collapse of Lehman Brothers

House of Debt: How They (And You) Caused the Great Recession, and How We Can Prevent It From Happening Again
by Atif Mian and Amir Sufi
Published 11 May 2014

And once the decline in house prices destroyed the net worth of indebted home owners, one consequence proved disastrous—they stopped spending. 3: Cutting Back A powerful narrative of the Great Recession focuses on the collapse of Lehman Brothers in September 2008. Allowing the bank to go bankrupt, the argument goes, was a “colossal error,” and the failure to save it triggered the global economic downturn.1 In an article on the causes of the Great Recession, Jacob Weisberg of the Daily Beast described it as “near-consensus” that “a global recession became inevitable once the government decided not to rescue Lehman Brothers.”2 This narrative is closely tied to the banking view articulated in chapter 1. According to this view, the collapse of Lehman Brothers froze the credit system, preventing businesses from getting the loans they needed to continue operating.

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According to this view, the collapse of Lehman Brothers froze the credit system, preventing businesses from getting the loans they needed to continue operating. As a result, they were forced to cut investment and lay off workers. In this narrative, if we could have prevented Lehman Brothers from failing, our economy would have remained intact. The Consumption-Driven Recession Is the collapse of Lehman Brothers the linchpin of any theory of the recession? Let’s go back to the data. One of the facts that jumped out in chapter 1 is that the Great Recession was consumption-driven. Let’s look more closely at the timing and magnitude of the spending declines. The decline in spending was in full force before the fall of 2008.

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Both new construction and remodeling are a function of household demand for housing services. As a result, residential investment is best viewed as another form of household spending on durable goods. The collapse in residential investment was already in full swing in 2006, a full two years before the collapse of Lehman Brothers. In the second quarter of 2006, residential investment fell by 17 percent on an annualized basis. In every quarter from the second quarter of 2006 through the second quarter of 2009, residential investment declined by at least 12 percent, reaching negative 30 percent in the fourth quarter of 2007 and the first quarter of 2008.

Global Financial Crisis
by Noah Berlatsky
Published 19 Feb 2010

Among the billions 124 Effects of the Global Financial Crisis on Wealthier Nations The Financial Crisis Has Fueled Anti-Semitism As the financial crisis continues to affect markets around the world, anti-Semites are still using it to promote conspiracy theories about Jewish involvement in the crisis, and anti-Semitic statements and other anti-Jewish messages are appearing on a daily basis on financial Internet discussion groups and on Web sites and blogs both in the United States and abroad. The crisis has also given birth to new anti-Semitic conspiracy theories. One of the most common rumors being circulated on the Internet suggests that, just prior to the collapse of Lehman Brothers, “$400 billion was frantically transferred to banks in Israel” by the company. That conspiracy theory, which has no basis in fact, is reminiscent of the one that emerged immediately after the 9/11 terrorist attacks, which claimed that “4,000 Jews” did not report to work at the World Trade Center that day because they had advance warning that an attack was imminent.

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Reproduced by permission of the author. 207 The Global Financial Crisis Introduction I am much honored to be invited to address the 4th Deposit Insurance Corporation of Japan Round Table in Tokyo. As you are well aware, the global financial system is unstable due to the burst of the global credit bubble. In particular, global financial markets have been under severe strain since the collapse of Lehman Brothers last autumn. Both the central bank and the deposit insurance corporation do not draw much attention under normal circumstances, and their presence stands out only when depositors and financial market participants do not have full confidence in the soundness of financial institutions and financial system stability.

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In Japan, the default of a mid-sized securities firm in the interbank money market, despite the small amount of default, triggered a steep liquidity contraction in the money market and led to turmoil in Japan’s financial system as a whole. In the current financial crisis, after the severity of the credit-related debt problem surfaced in August 2007, U.S. and European financial institutions faced a liquidity shortage, and the collapse of Lehman Brothers further exacerbated the conditions in the funding markets. 212 Solutions to the Global Financial Crisis As such, while a lack of liquidity was the starting point of the problem, the root cause of the problem was an issue of the solvency of financial institutions. In the early phase of a crisis, it is difficult to recognize how serious the liquidity problem is and how serious the solvency problem is.

