The Fed and Lehman Brothers by Laurence M. BallThe bankruptcy of the investment bank Lehman Brothers was the pivotal event of the 2008 financial crisis and the Great Recession that followed. Ever since the bankruptcy, there has been heated debate about why the Federal Reserve did not rescue Lehman in the same way it rescued other financial institutions, such as Bear Stearns and AIG. The Feds leaders from that time, especially former Chairman Ben Bernanke, have strongly asserted that they lacked the legal authority to save Lehman because it did not have adequate collateral for the loan it needed to survive. Based on a meticulous four-year study of the Lehman case, The Fed and Lehman Brothers debunks the official narrative of the crisis. It shows that in reality, the Fed could have rescued Lehman but officials chose not to because of political pressures and because they underestimated the damage that the bankruptcy would do to the economy. The compelling story of the Lehman collapse will interest anyone who cares about what caused the financial crisis, whether the leaders of the Federal Reserve have given accurate accounts of their actions, and how the Fed can prevent future financial disasters.
The Fed and Lehman Brothers : Setting the Record Straight on a Financial Disaster
Ball 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.
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Please take this quick survey to tell us about what happens after you publish a paper. Business Economics. The failure of Lehman Brothers looms large as a pivotal moment in the global financial crisis of — It is widely believed that the financial turmoil in the wake of the Lehman filing contributed significantly to the deepening of the recession and perhaps even to the slow pace of recovery since So, it is natural to seek an understanding of the public sector decision making—at the Fed and in the Treasury—surrounding this event.
The Center for Science and Justice, led by Professor Brandon Garrett, will apply legal and scientific research to reforming the criminal justice system. The bankruptcy of Lehman Brothers was the pivotal event of the financial crisis. Ever since the bankruptcy, there's been heated debate about why the Federal Reserve did not rescue Lehman in the same way it rescued other financial institutions. The Fed's leaders strongly asserted that they lacked the legal authority to save Lehman because it did not have adequate collateral for the loan it needed to survive. In his new book, "The Fed and Lehman Brothers", Laurence Ball argues that the official narrative of the crisis is wrong; the Fed could have rescued Lehman but chose not to because of political pressures and an underestimation of the damage the bankruptcy would do to the economy. Join us as we hear from Mr. Ball, a professor of economics at Johns Hopkins, who will discuss insights from his book.