got a meager golden parachute. https://abcnews.go.com/Blotter/story?id=5965360&page=1 Erongi XOXOX Berny3 InigoDeMontoya Really ? I think the banks would have learnt more if more had failed and more of the senior managers/directors had been criminalised and stripped of their personal wealth. Reply Share The trail goes furthur back in that the regulators,apparently,had no knowledge that packaged mortgages were worthless whereas everyone else in the industry knew what was going on. Deutsche Bank, Citigroup, JP Morgan Chase,RBS, Bank of America and Goldman Sachs were all fined huge amounts for their activities with bundled worthless mortgages,years afterwards.How useless were the regulators and others if they are implicit in the process either through incompetence or worse ,cooperation ? How useful are increased requirements for capital reserve if real value of bank assets is grossly overvalued due to failure by auditors, who seem to have got away with murder, as well as regulators.How much in this gravy train has really changed? Report collapsed | Pick Facebook Reply Report Share on Facebook Report BoneyOCoonassa Share Timothy Geithner Share on LinkedIn Reply Share 3 Sep 2018 23:03 Facebook Twitter Email (optional) ladyga Reply 3 Sep 2018 15:54 3 Sep 2018 20:19 3 Sep 2018 20:30 Excellent point, it is often made out that the 2008 bail-out was a once in a lifetime black swan event that was needed to address an unprecedented event. In fact the banks were bailed out every fart’s end in the US over the previous decades. Every time they screwed up they got sorted out by the government, Lehman was a good kicking that was long overdue. It was a similar case in Ireland, it was put about at the time that this was a one-off event, like heck it was, Irish financial institutions were bailed out at a rate of once every 10 years prior to this. When capitalist organizations (and I speak as a capitalist) are given socialist treatment there is a problem on both sides, but it is the capitalists who need to accept the blame. ID20857 | Pick Share piloui 3 Sep 2018 22:54 Share on Facebook Reply Threads collapsed The opposition to Fed rescues arises largely from a misconception that they transfer money from taxpayers to bankers who have lost risky bets. BaronVonAmericano | Pick Share on Facebook | Pick newest Share on Facebook | Pick | Pick Share Reply Share on Twitter Reply Making public perception of a potential bail out a more relevant factor in the decision than the actual facts about Lehman Brothers’ access to collateral seems pretty indefensible if you ask me. Share Share Report Share Thanks, Grauniad, for some balanced reporting at least… 1 2 Sounds like God’s Banker wanted LB out of the way. 4 Sep 2018 3:32 4 5 Share on Twitter Very good point. It also raises the question as to whether bailing out Lehman might have reduced the severity of the crash which followed? Speaking as a capitalist sceptic, very good post. Twitter | Pick Share on Twitter Twitter 16 17 Report Just because they could have paid the money back later doesn’t make this statement a misconception. Punishing an institution for the collapse of the economy, even if it makes said collapse worse, isn’t necessarily a bad idea. If only American politicians cared enough to follow up by implementing necessary regulation (starting with reinstating Glass-Steagall and campaign finance reform…), it may have been worth it. In essence, it’s like saying we shouldn’t shove the mob boss in jail because the community depends on his patronage. That may be true, and the community will suffer in the short run, but the ultimate goal is changing the system of dependency that allowed the mob to take over in the first place. Maybe the next crash will make this more obvious… but if there isn’t a radical political shift in the US I don’t see that happening any time soon. InigoDeMontoya eezysqueezy 4 Sep 2018 2:11 7 8 Share on Twitter Share on Twitter Facebook deise_sage 8 9 Twitter So-called market forces are just another way to dupe the non-rich into believing there is a plan and laws that govern. There are not. It’s all done ad hoc and on the spot to relieve the wealthy from responsibility for depredation. Report Twitter 3 Sep 2018 19:25 3 Sep 2018 18:16 Twitter 5 6 | Pick Share on Twitter Share Report Report Twitter 5 6 Twitter Twitter Facebook 3 Sep 2018 22:47 InigoDeMontoya Report 3 Sep 2018 17:31 | Pick Share on Facebook Report 3 Sep 2018 19:01 Erongi Share on Twitter Share on Facebook Reply Share Share on Twitter Facebook 3 Sep 2018 16:44 1 | Pick Facebook Twitter Reply I can’t feel bad that this happened to Lehman. I do feel bad that AIG and others were bailed out. I especially hate the fact that Goldman Sachs, which by all rights should have gone under, was allowed to declare themselves a bank and therefore receive bailout money from taxpayers. In what sense was Goldman ever a bank? 1 2 Mark David Turner InigoDeMontoya Share on Facebook Share