Capitalism: Money, Morals and Markets
by John Plender
Published 27 Jul 2015

Above all I am indebted to my beloved wife Stephanie, who was both a wonderful supporter-in-chief through some very difficult times during the gestation of the book, and a superbly perceptive subeditor. My debt to her in everything is beyond enumeration. INTRODUCTION The great financial crisis that began in 2008 with the collapse of Lehman Brothers, the US investment bank, has been the worst since the Wall Street Crash of 1929. Unlike that earlier crisis, it has not put the survival of the capitalist system in doubt. Indeed, the Great Recession that began shortly before the Lehman debacle was the first modern crisis in which no systemic alternative to capitalism was on offer.

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I conclude by explaining why the world is still on the edge of an abyss despite all the efforts of politicians, central bankers and financial watchdogs to strengthen the global financial system. Sadly, there is every likelihood that we will experience a further and more damaging crisis in due course. CHAPTER ONE THE ROOT OF ALL EVIL (OR NOT, AS THE CASE MAY BE) Capitalism is unloved. Since the collapse of Lehman Brothers, the American investment bank, in September 2008, it has become commonplace to refer to it as broken. Certainly its legitimacy is being questioned more than at any time since the Wall Street Crash of 1929 and the subsequent Great Depression. Few find it easy to live with the turbulent nature of the capitalist market economy, with its constant fluctuations in output and employment, accompanied by recurring financial crises.

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What is striking about this progression is that there have been two conspicuous spikes in the level of financial activity and profitability. One was in the Roaring Twenties, which led to a peak contribution by finance to the wider economy of nearly 6 per cent of GDP after the 1929 crash. The other was in the years before the recent credit crunch and subsequent collapse of Lehman Brothers. Even more impressive growth can be seen in the UK, where, over 160 years, financial services outstripped growth in the economy as a whole by 2 percentage points a year, accounting for no less than 9.4 per cent of GDP in 2006. In a less heavily regulated environment, UK bank balance sheets grew much faster than those in the US.

Zero-Sum Future: American Power in an Age of Anxiety
by Gideon Rachman
Published 1 Feb 2011

For five days, the world’s leaders seem to agree on a narrative about how the world works. At Davos, even the most intractable political differences are temporarily smothered by the globalization consensus. But at the Davos forum in 2009, it was clear that something had gone badly wrong. The meeting took place just four months after the collapse of Lehman Brothers had tipped the world into the biggest financial crisis since 1929. The international bankers who normally strutted proudly around the Davos cocktail circuit were in hiding as their institutions reeled and public opprobrium mounted. The Obama administration—locked in desperate economic negotiations at home—was conspicuous by its absence.

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She was the champion of the small entrepreneur and the shopkeeper, rather than the union boss or the senior civil servant. She was determined to cut red tape, regulation, and taxes. She believed in the market, not the state. One of her most famous and pithiest statements was “You can’t buck the market,”1 a phrase that essentially sums up the global ideological drift from 1978 until the collapse of Lehman Brothers in 2008. Thatcher was given her chance because by the late 1970s, Britain was in the grip of a powerful sense of national decline. It was a characteristic of the Age of Transformation that in country after country, free-market reforms were pushed through against a background of national economic crisis.

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The whole neo-conservative philosophy exemplified by Krauthammer’s speech in 2004 was based on an unexamined assumption of continued American economic supremacy. By the end of the Bush presidency, however, the United States was becoming much more conscious of the limits of its own power. Both the Iraq and Afghanistan wars had turned into long, bloody, and unpopular slogs. Then, in September 2008, the collapse of Lehman Brothers precipitated the biggest financial and economic crash in the United States since the Great Depression. The economic crisis was also a turning point in the presidential campaign. In the aftermath of the fall of Lehman, Barack Obama established a lead over John McCain in the opinion polls and went on to decisive victory in November 2008.

Crisis Economics: A Crash Course in the Future of Finance
by Nouriel Roubini and Stephen Mihm
Published 10 May 2010

After much kicking and screaming, the banks were forced to bring their SIV exposure back onto their balance sheets, sustaining massive losses in the process. The worst was yet to come. Beginning in August 2007, a much more severe shock—a full-blown liquidity and credit crunch—seized the financial markets, culminating in the collapse of Lehman Brothers and bringing the global financial system to the brink of collapse. During that time the remnants of the shadow banking system collapsed, and even the conventional banking system came under assault. The crisis was just beginning. Fear of the Unknown Risk, Uncertainty, and Profit, first published in 1921, contains iconoclastic economist Frank H.

