Researcher: Fed Could Have Saved Lehman Brothers From Bankruptcy

On a side note: Lehman Brothers was turned down by then NY Fed President Tim Geithner to be a bank holding institution yet Morgan Stanley and Goldman Sachs were not turned down. If Lehman was not turned down, like Morgan Stanley and Goldman Sachs, Lehman would have received a bailout…

The collapse of Lehman Brothers in a record-setting bankruptcy could have been avoided, but the political will was lacking at the Federal Reserve to rescue the troubled investment bank, according to newly published research.

“Fed officials have not been transparent about the Lehman crisis. Their explanations for their actions rest on flawed economic and legal reasoning and dubious factual claims,” says Laurence M. Ball, chairman of the economics department at Johns Hopkins University and author of the report.

Lehman’s $639 billion bankruptcy filing occurred as a bubble in the U.S. housing market contracted from a 2006 peak. The U.S. economy fell into the deepest recession since the Great Depression in the months after the bankruptcy as unemployment jumped to a 30-year high of 10 percent.

Ball’s research concludes that the Fed did have the legal authority to bail out Lehman, whose collateral was deeply impaired. But Lehman’s crisis occurred amid a backlash against government bailouts of Bear Stearns, Fannie Mae, Freddie Mac and AIG.

Read more: Researcher: Fed Could Have Saved Lehman Brothers From Bankruptcy

3 responses to “Researcher: Fed Could Have Saved Lehman Brothers From Bankruptcy

  1. Same was said about IndyMac – could have survived especially with the bailout – but NY Sen. Chuck Schumer’s friends wanted a bank.

  2. A sacrificed goat on the alter of covering their asses.
    Lehman Brothers the least liked of all, except IndyMac, another sacrificed goat. 1 billion dollars for 30 billion in assets, if I remember correctly…. Given to 1 West Bank, no other bidders. The fed CHOSE the winners and LOSERS.
    Can you say rigged?

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