Share on Pinterest Facebook Reply | Pick Report 3 Sep 2018 20:35 Share Facebook | Pick Share on Twitter 7 8 Report Share on Facebook Facebook Share on Twitter Twitter Twitter Reply Share on Facebook Share on Facebook Every millionaire protected. Many dont even lose jobs. Meanwhile, poor people are starving and the government claims poverty. Facebook Share Reply Comments 187 Reply Show 4 more replies raphanus “That was the CAUSE of the banking problems, not the result of it.”No, greedy bankers and loan companies wrote worthless loans that weren’t backed by the income to pay them back. They were based on the promise that property values would continue to rise and the borrowers could refinance in a couple of years for a cash payout on the new inflated values driven up by the buying frenzy caused by all the speculative loans. The bankers then bundled the worthless paper into derivatives, sold them off, and left the suckers who invested in them to spread the disaster when the bubble finally burst. As for mortgages being “non-recourse”, most of the borrowers who were “under water” did not just walk away from their loans. They continued paying mortgages at their previous bubble values, not on the new lower value of their property. That sucked money out of the economy and allowed the banks to pay back the government financing with interest. Had more government intervention gone into writing down the inflated loans to the current market values, the reduction in loan repayments would have gone into homeowners’ pockets and into the economy rather than into the banks’ vault. Report Report Reply Erongi 3 Sep 2018 17:23 Twitter Hank of Goldman Sachs had the chance to save but didn’t, their biggest competitor…. And people still debate WHY? Reply 0 1 15 16 Facebook Reply Reuse this content,View all comments > JonS78 Reply | Pick Erongi Share 2 3 0 1 unthreaded aganuin 4 Sep 2018 1:08 Twitter Share on Twitter Report | Pick Report 0 1 Lehman Brothers Share This comment was removed by a moderator because it didn’t abide by our community standards. Replies may also be deleted. For more detail see our FAQs. Show 5 more replies XOXOX Berny3 Facebook Twitter Another set of bibs and plastic spoons wouldn’t have hurt. Reply hum9ol Facebook Facebook recommendations CivilDiscussion 1 2 The Lehman Brothers party is a red herring – it’s the system that stinks Reply ladyga Facebook 6 7 Report 4 Sep 2018 2:06 Facebook Facebook aganuin Twitter Share Share | Pick Report 0 1 Share 3 Sep 2018 16:54 Since you’re here… Share Share on Twitter Twitter Bill Young ID20857 Twitter Report Share Report baldisgood 5 6 Share on Facebook Straining to make this about the EU, aren’t you? FatCat08 | Pick Share Share on Twitter 10 11 | Pick Report What goverment? Who’s starving? Twitter | Pick Share on Facebook Maclon 3 Sep 2018 18:24 Minnoka Report 10 11 Share on Twitter Reply elliot2511 | Pick If I’m correct, Hank Paulson had been a senior executive in Goldman Sachs before he joined W’s cabinet. Its also well recorded that others who have gone this “public service” route often end up in lucrative gigs in the banking/finance sector when they exit the revolving door. How can people in this situation be expected to objective arbiters of what serves the public interest? For instance – eventhough the short term consequences were dire – maybe short term was not the only consideration. The absence of a big beast like Lehmans from the sector might be expected to benefit those who survive with a larger share of the market. The decision makers should have no scope for conflict – it must be time to prohibit easy movement between the gamekeepers of the public interest and the poachers of private profit. Even if there were no conflicts in the Lehman case, the careet contexts of thre decision makers should not be a source of doubt. Share on Twitter Reply joAnn chartier Lehman Brothers Reply Report Share on Twitter WillisFitnurbut Facebook Indeed; it took ages to work out that the London branch was only illiquid and not actually insolvent. This was, perhaps, Lehman’s big failing — not having put in place the ability to generate an asset list/collateral total fast enough to be able to qualify for saving. Twitter | Pick ‘How could it be legal to rescue Bear Stearns and AIG, but not to rescue Lehman?’Photograph: Linda Nylind/Guardian Share Share on Twitter Reason (optional) Twitter Share on Facebook Twitter 3 Sep 2018 17:57 Report Share on Twitter brilfc | Pick The packaged mortgages were not “worthless”. The low-grade tranches turned out to be worthless. The high-grade tranches were merely ‘worth less than they were assumed to be’. The problem was not their underlying value, but the inability to easily work out their future values at a given point in time. Share on WhatsApp Reply Share on Twitter 4 Sep 2018 11:08 Hank Paulson had been a senior executive in Goldman Sachs before he joined W’s cabinet. Its also well recorded that others who have