"Public Policy Issues Raised by the Report of the Lehman Bankruptcy Examiner," Statement of Anton R. Valukas. Accessed April 16, Rosalind Z. Wiggins, Thomas Piontek, Andre Metrick. Yale Program on Financial Stability Case Study. "The Lehman Brothers Bankruptcy A: Overview," Page 5. Accessed April 16, S&P Dow Jones Indices LLC. the bankruptcy of Lehman Brothers the 15th of September in and the imminent consequences of it. 2. Lehman Brothers: A versatile company For over years, Lehman Brothers has had a big impact on the financial and commercial history of the United States . Lehman Brothers focused on distinguishing the potential of. Ultimately, on 15 September when Lehman Brothers filed for bankruptcy, the stocks of banks and primary dealers declined by −% and −%, respectively, and were the biggest losers.
Related videosFormer Lehman Brothers Employees On The Crisis
Call the membership department at or email form sipc. The liquidation of Lehman Brothers Inc. This date, Friday, September 19, , is the filing date for which all claims are valued. The court appointed James W. Giddens as Trustee. You may contact the Trustee at:. Chapman under Case Number scc. The Accelerated Final Distribution Election provides unsecured general creditors the opportunity to receive an additional 1.
The U. Search Query. Steps SIPC takes to recover customer assets when a brokerage firm fails financially. How We Protect You. What is SIPC? A brief introduction. Watch a short video. SIPC steps in when a brokerage firm fails financially, and assets are missing from customer accounts.
For Member Firms. Member Filing Requirements Questions about filing requirements? Hauled before Congress in October, his only public outing since the fall of Lehman, Fuld blamed "rumours, speculation, misunderstandings and factual errors" for the collapse. I take full responsibility for the decisions that I made and for the actions that I took based on the information we had at the time," he said, but there was nothing he would have done differently.
Like the bosses of other investment banks, Fuld had been salivating since the middle of the decade over the enormous profits on offer from slicing and dicing America's mortgages into securities for sale to investors around the world. Lehman rushed headlong into this business, ignoring warnings that the US housing market had become dangerously overheated and that mortgage brokers were doling out loans to people who could never repay them.
The bank was also one of the biggest financiers of commercial property and had taken some pretty optimistic views of its portfolio's worth. A reckoning was fast approaching and Lehman had put itself at more risk than most: to juice results and get ahead of the competition, it had pumped itself up on debt.
As long as it had assets to match them, this was fine. But investors were increasingly sceptical about the value of the assets Lehman claimed. Clients fled. Lehman scraped together the coin — just — and made it to the weekend, but it was clear it wasn't coming out the other side as an independent bank. Henry Merritt Paulson, Hank to everyone, is a man of impeccable free market credentials. It is gobsmacking that he will go down in history as the Treasury secretary who ordered the biggest-ever government intervention in the US banking system.
It is still gobsmacking to him, too. Terrifying looking — totally bald, with the thick neck of the American football player that he was in college — Paulson had been both an obvious choice for Treasury secretary and an odd one.
But he was not a natural politician, a tub-thumper in negotiation rather than a flatterer, and a tongue-tied mess in public speaking. The best orator in the world would have had trouble explaining the Treasury's policy pirouettes as the credit crisis spiralled last year. Just the weekend before Lehman collapsed, he had ordered the mother of all bailouts, the nationalisation of America's two mortgage finance giants, Fannie Mae and Freddie Mac, putting the Treasury on the hook for potentially hundreds of billions of dollars.
Yet in subsequent days, he had rediscovered his free market mojo. Capitalism must claim its scalps. Banks that take too much risk should be hoist on that petard. If the government were to guarantee nobody fails, then what's to stop bankers rolling the dice for higher and higher stakes — and higher and higher bonuses when the gambles pay off?