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In fact, few people likely understood that stress in the repo or commercial paper market in one country could be quickly transmitted elsewhere. While there had been some crises that crossed national borders, none came close to rivaling the Great Depression; understanding of how the global financial system could—and would—unravel was limited. That ignorance ended after the collapse of Lehman Brothers on September 15, 2008. When it failed, the hundreds of billions of dollars in short-term debt it had issued—most of it commercial paper and other bond debt—became worthless, triggering panic among the various investors and funds that held it. This panic prompted a run on the money market funds that provided lending to the commercial paper market and sowed further panic throughout the global banking system.

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Japan, which many initially hailed as immune to the crisis, saw its economy contract at an annualized rate of 12.7 percent in the final quarter of 2008; South Korea saw an even bigger decline of 13.2 percent. China managed to avoid an outright recession, even if its growth dropped below sustainable levels. Most of the rest of the world was not so lucky. In the finger-pointing that followed, many market watchers focused on the collapse of Lehman Brothers, seeing in that catastrophe the cause of all the world’s ills. Even now some consider this event the catalyst for the crisis. This interpretation is comforting but wrong. By the time of Lehman’s collapse in September 2008, the United States had been in a recession for ten months, and much of the rest of the world was already in the same boat.

Unfinished Business
by Tamim Bayoumi

The press release prompted an injection of liquidity into the markets by the European Central Bank that was a precursor to many such moves on both sides of the Atlantic as well as policy rate cuts by the US Federal Reserve. Such palliatives had only limited effects, given market jitters coming from uncertainty about the viability of major banks. This financial equivalent of a phony war ended with the market panic that followed the collapse of Lehman Brothers, a mid-sized US investment bank, on September 15, 2008. The subsequent freezing of North Atlantic financial markets, global recession, and painfully slow recovery have forced both central banks to dabble with all sorts of “unconventional” policies such as buying assets and lowering interest rates below zero

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Despite the obvious attractions of including the Swiss and UK experiences (both countries experienced major banking problems) their addition would have involved adding a lot of country-specific detail without a commensurate increase in underlying insights.8 Figure 2: Output losses were mainly in the North Atlantic region. Source: Haver Analytics. * * * What Went Wrong There have been many books about the crisis that followed the 2008 collapse of Lehman Brothers in the United States and the 2009 admission of the size of Greek debt in the Euro area. At the risk of oversimplification, the main strand of the US literature involves blow-by-blow accounts of the crisis in which (for example) large and complex banks appear fully formed, while the equivalent narratives on the Euro area are similar except that they provide greater historical background on the creation of the currency union.9 In both cases, the focus on how policymakers reacted to the new and largely unexpected challenges.

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As the SEC predicted, easier access to the repos market further deepened the already substantial role of US assets in international banking, including the booming market for mortgage-backed securities. The deep involvement of European banks in US repos markets explains why the seizing up of these markets after the collapse of Lehman Brothers over the crisis immediately translated into dollar and liquidity shortages at European banks. The second and even more corrosive trend was to increase the desirability of high-yielding mortgage-backed securities issued by private firms. Before the SEC decision, mortgage-backed securities represented a useful way of pooling risk and selling bundles of loans to investors.

What's Next?: Unconventional Wisdom on the Future of the World Economy
by David Hale and Lyric Hughes Hale
Published 23 May 2011

Most of the losses that will be sustained by banks domiciled elsewhere among advanced economies will result from their operations in American or British markets, or from their exposure to American mortgage-backed and corporate securities. Given the importance of the US and, to a lesser extent, British economies and financial systems to their global counterparts, it was inevitable that the North Atlantic financial crisis would have serious global consequences. In particular, the collapse of Lehman Brothers and AIG in September 2008 triggered an abrupt decline in business and consumer confidence and, via their impact on share prices, a sudden and substantial loss of household and corporate wealth. The ensuing financial turmoil triggered a sharp contraction in the availability of finance for, among other things, international trade.