gone this “public service” route often end up in lucrative gigs in the banking/finance sector when they exit the revolving door. Paulson was a banker, who refused to bail out a bank. 3 Sep 2018 17:28 Facebook Twitter Facebook | Pick Report Share on Facebook | Pick Hundreds of thousands of people lost their homes, the housing market crashed, and millions of people owed the banks more than their houses were worth for years, but the bankers made out like bandits and all got their bonuses. The world economy would have been better off if all the money given to the banks had been given to home owners to pay down the excessive mortgages the financial institutions had, in many cases fraudulently, given them. Dodd-Frank was imposed to demand more responsibility from speculating bankers interested only in their own profit. Now right-wing politicians are doing everything they can to gut Dodd-Frank so that the bankers can eagerly lead us into the next economic crisis, all the while raking in enormous profits. If the EU bankers had been forced to write off 50% of their Greek debt initially, that crisis would have been resolved years ago with far less suffering to ordinary people all over Europe. The author thinks it’s a positive outcome that money injected into the banks was all paid back with interest? I guess he thinks it’s OK for the general public to suffer as long as the bankers get their generous profits back. Share on Facebook 3 4 Order by oldest Share Reply Twitter Share on Facebook | Pick Pinterest BoneyOCoonassa Reply Report Twitter comments (187)Sign in or create your Guardian account to join the discussion. 3 Sep 2018 17:22 Share on Facebook Report Reply 5 6 Excellent comment. The extreme overvaluation of assets must have made it impossible to to assess how much collateral banks actually had in 2008. Some or most of those banks on your list in the first paragraph have been charged and fined multiple times for sharp practices and wrongdoing. There should be a system whereby they get points on their banking licience for every fine, until it gets taken away from them 3 Share on Twitter | Pick 3 4 Reply Share on Facebook Share on Twitter Share on Facebook Report DavidTheDude rdobinson Share on Twitter 3 Sep 2018 19:18 Share on Facebook Share on Twitter Share Moral hazard is a very real long term problem. You could just as easily argue that it’s indefensible not to pay a random when kidnappers are threatening to kill a hostage. Twitter Share on Twitter Show 4 more replies | Pick Twitter Report What is the alternative though? Appoint people with no experience of working within financial services? This seems like a much less favourable alternative. Share on Facebook hum9ol 3 Share on Twitter I know one of the auditors on the subsequent Lehmans audit after it had been allowed to fail. They did have the assets to survive all be it, it took them about 4 years to find and calculate all their assets. There is no evidence at all. Through the Primary Dealer Credit Facility (PDCF) Lehman could borrow as much as it could provide collateral to cover. Lehman just had to deliver the collateral and the Fed would lend the money. In fact, Lehman borrowed $28 billion on the day it filed bankruptcy against total collateral of $32.866 billion. That tied for the third largest loan the PDCF had made up to that date. The largest PDCF loans to Bear Stearns were $28.5 billion, $28.2 billion and $28 billion. Subsequent to the Lehman failure, three larger firms, Barclays, Morgan Stanley, and Merrill Lynch, borrowed larger amounts. (I have heard of pawn brokers who will come to your home and search for collateral they can accept, but it doesn’t work that way in the financial markets where everything is electronic.) When the government didn’t have time, the IMF did. Also, think savings & loan crisis which helped the larger institutions hoover up the smaller ones. Facebook Facebook KatieL 3 Sep 2018 21:02 That’s not what I mean at all. The freezing of the financial system when Lehman fell precipitated the biggest financial crisis in history. For a few days there was a possibility that banks would no longer exist in their current form, vast swathes of the economy would stop functioning and millions of people / businesses would be stuck in courts for years. Yet politically they had to try it, I’m sure in the hope it wouldn’t be as contagious as it was. As it happened, Lehman’s collapse showed they couldn’t let a similar entity go through the same thing. Reply Report Cupidity. Romancing the markets? | Pick Facebook Facebook Reply Reply Share on Twitter Mark David Turner Share on Twitter Twitter willyrobinson Reply Share Share 4 Sep 2018 1:58 Share on Twitter gavindac1 9 10 Report | Pick Reply Report Share Share on Facebook Reply Facebook Twitter 4 Sep 2018 3:56 Laurence M Ball 2 3 | Pick Report Reply Report Twitter Think this is the first article I’ve read in the Guardian that criticises politicians for NOT