This was the line in the sand moment, Paulson figured. The time to "re-establish moral hazard". Lehman would get no money from the government. Wall Street would have to sort this one out itself. No bailout this weekend, he said. It was a message delivered by the Fed's Tim Geithner, the quiet-spoken government apparatchik whose career was forged in the Asian debt crises of a decade earlier, when the chief executives piled in to the Fed that Friday evening.
Some blame him for not delivering it forcefully enough. Paulson and Bernanke did deliver it forcefully, but all the way through that fraught weekend it hung there in the room: You did it for Bear Stearns. Few could really believe that there wouldn't somehow be taxpayer money, Fed loans or government guarantees — something — to smooth a rescue. In a hour blizzard of brainstorming and deal-doing, Wall Street was changed forever. But not in the way Paulson had hoped.
It was clear from that Saturday morning, when the titans of the industry reconvened, that Lehman was infinitely more complicated than LTCM before it. The chief executives were split into teams, some to examine how awful Lehman's property portfolio might be, others to try to untangle Lehman's trading relationships.
No one doubted that the consequences of failing to do a deal could be catastrophic, but the bickering began immediately. John Mack spoke up against the idea. How was it fair that his firm, Morgan Stanley, should end up with a slice of a dodgy property portfolio while Barclays or BofA walks off with the Lehman jewels?
Other firms pointed out that that, after the credit crisis, they couldn't afford to rescue of someone else. Nonetheless, talks continued. Bob Diamond, who runs Barclays' investment banking division, had made no secret of his desire to turn it into a global powerhouse, but had previously argued it was better to poach staff from rivals, rather than buy competitors outright and be saddled with reluctant employees.
This weekend, though, he scented the chance for a bold move. Barclays advisers crawled all over Lehman's books, as Diamond barked orders. No less ambitious was Ken Lewis, the bespectacled banker from North Carolina, whose Bank of America has long been an also-ran in investment banking. The company's bright-red branches dominated retail banking, but Lewis's attempts to build an investment bank to rival Goldman Sachs and its peers were always something of a laughing stock.
When bad bets by its Wall Street traders had wiped out the profits from the retail banking side in , Mr Lewis said he had had "all the fun I can stand in investment banking". But Lewis saw an opportunity to change his fortunes with an audacious bid for Lehman, and his staff had been sniffing around all week.
By Friday, though, they knew they couldn't make the numbers work. His team of advisers flew back to North Carolina empty-handed on Saturday morning, only to be told to get straight back on the plane to New York. Now Lewis was flying in with them. The mission had changed. There was a new target. They touched down around lunchtime. Thain was brainy in a way that didn't quite add up to smart. That morning, though, Thain had seen an important pattern in the credit crisis.
With markets panicking, investors and clients were sucking their money away from whichever bank looked the most dangerous. After Bear Stearns in March it had been Lehman. After Lehman, it would be Merrill. Thain was determined not to do a Dick Fuld — fight the market and lose. To salvage what he could of the year old firm, he was willing to sell it. The next day, Merrill agreed to be taken over. It is time to "spray foam on the runway", Tim Geithner told his sleep-deprived officials on Sunday afternoon.
Lehman was going to crash. Only then did the truth dawn. Paulson, Geithner and Bernanke had not been negotiating. There really would be no government guarantees, no taxpayer bailout.
Bob Diamond at Barclays had come closest to a deal, but even he had come back to the Treasury demanding that it backstop Lehman's trading positions until he could arrange a vote of Barclays shareholders. When Barclays received a "no", the game was over for Lehman.
Dick Fuld, pacing uptown, had come to the same realisation by the middle of Sunday. Geithner was not returning his calls. If her husband wanted to call him back, he would. Spraying foam on the runway meant doing whatever was possible to keep markets happy while the unpredictable consequences of Lehman's failure played out.
The Fed promised to pump money into the markets. Meanwhile, Geithner shifted his attention to the insurance giant AIG, where he was trying to orchestrate another private-sector rescue. There was not enough foam. When Lehman crashed, pieces flew off in all directions. On the Monday morning, an exhausted-looking Paulson began a tense press conference with an attempt at levity. He insisted that markets had had a long time to prepare for Lehman's collapse, and the banking system was "safe and sound".