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The Australian banking system did have an Achilles’ heel in the form of a relatively low deposit-to-loan ratio and, correspondingly, an unusually high level of dependence on “wholesale funding,” especially from offshore. This rendered Australian banks potentially vulnerable to the drying up of international liquidity. As such, the Australian government’s prompt extension of a guarantee of banks’ wholesale borrowing after the collapse of Lehman Brothers was critical in preventing the loss of liquidity. Australia’s Residential Property Market Rested on Firmer Foundation House prices in Australia’s major cities rose by about 150 percent over the twelve years preceding the onset of the financial crisis—more than in the United States or Canada, but less than in a number of European countries, including the Netherlands, Norway, the United Kingdom, Spain, and especially Ireland.

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Contraction in Global Manufacturing-Trade Had Little Impact on Australia As noted earlier, one of the principal channels through which the North Atlantic financial crisis was transmitted to the global economy was via the dramatic contraction in trade, particularly in manufactured goods, that was prompted by the abrupt decline in discretionary spending in the United States and Britain, and by the associated fierce inventory cycle that followed the collapse of Lehman Brothers. However, this sharp trade downturn had very little impact on Australia as a result of the unusual (for an advanced economy) composition and orientation of Australia’s exports. North America and Western Europe account for only 15 percent of Australia’s merchandise exports, with Asia taking 70 percent (within that total, non-Japan Asia makes up just over 50 percent); thus, the sharp contraction in American and European imports had little direct impact on Australia’s exports.

The Great Divide: Unequal Societies and What We Can Do About Them
by Joseph E. Stiglitz
Published 15 Mar 2015

The documentary raises a question: Could this have influenced some economists’ judgments? RESPONSES TO THE CRISIS Just as the “making of the crisis” illustrates several of the themes of this book, so do the articles I wrote in 2008 and 2009 on the responses, of which one, “How to Get Out of the Financial Crisis,” published in Time magazine a month after the collapse of Lehman Brothers, is included here. The disparity between what was needed and what was done illustrates the great divide. Even though the crisis had long been in the making, and even though there had been ample warnings, those in charge, both at the Fed and in the administration, seemed surprised, and I believe genuinely were—a remarkable testament to the ability to close one’s senses to information that one finds unpleasant and contradicts one’s preconceptions.

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Yet the Fed chair Ben Bernanke would blithely claim that the risks were “contained.”13 The precipitating event that plunged the country from the recession that began in December 2007 (which Bush’s policies—another tax cut for the rich in February 2008—had done little to end) into a deep recession, the worst since the Great Depression, was the collapse of Lehman Brothers on September 15, 2008. After confidently asserting that letting it collapse would have only a limited effect on the economy—and would teach banks an important lesson—the Fed and Treasury took a 180-degree turn and bailed out AIG, the most expensive bailout in human history, an amount of corporate welfare to one firm that exceeded that given to the millions of poor Americans over years and years.

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(Of course, as I explained in Freefall and earlier in this book, one could save the banks without saving the bankers and the banks’ shareholders and bondholders. The irony was that what we did was unnecessarily expensive to the taxpayer, and less effective than it could or should have been.) Two years after the collapse of Lehman Brothers, the banks were largely back to health. Lending to small and medium-size enterprises was still markedly below the crisis, but this was partly because we had focused rescue efforts on the big banks, letting hundreds of the smaller, local, and regional banks that are disproportionately engaged in such lending to be shut down.

Prosperity Without Growth: Foundations for the Economy of Tomorrow
by Tim Jackson
Published 8 Dec 2016

But this vision of progress as a paradise of continually rising consumption has come under serious scrutiny – not just from those who doubt its feasibility on a finite planet or question its desirability from a human perspective, but also from those wondering where on earth economic growth is going to come from in the wake of the worst financial crisis in almost a century. The fault lines in conventional economics have widened. What once seemed tiny fissures, barely visible to the Western eye, have now become deep chasms threatening to engulf entire nations. The collapse of Lehman Brothers on 15 September 2008 signalled more than the onset of a cyclical liquidity crisis. The pallid light of recession has illuminated crack after crack in the shiny surface of capitalism. It is now apparent that these cracks run right to the heart of the model. An economy whose stability rests on the relentless stimulation of consumer demand destroys not only the fragile resource base of this finite planet, but also the stability of its financial and political system.