bailing out a bank. Share Facebook Share on Twitter Mon 3 Sep 2018 03.30 EDT Share on Twitter Read more HarryFlashman joAnn chartier KatieL brilfc 14 15 2 3 Report 3 Sep 2018 20:49 Share | Pick Facebook KatieL Jiri Share on Facebook Share on Facebook Reply KatieL Report 10 11 Share on Twitter Share on Facebook 3 Sep 2018 17:35 InigoDeMontoya Share Reply expanded Share on Twitter Share on Facebook Report Share Twitter 6 7 Reply deise_sage Share on Facebook Reply eezysqueezy Twitter | Pick 4 Sep 2018 3:44center_img Twitter | Pick Larry Elliott Report Reply Twitter 4 Sep 2018 3:45 Facebook Report Twitter 4 Sep 2018 3:30 Report Report Facebook InigoDeMontoya 3 Sep 2018 20:38 Report Twitter Report Share Share on Twitter “and all got their bonuses.” Well. Except the ones who were fired or made redundant. And the ones who went to jail. And the ones who didn’t get a bonus that year. “Hundreds of thousands of people lost their homes, the housing market crashed” That was the CAUSE of the banking problems, not the result of it. “millions of people owed the banks more than their houses were worth for years” Not really — this was in the US where a large proportion of mortgages are “non-recourse”. | Pick Stefan Stern Share Twitter Share on Twitter 8 9 “Doesn’t really address the central irony that in letting Lehman fail, they ensured that they would likely never let anything else fail ever.” By allowing a bank to actually fail the Fed was somehow broadcasting to banks that it wouldn’t let them fail? How does that follow? I don’t think what you have posted is ironic. Truthfully, it instead sounds more like a non sequitur. “If one examines Lehman’s finances on the eve of its bankruptcy, it is clear that the firm did have ample collateral to borrow the cash it needed to stay in business” Incompetent misleading journo. Lehman was sitting on losses which would have crystallized anyway, bailout or not, and would have swallowed any net assets allegedly available for collateral. If Lehman has those, they would have borrowed to bail themselves out in the first place. I meant to say ”bidder”… Twitter Facebook Facebook Loading comments… Trouble loading? Since the dawn of the Thatcher/Reagan era, government has not been serving the public interest. Perhaps more accurately stated, since that time the focus of government policy has been to help those who do not need help, instead of those that do. deise_sage Share on Twitter hum9ol 4 Sep 2018 3:07 JonS78 4 Sep 2018 1:28 Reply Share | Pick Facebook 3 Sep 2018 22:29 3 Sep 2018 22:28 Share on Twitter Report Share You’re totally right. This is really the crux of the issue; At some point will the little people realize they are getting screwed by the rich (private AND public) and rebel. Share on Twitter | Pick Goldman did a quickie changeover to become a bank so they could get bailed out. Remember your government works day and night to help the rich stay away from losses. Share on Facebook Reply Share on Facebook Facebook Report Nobby Stiles 3 Sep 2018 19:54 10 11 Reply Report Share InigoDeMontoya Share on Twitter In 2007 Fortune magazine ranked Lehman Brothers investment bank number 1 on its list of “most admired securities firms”. Just a year later, on 15 September 2008, the financial world was shocked when Lehman, with $600bn (£463bn) of assets, filed for bankruptcy, causing chaos in financial markets: stock prices plummeted, credit flows froze, and markets feared that even larger financial institutions – from Morgan Stanley to Goldman Sachs and Citigroup – might fail.The Lehman bankruptcy was shocking, in part, because it was unique. Other financial institutions, such as Bear Stearns and AIG, also experienced crises in 2008 and surely would have failed if not for emergency loans from the US Federal Reserve. On the eve of its bankruptcy, Lehman urgently sought similar aid from the Fed, but the policymakers at the time – Fed chair Ben Bernanke, Treasury secretary Henry Paulson, and Timothy Geithner, president of the Federal Reserve Bank of New York – said no. Ever since, Bernanke, Paulson and Geithner have given a consistent rationale for their decision, one they are now reiterating at media events commemorating the 10th anniversary of the financial crisis: the trio wanted Lehman to survive, but rescuing it would have been illegal, and they were unwilling to break the law. As Paulson put it in July, “we didn’t believe then and we don’t believe now that there was a single authority we had” that would have allowed a Lehman rescue. Report Share Facebook piloui JonS78 Twitter Twitter 1 2 6 7 Share Facebook 3 Sep 2018 22:32 Share on Facebook Share on Twitter Share on Facebook You seriously think Lehman was Goldman’s biggest competitor? Also a bit silly to suggest that an ex head of Goldman Sachs would always take decisions solely in the interests of his ex employer. if he did that he wouldn’t be treasury secretary in the first place. Paulson wanted Barclays to take over Lehman – but that deal was killed from our side. If Paulson was acting solely in the interests of GS he wouldn’t have pushed for his competitor to be taken over by another competitor creating a stronger competitor.. 