She did not think hubris was a cultural phenomenon among Wall Street firms at the time, but was more of a characteristic in certain individuals. Another issue that has arisen since the crisis is the lack of criminal prosecutions. One unhelpful practice that was widely prevalent at the time was company chairs acting as CEOs.
What kind of fallout might the next financial crisis bring? Antoncic also pointed to other areas of concern. Banks today have more capital than they did before the last crisis, and are more cautious in lending.
Antoncic, however, is concerned about the state of U. Another potential red flag is that shadow banking is behind much of the leveraged lending these days. Such lending is typically covenant light. The deciding factor was politics: the decision-makers, especially Paulson, were unwilling to endure the intense criticism that would have followed a Lehman rescue. Another factor was that policymakers did not fully anticipate the severe damage that the Lehman bankruptcy would inflict on the financial system and economy.
But, once again, their claims are contradicted by the real-time record. As Lehman faced bankruptcy, policymakers hoped that they could calm financial markets with measures including increased lending to Morgan Stanley and Goldman Sachs.
But what about the collateral issue that is central to the official Lehman narrative? Because Lehman had ample collateral, a short-term loan from the Fed would clearly have been legal, and would have created very little risk for the Fed or taxpayers. With help from the Fed, Lehman might have weathered the financial crisis and be a healthy firm today. 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. He is currently not an officer, director, or board member of any organization with an interest in this article. David Skeel S. Play Video.
Brookings Now Bernanke on the causes of the financial crisis, questioning how we measure potential economic output, and more new research in economics Fred Dews. Footnotes See, e. Too Big to Fail , pp. Too Big to Fail , p. See, e. See also Henry M. Paulson, Jr. Erin Callan Montella. International Markets. Alternative Investments. Hedge Funds Investing. Top Stocks. Actively scan device characteristics for identification.
Use precise geolocation data. Select personalised content. Create a personalised content profile. Measure ad performance. Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. Your Money. Personal Finance. Your Practice. Popular Courses. Business Company Profiles.
Table of Contents Expand. Lehman Brothers History. The Prime Culprit. The Colossal Miscalculation. The Beginning of the End. Hurling Toward Failure.
0コメント