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At the very least, as this chapter argues, it is clear that the task of rebuilding an economy fit for the challenges of the twenty-first century has become more not less essential in the years since this book was first published. In search of villains In November 2008, two months after the collapse of Lehman Brothers, Queen Elizabeth II visited the London School of Economics and asked why exactly no one had seen the crisis coming. Feeling perhaps a little caught out by Her Majesty’s interest in the matter, the assembled economists went away and did what academics do best: they organised a seminar. A group of economic heavyweights deliberated long and hard before putting their names to a carefully written three-page letter they hoped would set the record straight.

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It’s just that this doesn’t really answer Her Majesty’s question.5 How did these system risks arise? Why didn’t economists understand them? Why on earth would we leave it to ‘collective imagination’ to prevent financial disaster? What were the invisible causes of the financial crisis? A little hindsight is a valuable thing. The proximate cause of collapse of Lehman Brothers is usually taken to be subprime lending in the US housing market. Some have highlighted the unmanageability of the ‘credit default swaps’ used to parcel up ‘toxic debts’ and hide them from scrutiny. Others have pointed the finger of blame at greedy speculators and unscrupulous investors intent on making a killing at the expense of vulnerable institutions.

Firefighting
by Ben S. Bernanke , Timothy F. Geithner and Henry M. Paulson, Jr.
Published 16 Apr 2019

The collapse of Bear Stearns on March 14 would mark an inflection point in the crisis, exposing the system to its greatest peril and putting America’s emergency arsenal to its sternest test since the Depression. The Fed crossed a Rubicon by intervening to prevent the implosion of a nonbank. The Bear rescue did help avert the cascade of financial defaults and economic pain that we would later see after the collapse of Lehman Brothers, and it helped buy six months of relative calm. But it was not particularly comforting even at the time. We would not have been able to prevent a chaotic failure if JPMorgan Chase hadn’t been willing to buy Bear and guarantee the vast majority of its obligations. And we knew that Bear wasn’t the only overleveraged and interconnected nonbank at risk of a run.

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STRATEGY As losses worsened early in the crisis, U.S. policymakers urged financial institutions to raise private capital. Private capital raised between Jan. 1, 2007, and Oct. 13, 2008, for the nine banks receiving initial government investments Source: Goldman Sachs U.S. STRATEGY Then, as panic followed the collapse of Lehman Brothers, Treasury made large capital investments in the biggest banks using new authority from Congress . . . Government and other capital raised between Oct. 14, 2008, and May 6, 2009, the day before stress test results were released Source: Goldman Sachs *Includes capital injections made under the Capital Purchase Program (CPP).

The Default Line: The Inside Story of People, Banks and Entire Nations on the Edge
by Faisal Islam
Published 28 Aug 2013

The FSA required that Kaupthing Singer & Friedlander (Kaupthing’s UK branch) hold 90–95% of the value of deposits. In his book Frozen Assets, Armand Thorvaldsson, the CEO of Kaupthing’s London arm, reveals one remarkable rescue effort. Kaupthing presented the UK FSA with a plan to move its headquarters from Reykjavik to London. Even in the aftermath of the collapse of Lehman Brothers, Kaupthing’s deposits increased from £75–100 million per week to £150 million per week. There were more depositors, but volumes were below the £35,000 limit for deposit insurance. It was after the nationalisation of Iceland’s troubled third biggest bank Glitnir that the bank run on Iceland started.

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There were all sorts of different views within the tripartite committee representing the Treasury, the Bank of England and the FSA. Britain going it alone on recapitalisation had risks, and so the various UK authorities were keen on a concerted international plan. However, just after the collapse of Lehman Brothers, the US Treasury secretary, Hank Paulson, announced TARP (Troubled Asset Relief Program) – an entirely different type of rescue plan involving the purchase of toxic assets, rather than bolstering up the banks with new capital. Britain paused its bank recapitalisation plans. In August 2008 two senior government figures communicated to the bosses of Lloyds TSB and HBoS that ‘If you want to ask us a question then you should ask.’