1 2 JonS78 3 Sep 2018 17:26 Mr Ball is right in that Lehman had been a target for some years, given its culture of arrogance and extreme cupidity. When the infamous hedge fund Long Term Capital blew up, Lehman was the only investment bank not participating to the safeguard effort undertaken by the Fed – It sealed its fate at that moment. As a trader at one of the major investment bank, we had previously alrerady received the instructions from the top no longer to accept Lehman’s name… for a few hours. But the conclusion he implies that Lehman should have been saved is very debatable. Another scenario would have been to let many more banks fall, and nationalize the system, which would have been much more fair, not just to Lehman’s bankers but to the public. Today in any case, banks have become regulated utilities, but with undeserved windfall profits opportunities still largely left to banks shaerholders. This is absurd. When I read that governments have “made money” out of rescuing banks, it strikes me most people still don’t understand the workings of fiat money. Don’y they see that, by construction, if you throw in “enough” money, you’ll put the system afloat again? Where is the “merit”, was this a valid “test”? did we learn anything? That is what happened. And instead of talking about gain or loss in terms of electronic money, one should wonder if thee was a gain or a loss to society, whether we live in a better or worse place. That is the real question. Why trillions for saving banks make more sense than trillions to fund universal basic income (as a way to cut out the tail risk plaguing anyone’s life now that machines take over jobs one after the other) – or trillions to fund the environmental transitions to save our habitat and permit that mankind lives a bit longer on this planet ? those are the real questions Twitter John Burnett Share Share Twitter 11 12 Facebook Share on Twitter Minnoka 4 Sep 2018 3:43 Although that’s all falling apart with the leadership of the Labour party embracing treating members of one religion differently. InigoDeMontoya Share Facebook 2 3 Reply baldisgood 0 1 Share on Facebook Share on Facebook Share on Facebook Share on Twitter | Pick Report Opinion Report Reply 0 1 Share on Facebook 4 Sep 2018 0:45 Share Share on Twitter Facebook Reply Twitter 1 Report Twitter 3 Sep 2018 18:26 yet another shoehorn award! Well done! | Pick 2 Facebook | Pick Reply SwissUser Facebook Share on Facebook Show 25 Topics Maclon Report Share Misleading, incorrect comment… The 2008 crisis was known as the credit crunch because lending between banks dried up. Lehman had assets to borrow against but firms were unwilling to lend because they were worried about doing so. Take Lehman’s European business for example – the administrators have wound it down with several billion of assets remaining after paying back secured creditors and taking a huge amount in fees. Short term lending made available to the other bank allowed them to weather the crisis, but unfortunately Lehman Brothers was made to be the fall guy Reply Report How could it be legal to rescue Bear Stearns and AIG, but not to rescue Lehman? The 2008 decision-makers point out that the Federal Reserve Act requires that Fed loans be secured by collateral, which protects the Fed and taxpayers from losses if the loans are not repaid. According to Paulson and colleagues, the firms rescued by the Fed had enough collateral for the loans they needed, and Lehman Brothers did not.Lehman executives have bitterly contested this story, saying their firm could have survived if only the Fed had treated it the same way it treated other financial institutions. Some disinterested observers accept the policymakers’ explanation for their decision, but others do not. As Paulson ruefully put it in July, when he and his colleagues were asked the question of why they let Lehman fail, “we answer it and most people still don’t believe us” (a statement that elicited chuckles from an audience of sympathetic journalists).There is a vast amount of publicly available information on the Lehman bankruptcy, much of it gathered by the Congressionally appointed Financial Crisis Inquiry Commission and by the examiner appointed by the court. These and other public records provide good reason for people not to believe Paulson, Bernanke and Geithner: their story isn’t true. Facebook The banks could “pay the money back” because the Fed. essentially GAVE the banks $2.2 TRILLION in printed $$$ – “buying” lots of junk assets for whatever the banks TOLD them to pay. This was all behind the scenes; the $800 billion bailout Congress passed on top of this was the public part that got all the attention. Can you IMAGINE how all the neoliberals