But it wasn't. Investment funds that had promised their savers they were the safest place for their money came forward to say they had lost money on Lehman, sparking panic. The private sector pulled away from AIG, leaving the Fed no alternative but to nationalise it, and worry about untangling its vast sub-prime mortgage trades later.
By Wednesday, the credit markets had seized up entirely. Big corporations were reporting difficulty getting funding to pay wages and invoices. The economy appeared in grave danger. Who are these guys that just keep coming?
On Thursday night, the Treasury went literally down on his knees before Nancy Pelosi, speaker of the House of Representatives, begging her to agree taxpayer money to bail out the financial system. Bernanke, a scholar of the financial panic that caused the Great Depression, told fearful lawmakers there wouldn't be a banking system in place by Monday morning if they didn't act.
Paulson talked openly about planning for martial law, about how to feed the American people if banking and commerce collapsed. Despite this, it would take almost two weeks before Congress agreed — at the second attempt.
The best defence of the decision to let Lehman fail is that it shocked Congress into providing funds to recapitalise the banking system — something it might not have done without the scenes of Lehman staff carrying their boxes into the street. If the credit crisis had continued to play out slowly, largely hidden from public view, America's sclerotic political system may never have mustered the energy to react. But the consequences of those 48 hours, when Paulson's laissez-faire capitalism briefly reasserted itself, were severe.
Ben Bernanke admits that Lehman's demise had consequences for the rest of the economy. I don't mean everything would have been great if we had bailed out Lehman. We were in a financial crisis before Lehman. But it had a shock value that just caused everything to fall off a cliff. If you look at data on almost anything — consumer spending, investment spending, car sales, employment — it just drops off the table at Lehman Brothers and I don't think we needed to have that.
Paulson's initial defence of letting Lehman fail, that he believed the market had had time to prepare, gave way to the one he uses today, echoed by Bernanke. This is that there was simply no way the Fed or the Treasury could have intervened.
There was no legal mechanism to provide funds to an insolvent company. It's an argument that still perplexes many. It should be viewed as an unacceptable. They didn't have legal authority to do Lehman Brothers, but two days later they had legal authority to do AIG, an insurance company? Nobody thought they had legal authority to do Bear Stearns, but they found a legal authority. The Treasury — now run by Geithner, appointed by Barack Obama to succeed Paulson in January — and the Fed are pushing Congress for precisely the formal powers they say they need to seize and sort out future Lehmans.
The proposal is part of a wider set of reforms designed to ensure Wall Street is never again allowed to run wild, gamble with so much borrowed money, or to allow firms to grow so big they can hold the economy to ransom when they get into trouble.
But these reforms are bogged down in Congress, in the teeth of a resurgent lobbying effort from the finance industry. The last CEO of Lehman Brothers has made one public appearance since that fateful weekend, telling a Congressional hearing that the pain will stay with him for the rest of his life.
Friends report he feels betrayed by Hank Paulson, and mystified by what he could have done differently, but he is now personally besieged by lawsuits from shareholders claiming he misled them. The Bank of America chief executive has lived to rue that whirlwind weekend of dealmaking — the acquisition of Merrill turned out to be pure poison.
Spiralling losses forced Lewis to go cap in hand for a government bailout, and shareholders revolted, stripping him of the additional title of chairman. His days at the helm are numbered. The former Treasury secretary had longed for retirement, a return to his loves of bird-watching and rearing wildlife on his farm in Illinois, but he has instead been fighting to salvage his reputation.
Assailed by Congress, which believed he was more interested in helping his friends at Goldman Sachs than saving the real economy, he is writing a self-justificatory book, out in the New Year. Diamond refuses to be cowed by public revulsion against Wall Street pay, and continues to poach bankers with high bonuses.
