‘The Fed and Lehman Brothers’ Review: When the Bailouts Stopped - WSJBall re-examines the evidence of the choices facing the managers of the financial crisis. In particular he looks at a crucial choice — to let the storied Wall Street firm Lehman Brothers fail in bankruptcy rather than offer taxpayer support for a bailout. His conclusion: the Federal Reserve, US Treasury, and New York Fed made a grave unforced error in allowing Lehman Brothers to declare a messy bankruptcy — still the largest US corporate bankruptcy of all time — in the process adding destructive force to the financial tsunami already enveloping the economy and financial markets in September And they disingenuously described the reasons for their decision. One of the conditions of Fed lending is that it cannot lend money to insolvent institutions, or banks with insufficient collateral to pledge for a new loan. It is undeniable that Lehman faced a liquidity crisis in September — the inability to pay back everyone it owed money to, if everyone wanted their money back right away. The dispute Ball addresses is whether Lehman had enough assets in the medium-to-long run that would have covered what it owed so that a fresh loan from the Fed could have averted bankruptcy.
The Fed and Lehman Brothers: Setting the Record Straight on a Financial Disaster
The bankruptcy of the investment bank Lehman Brothers was the pivotal event of the financial Author interviews, book reviews, editors' picks, and more.
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