would HOWL if the Fed printed $2.2 trillion and GAVE it to working people? ” Paulson told the others: “I can’t do it again. I can’t be Mr Bailout.” Paulson’s chief of staff put the point bluntly in an email to Paulson’s press secretary: “I just can’t stomach us bailing out Lehman … will look horrible in the press, don’t u think?” That’s a perfectly sensible attitude to take. Even if you think it would have been better for Lehman’s to have been bailed out (which, with 20/20 hindsight, it probably would have been, all things considered), at the time, given the situation before him, Paulson’s decision was perfectly reasonable and ten years on, is entirely defensible. JumpingSpider Share on Facebook Facebook | Pick Market forces must be allowed to operate unfettered. Too big to fail is immoral. Support The Guardian Show 1 more reply Correct. Reply Report Share on Facebook Facebook Share on Facebook 12 13 JonS78 Report Share on Facebook KatieL | Pick The error was the earlier bail-outs. These delivered the wrong message and Lehman assumed it was in line for a handout. Reply Twitter Share on Facebook Lehman was left to fail because it was not Goldman Sachs. Now THAT would have been different. Dickie Fuld was just not in the clique Share on Twitter Would have helped less that requiring banks to bail out homeowners as a condition on the $29 trillion in near-zero interest loans made by the Fed. Had everyone kept their home our economy would be vastly better. | Pick | Pick Twitter Share on Twitter 3 Sep 2018 19:06 | Pick 4 Sep 2018 14:44 Share on Twitter Share on Messenger Facebook Facebook BoneyOCoonassa 100 Jiri | Pick gavindac1 It is what made Britain great. It is what makes the US great and will make it great again. Reply 6 7 Facebook Share on Facebook The 2008 crisis was known as the credit crunch because lending between banks dried up. Lehman had assets to borrow against but firms were unwilling to lend because they were worried about doing so. 1 2 Share 1 2 US economy | Pick Close report comment form Twitter HarryFlashman Share on Twitter 0 1 You forget how institutionalised people become.Most front office people move very 3-6 years – check LinkedIn. He was a lifer and a ‘Goldman’. Reply Share Facebook 4 Sep 2018 1:00 1 2 Share on Facebook | Pick deise_sage BoneyOCoonassa 3 Sep 2018 19:05 Shares7272 Share on Twitter 3 Sep 2018 16:34 Share on Twitter Facebook | Pick The key policymakers have always maintained they had no choice but to let Lehman collapse. That’s simply not true | Pick 4 5 Share on Facebook Share Paul Cockburn Share on Twitter TaliShar Twitter Facebook Share on Twitter Share Report | Pick Twitter 25 Report Share Twitter Reply View more comments Thanks for doing the digging for us. That habit we have of just accepting what is put before us — in news/economics/politics — without that background of who what and why we are just rah rah for a team rather than who and what is behind the latest gasp of outrage. 3 Sep 2018 17:13 XOXOX Berny3 Share on Twitter Facebook Ten years on, the Fed’s failings on Lehman Brothers are all too clear | Pick | Pick Twitter DinkSinger Facebook Whilst I am not condoning either the leverage – which was excessive – or their business model, they only needed sufficient liquidity to keep going and back out with losses to avert what happened. Also, the European – London – business could have offset/cover a lot of losses and prevented the scale of the crash. Share Show 3 more replies Share on Facebook Share on Facebook Facebook Facebook oldest Exactly! It would be helpful if The Gaurdian included biographies of it’s invited columnists so the rest of us could get some sense of who they are. Lawrence Ball is an American “New Keynesian” macroeconomist with a fairly impressive background. You can find his qualifactions online: M.I.T., Princeton, Harvard, and recently Johns-Hopkins universities, as well as a lot of work for several central banks and international organizations. You can probably trust his research. The bigger questions of “what should have been done” and “whose fault was it” are something else. Bill Young 4 Sep 2018 3:29 | Pick Reply 16 17 Reply CivilDiscussion Share on Facebook Share on Facebook Ben Bernanke Couldn’t agree more, not a single bank should be allowed to fail they all should have been propped up with trillions of dollars. Maybe the Fed can print a few trillion more and Lehman Brothers can be revived.Neoliberal “capitalism” looks a lot more like Neo-feudalism. Twitter | Pick 3 Sep 2018 20:02 10 11 3 Sep 2018 17:44 Share on Twitter Share on Facebook Share on Facebook Share KatieL Michael Callahan Twitter Share on Facebook Reply Many emails and memos document the discussions among Fed and Treasury officials in the days before the bankruptcy, and they make it clear that the discussions had nothing to do with the Fed’s legal authority or Lehman’s collateral. Instead, Lehman’s fate was determined by officials’ views of the