But its direct losses would mostly fall on the shoulders of institutional investors and current and former Lehman investment bankers who held the firm's stock. A failure of AIG, however, would directly affect a huge number of average Americans.
This wasn't just a problem for Wall Street: its insurance products were intertwined throughout Main Street. Once the world realized how bad of an idea it was to allow Lehman to fail, everything changed. That's why the widespread bank bailouts occurred.
While the U. So the calculus above became irrelevant. But at the time, during the weekend of September , , the logic above explains why Lehman wasn't revived. Skip to content Site Navigation The Atlantic. When you have reset your password, you can Sign In. Please choose a screen name.
This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards. Screen Name Selection. Only letters, numbers, periods and hyphens are allowed in screen names. Please enter your email address so we can send you a link to reset your password. Your Comments. Sign In Sign Out. We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Standards.
We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or by filling out this form. New comments are only accepted for 3 days from the date of publication.
Latest Business. AstraZeneca vaccine turns profitable in the third quarter In addition to the legislative changes since , the regulators themselves have adjusted to the post-crisis world. In , the Fed and Treasury seem to have had very few bankruptcy experts in their midst. This may have been one reason bankruptcy was not more seriously considered with Bear Stearns.
A decade later, there seems to be much more bankruptcy expertise within the ranks of the regulators. Given all these changes, the misperception of Lehman may seem to be solely of historical interest, and of little relevance for current financial markets. In reality, however, the misperception still matters a great deal. First, the conventional wisdom could chill enthusiasm for enacting the bankruptcy-for-banks legislation currently pending in Congress.
Lawmakers and others who are skeptical about bankruptcy are likely to view bankruptcy amendments through the lens of that skepticism. This would be unfortunate. As I have argued on this site previously, 19 the proposed legislation would significantly improve the effectiveness of bankruptcy by facilitating SPOE-style transactions. Under SPOE, shareholders would not be the only constituency that would bear losses. Bondholders and other holders of longterm debt would too, and they can be expected to argue vehemently that SPOE will unleash chaos if it is implemented, just as according to them bankruptcy would.
The shadow of Lehman could reinforce this reasoning. It could discourage regulators from invoking Title II, or could encourage them to delay intervention too long. If regulators and others do not believe bankruptcy can work, they may slack off in their preparations for its use. They may not oversee the living will process and stress tests as vigorously, and incorporate bankruptcy as fully, if they do not believe bankruptcy will actually be an option if a large financial institution falls into distress.
I do not want to exaggerate the significance of these consequences. Most do not seem to have materialized thus far, at least among those most involved in the design of the post-crisis financial architecture. Ten years after Lehman, memories of are still vivid. Regulators have been energetically and creatively working to make the SPOE process and the bankruptcy alternative as effective as possible.
But as memories of the crisis grow dimmer, the conventional wisdom about Lehman could prove corrosive. The best antidote would be to pass the proposed bankruptcy for banks legislation, and to rethink the meaning of Lehman, so that a new narrative is in place when the next crisis hits. The author did not receive financial support from any firm or person for this article or from any firm or person with a financial or political interest in this article.
Accessed Dec. International Journal of Accounting Research. Could it have been Prevented? Recommendations for Going Forward ," Page 1. Hong Kong Institute of Bankers. David P. Claudio Scardovi. Springer, Matrix Private Capital Group.
Richard Fuld. Fuld, Jr. Rosalind Z. Wiggins, Thomas Piontek and Andrew Metrick. Life Foundation. Erin Callan Montella. International Markets. Alternative Investments.
Hedge Funds Investing. Top Stocks. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data.
We and our partners process data to: Actively scan device characteristics for identification. I Accept Show Purposes. Your Money. Personal Finance. Your Practice.
0コメント