The Morgan Stanley chief kept his cool as panic threatened to engulf even his firm. He persuaded regulators to ban speculation against his shares and then became one of the first to pay back the government bailout. Slated to retire next year. This smooth son of Greek immigrants is now the King of Wall Street. One of the few CEOs who pulled out of sub-prime in time, his cockiness is at new highs. Obama prevaricated over reappointing the Republican academic to the Fed chairmanship, but an overwhelming number of economists advised that Bernanke — despite his mistakes — should be rewarded for preventing the crisis becoming, in his words, "Depression 2.
Proving that bankers can make money in any market, Goldman Sachs has soared back into the black this year, but Blankfein, its CEO, has become a lightning rod for criticism of Wall Street.
He faces the tricky question of what to do about his bonus. Will he have the balls to take it? With markets still in panic mode in January, Obama believed that promoting the New York Fed chairman to Paulson's old job would bring continuity.
But he is growing in stature. The Merrill boss went from hero to zero in four months. Merrill's losses spiralled out of control and Lewis blamed Thain for keeping him in the dark. When Thain asked for a multi-million-dollar bonus, it was the last straw, and he was fired by Lewis in January in a minute meeting. Sometimes I lie awake at night trying to place all the if-onlys in some kind of order.
Sometimes the order changes, and sometimes there is a new leader, one single aspect of the Lehman collapse that stands out above all others. But it's never clear. Except when I stand right here and look up at the great glass fortress which once housed Lehman, and focus on that 31st floor. Then it's clear. Boy, is it ever clear. And the phrase if only slams into my brain. If only they had listened — Dick Fuld and his president, Joe Gregory.
Three times they were hit with the irredeemable logic of three of the cleverest financial brains on Wall Street — those of Mike Gelband, our global head of fixed income, Alex Kirk, global head of distressed trading research and sales, and Larry McCarthy, head of distressed bond trading. Each laid it out, from way back in , that the real estate market was living on borrowed time and that Lehman Brothers was headed directly for the biggest subprime iceberg ever seen, and with the wrong men on the bridge.
Dick and Joe turned their backs all three times. It was probably the worst triple since St Peter denied Christ. Beyond that, there were six more if-onlys, each one as cringemakingly awful as the last. If only Chairman Fuld had kept his ear close to the ground on the inner workings of his firm — both its triumphs and its mistakes. If he had listened to his generals, met people who formed the heart and soul of Lehman Brothers, the catastrophe might have been avoided.
But instead of this, he secluded himself in his palatial offices up there on the 31st floor, remote from the action, dreaming only of accelerating growth, nursing ambitions far removed from reality. If only the secret coup against Fuld and Gregory had taken place months before that clandestine meeting in June If the 11 managing directors who sat in ostensibly treasonous but ultimately loyal comradeship that night had acted sooner and removed the Lehman leaders, they might have steadied the ship, changing its course.
If only the reign of terror that drove out the most brilliant of Lehman's traders and risk takers had been halted earlier, perhaps in the name of common sense. The top managers might have marshalled their forces immediately when they saw giants such as Mike Gelband being ignored. If only Dick Fuld had kept his anger and resentment under control.
Especially at that private dinner in the spring of with Hank Paulson, secretary of the United States Treasury. That was when Fuld's years of smouldering envy of Goldman Sachs came to the surface. Could that perhaps have been the moment Hank decided he could not bring himself to bail out the bank controlled by Richard S Fuld? If only President George W Bush had taken the final, desperate call from Fuld's office, a call made by his own cousin, George Walker IV, in the night hours before the bank filed for Chapter 11 bankruptcy.
It might have made a difference. If only Those two words haunt my dreams. I go back to the fall of Lehman and what might have made things different. For most people, victims or not of this worldwide collapse of the financial markets, it will be, in time, just water over the dam. But it will never be that for me, and my long background as a trader and researcher has prompted me many times to burrow further to the bedrock, the cause of the crash of