political and economic consequences of a Lehman rescue or a Lehman bankruptcy.The deciding factor was politics: the decision-makers, especially Paulson, were unwilling to endure the intense criticism that would have followed a Lehman rescue. Having experienced the backlash from politicians and the media against the Fed’s loan to Bear Stearns in March 2008 and the government takeovers of Fannie Mae and Freddie Mac in early September, Paulson told the others: “I can’t do it again. I can’t be Mr Bailout.” Paulson’s chief of staff put the point bluntly in an email to Paulson’s press secretary: “I just can’t stomach us bailing out Lehman … will look horrible in the press, don’t u think?”Another factor was that policymakers did not fully anticipate the severe damage that the Lehman bankruptcy would inflict on the financial system and economy. Today, Paulson, Bernanke and Geithner claim they knew in advance that the event would be a “catastrophe”, a “calamity”, and an “epic disaster”. But, once again, their claims are contradicted by the real-time record. As Lehman faced bankruptcy, policymakers hoped that they could calm financial markets with measures including increased lending to Morgan Stanley and Goldman Sachs.But what about the collateral issue that is central to the official Lehman narrative? If one examines Lehman’s finances on the eve of its bankruptcy, it is clear that the firm did have ample collateral to borrow the cash it needed to stay in business, a fact that officials would have discovered had they actually looked.Because Lehman had ample collateral, a short-term loan from the Fed would clearly have been legal, and would have created very little risk for the Fed or taxpayers. With help from the Fed, Lehman might have weathered the financial crisis and be a healthy firm today. Even if Lehman had proved to be unviable in the long run, temporary assistance would have given it time to wind down its business in an orderly way, which would have lessened the disruption of the financial system, the severity of the recession and the loss of jobs. Share on Facebook 0 1 | Pick 4 Sep 2018 6:10 Share on Twitter 2 3 Report Share 3 Sep 2018 17:58 Share on Facebook Share on Twitter baldisgood | Pick Share on Twitter Twitter Share on Twitter All Twitter Share on Twitter Report 0 1 2 3 Debauchery2 Twitter | Pick Show 1 more reply Reply | Pick 4 Sep 2018 3:14 Share on Twitter Facebook Twitter Report Reply 9 10 Twitter Twitter Reply 3 Sep 2018 18:50 3 Sep 2018 18:52 CivilDiscussion ID20857 | Pick Share on Twitter Reply | Pick Share on Facebook Twitter 4 Sep 2018 6:56 Reply Minnoka Facebook Lafcadio1944 | Pick osm2009 Succe55 | Pick Yes, But, I like to know what will happen next??Where are we headed financially.?? The next recession will probably be as bad asthe one we had back in 2006. Remember, here in the states we don’t have any formof an actual safety net, and even with a steady job you’ll be a fool to feel too comfortable. The US-Gov. is sold out to the highest bitter.etc.etc…. Share elliot2511 2 3 Twitter Share on Facebook In that role, he was as much a politician as central banker. Share 3 Sep 2018 20:48 Share Twitter Twitter Share Share on Facebook 3 Sep 2018 16:06 Share on Twitter 3 Sep 2018 15:48 Report Report Reply Mark David Turner Share on Facebook | Pick Reply Twitter Share on Twitter Facebook Facebook Reply Share Reply 7 8 Share on Facebook 3 Sep 2018 20:48 3 4 | Pick Twitter Sorry there was an error. Please try again later. If the problem persists, please contact Userhelp Reply Share on Facebook Twitter Reply Report 2 3 Reply Share DavidTheDude Share Share SwissUser Share Share on Facebook Share Maclon 2 These key policymakers attacked in this cif are right. The claims here are nothing more tha strawmen fallacies and wild fanciful speculations specially selected to fit with his opinions. Despite the claim in the title of his new book being promoted here, he does nothing to set the record straight. comment Share on Twitter Share 9 10 baldisgood 4 Sep 2018 15:16 Share on Facebook Share on Twitter Twitter Read more Doesn’t really address the central irony that in letting Lehman fail, they ensured that they would likely never let anything else fail ever. I’d certainly disagree with the idea that Lehman was sitting on sufficient collateral – their leverage was (as I remember, please correct me) over 30x at a time asset prices had been hammered. The chances of FMV were minimal. Their balance sheet was just too stretched. Yes Lehman might have survived in theory but in the same way every bank could have survived when it didn’t. There was no confidence in Lehman as a counterparty, people were stopping doing deals with them. Liquidity was evaporating in the exact areas into which they might have sold assets. US elections were coming. They couldn’t have survived in practice. Share on Facebook Facebook hum9ol Share on Facebook 3 Sep 2018 23:13 | Pick NeverMindTheBollocks 3 4 Share