MiniCase_PPTsC05MiniCaseLettingLehmanGo课件.pptVIP

Letting Lehman Go Should the United States government have allowed Lehman Brothers to fail? There are other things the Treasury might do when a major financial firm assumed to be “too big to fail” comes knocking, asking for free money. Here’s one: Let it fail. Not as chaotically as Lehman Brothers was allowed to fail. If a failing firm is deemed “too big” for that honor, then it should be explicitly nationalized, both to limit its effect on other firms and to protect the guts of the system. Its shareholders should be wiped out, and its management replaced. Its valuable parts should be sold off as functioning businesses to the highest bidders — perhaps to some bank that was not swept up in the credit bubble. The rest should be liquidated, in calm markets. Do this and, for everyone except the firms that invented the mess, the pain will likely subside. – “How to Repair a Broken Financial World,” by Michael Lewis and David Einhorn, The New York Times, January 4, 2009. Letting Lehman Go Although it had lived and nearly died by the sword many times over the years, by 2008 the firm was holding an enormous portfolio of failing mortgage-backed securities, and the future was not bright. After two major Bear Stearn’s hedge funds collapsed in July 2007, Lehman was the constant focus of much speculation over its holdings of many of the distressed securities behind the credit crisis. Lehman’s portfolio included the collateralized debt obligations and credit default swaps which had flooded the market as a result of the real estate and mortgage lending boom of the 2000 to 2007 period. Allowing Lehman to fail – it filed for bankruptcy on September 15, 2008 – was in the eyes of many in the global financial markets the individual event which caused the global credit crisis which followed. Letting Lehman Go The U.S. Federal Reserve has long held the responsibility as the lender of last resort, charged with assuring the financial stability of the U.S. financial syst