Lehman Brothers

By John Terrett in Americas on April 21st, 2010
Photo by AFP

When the giant investment bank Lehman Brothers fell, it created the largest bankruptcy filing in US history and helped accelerate the worst global recession in 70 years.
 
Now 19 months later Washington's asking how the firm failed and why it couldn't be saved.
 
Recent revelations have suggested that the true state of Lehman's balance sheet at the time of its collapse was much worse than thought - and that the firm used an accounting "trick" to hide the reality of its books.

Federal Reserve Chairman Ben Bernanke, who was testifying in Washington DC on Tuesday before a House committee investigating the collapse of the investment bank in 2008, said the failure of Lehman Brothers was "unavoidable".  

By John Terrett in Business on June 17th, 2009

President Obama has announced the most sweeping reorganization of financial-market supervision since the 1930s … touching almost every corner of banking from misleading or dangerous mortgages to credit cards and exotic financial products.

Among his main proposals, the creation of a new Super Regulator to oversee the industry in future.

The aim is to stop a financial crisis, like the one we’re now living though, from ever happening again.

At the centre of the plan which administration officials refer to as a “white paper”  are new powers for the central bank the Federal Reserve to oversee the biggest financial players.  Firms whose collapse would rock the whole economy as Lehman Brothers did.

There are new rules for the authorities to unwind and break up systemically important companies — as the FDIC agency already does with failed banks.

By Abid Ali in Business on May 19th, 2009

Governments have spent more than 12.5 trillion dollars trying to rescue the banks from themselves and the global economy from a 1930’s style depression.

They may have been a bit slow of the mark trying to get to grips with the issue, and there certainly have been some mistakes none bigger than former U.S. treasury secretary Henry Paulson’s decision to let Lehman Brothers collapse. But they did step in. And there certainly are signs the economy may have hit the bottom.

Investment banks in the first quarter certainly came up trumps, beating the markets best guess on their earnings.

Losses were not bad as many thought at Citigroup ($966 million) or Morgan Stanley ($578 million).

In the first three months of this year Goldman Sachs ($1.66 billion), JP Morgan Chase ($1.52 billion), Credit Suisse ($1.71 billion) made respectable profits.

Is it time to pay for the clear up? Should governments slap the banks with a windfall tax?

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