Share on Twitter | Pick … we have a small favour to ask. The Guardian will engage with the most critical issues of our time – from the escalating climate catastrophe to widespread inequality to the influence of big tech on our lives. At a time when factual information is a necessity, we believe that each of us, around the world, deserves access to accurate reporting with integrity at its heart.More people are reading and supporting The Guardian’s independent, investigative journalism than ever before. And unlike many news organisations, we have chosen an approach that allows us to keep our journalism accessible to all, regardless of where they live or what they can afford. But we need your ongoing support to keep working as we do.Our editorial independence means we set our own agenda and voice our own opinions. Guardian journalism is free from commercial and political bias and not influenced by billionaire owners or shareholders. This means we can give a voice to those less heard, explore where others turn away, and rigorously challenge those in power.We need your support to keep delivering quality journalism, to maintain our openness and to protect our precious independence. Every reader contribution, big or small, is so valuable. Support The Guardian from as little as $1 – and it only takes a minute. Thank you. The events of 2008 will not be the last financial crisis in US history. Sooner or later, another major financial institution will find itself in trouble, and policymakers will have to decide whether to rescue it. We can hope that the Fed’s officials have learned the lessons of 2008, so that they stand ready to rescue the next Lehman Brothers.There is reason for worry on this score. The “bailouts” of 2008 were highly unpopular across the political spectrum: Bernie Sanders derided them as “socialism for the rich”, and conservatives were also distressed by government intervention in banking. These views led Congress, as part of the Dodd-Frank Wall Street Reform Act of 2010, to restrict the Fed’s authority to lend to distressed financial institutions. The details are complex, but one upshot is that a rescue of Lehman Brothers might truly be illegal under current law.The opposition to Fed rescues arises largely from a misconception that they transfer money from taxpayers to bankers who have lost risky bets. In fact, many of the Fed rescues in 2008 – and certainly the rescue of Lehman Brothers that could have occurred – were short-term loans that were very likely to be paid back with interest. Even if loans had not been repaid, collateral protected the taxpayers from significant losses. If members of Congress wish to reduce the dangers of future financial crises, the first thing they can do is repeal the Dodd-Frank restrictions on Fed lending.• Laurence M Ball is the writer of The Fed and Lehman Brothers: Setting the Record Straight (Cambridge University Press) Twitter And EU lets these kind of people have all the power. But being against the EU apparently make you a racist and right-winger in the crazy world of The Guardian. Share on Facebook Facebook 13 14 0 1 4 Sep 2018 8:00 Share Report Report Share on Twitter 50 Share If one examines Lehman’s finances on the eve of its bankruptcy, it is clear that the firm did have ample collateral to borrow the cash it needed to stay in business, a fact that officials would have discovered had they actually looked. That seems a very bold claim to make. Some evidence to back that up would be helpful. Lehman had collateral because I say they had collateral and everyone else was wrong doesn’t really qualify as evidence. Report Twitter 3 Sep 2018 23:02 DavidTheDude Share on Facebook 11 12 Share on Facebook Facebook Share on Twitter | Pick Would have encouraged Greece to borrow more if their debt was written off. They have been poor at managing money for a generation, at least, and they need to learn to avoid taxes and not retire very young for retiring from “hazardous” professions like hairdressing. FatCat08 Facebook Minnoka osm2009 Share on Twitter “If Paulson was acting solely in the interests of GS he wouldn’t have pushed for his competitor to be taken over by another competitor creating a stronger competitor..” Hahahahah… nice one. Nobody likes a monopoly until they own one. Facebook 24 25 3 Sep 2018 19:23 Share Share on Twitter Share on Twitter Facebook Rolling Stone magazine should resurrect the Matt Taibbi articles that exposed the whole ugly corrupt mess — those were the blazing inferno articles that named and blamed with absolute clarity and appropriate giant squid context. Report | Pick Share on Facebook Share Share on Facebook | Pick Please select Personal abuse Off topic Legal issue Trolling Hate speech Offensive/Threatening language Copyright Spam Other Share Share on Facebook 0 1 Sign in or create your Guardian account to recommend a comment Share on Facebooklast_img


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