Word: lehman
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Dates: during 2000-2009
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...state to decide what banks pay their employees or managers." But like other issues on the table in Pittsburgh, this is a battle bankers are likely to lose. In a speech on Wall Street on Sept. 14, the anniversary of the failure of Lehman Brothers, President Barack Obama warned the banking industry not to fight reform. "We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses," Obama said. The question is just...
Last Sept. 15, the venerable investment-banking firm of Lehman Brothers--saddled with a lot of dud real estate investments and unable to persuade its jittery creditors to keep lending it money--filed for bankruptcy protection. It was the largest bankruptcy ever in the U.S., but the really big news was what happened afterward. First came a financial panic that threatened to shatter the global capitalist order, followed by an unprecedented--and unprecedentedly expensive--effort by governments on both sides of the Atlantic to patch things...
...already knew all this, of course. It happened just last year, and in recent weeks, the news media have engaged in an orgy of commemoration and explanation of the Lehman collapse and its aftermath. So here's the $64 trillion question: What, if anything, have we learned...
First, the fragility, a.k.a. risk. A year ago, officials at the Treasury Department and the Federal Reserve didn't think letting Lehman go bankrupt would be a disaster. Those same officials have since argued that the law gave them no choice. But it's also clear that the authorities--then Treasury Secretary Hank Paulson, in particular--didn't want to intervene. The Fed and Treasury had taken a lot of flak for their earlier bailouts of Bear Stearns, Fannie Mae and Freddie Mac. It was time to let the market work...
Within days of Lehman's failure, it was apparent that the market wasn't up to the task. There was a run on money-market funds after the Reserve Fund (which had pioneered the money-fund business in 1970) revealed that it owned a lot of suddenly worthless Lehman debt. London-based hedge funds that relied on Lehman for day-to-day financing found themselves unable to do business. Similar dislocations played out around the world, and financial institutions became paralyzed by fear and confusion. They simply didn't trust one another anymore and didn't want to lend...