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The fear was that an HBoS collapse would have hit RBS, then Barclays, then the domino effect would have been impossible to stop. The question HBoS and Lloyds did ask was whether competition law could be waived to enable a merger. The Treasury was split, as was most of the tripartite committee, and there was a dither. It took the collapse of Lehman Brothers to convince the doubters. At this point, many in government were convinced that having seen HBoS’s rotten books, Lloyds would drop its bid. It did not. ‘Taxpayers got a great deal. It would have cost a lot more to separately bail out HBoS,’ reflects a former minister. Nonetheless, separate plans to do just that were prepared in case Lloyds pulled out of the HBoS deal.

The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success
by William Thorndike
Published 14 Sep 2012

He travels by corporate jet and spends much of his time touring operations, meeting with Wall Street analysts, and attending conferences. The adjective rock star is often used to describe these fast-moving executives who are frequently recruited into their positions after well-publicized searches and usually come from top executive positions at well-known companies. Since the collapse of Lehman Brothers in September 2008, this breed of high-profile chief executive has been understandably vilified. They are commonly viewed as being greedy (possibly fraudulent) and heartless as they fly around in corporate planes, laying off workers, and making large deals that often destroy value for stockholders.

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—Rudyard Kipling, “If” As the Nobel Prize–winning chemist Louis Pasteur once observed, “Chance favors . . . the prepared mind,” and speaking of prepared minds, let’s conclude by looking at how the two remaining active outsider CEOs, Warren Buffett and John Malone, navigated the financial meltdown that followed the September 2008 collapse of Lehman Brothers. As you would expect, both pursued dramatically different courses from their peers’. At a time when virtually all of corporate America was sitting on the sidelines, shepherding cash, and nursing ailing balance sheets, these two lions in winter were actively on the prowl. Buffett, after a long period of relative inactivity stretching back to the immediate aftermath of 9/11, has had one of the most active periods of his long career.

Paper Promises
by Philip Coggan
Published 1 Dec 2011

Banks also are the medium through which most monetary exchanges are made; cheques, debit-card and credit-card payments are all processed through the banking system and cash payments are usually withdrawn from a bank. The reason why the authorities panicked so much in the autumn of 2008 after the collapse of Lehman Brothers was that they feared the banking system was freezing up. Banks seemed unable to raise funds in the money markets (where companies and pension funds store their cash and billions are lent and borrowed on a short-term basis). Without such vital funds, banks might have become unable to perform their role as a medium of exchange; what if the cashpoint machines stopped working or businesses could no longer pay their employees?

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In every respect, he proved to be correct. Eventually, however, Galbraith warned that the process would have to come to an end. And what would happen then, he wondered, given that ‘an interruption in the increase in debt means an actual reduction in demand for goods’. The debt crisis provides some clues. After the collapse of Lehman Brothers, credit-card companies started to restrict the amount of credit they offered and consumers started to use their cards less often. The total amount of US credit-card debt fell in every month for the next two years and, by November 2010, was 15 per cent below its peak. ‘Although our economy has experienced other long episodes in which revolving credit growth has slowed, we have never seen such a prolonged period of outright decline,’ said Elizabeth Duke of the Federal Reserve Bank of Philadelphia.7 In part, this was because the default rate on credit cards rose from 4 per cent in 2007 to more than 9 per cent in 2009.

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The rescue of the banks caused a great degree of cynicism, especially among those who remembered the arguments advanced back in the 1980s that ‘lame duck’ industries such as mining and steel should not be rescued, and who noticed the change of tune when the powerful banking sector was in trouble. Issues of fiscal probity also seemed to be forgotten. As Joseph Stiglitz, the Nobel prize-winning economist, remarked: ‘When the banks said they needed hundreds of billions of dollars, all worries about the size of the deficit were shunted aside.’1 Stiglitz even sees the collapse of Lehman Brothers as a moment to rival the fall of the Berlin Wall;2 in this case, it was the free market capitalist model that was undermined. To critics like Stiglitz, the US could no longer claim that its financial system was the best allocator of capital. The rival Chinese approach, with governments controlling the banks and restricting the flow of international capital, looked much more appealing to developing countries.

Trillion Dollar Triage: How Jay Powell and the Fed Battled a President and a Pandemic---And Prevented Economic Disaster
by Nick Timiraos
Published 1 Mar 2022

Jay Powell watched closely, and he would later borrow extensively from Bernanke’s playbook. Chapter Three “WE WOULD TREAT HIM PRETTY UGLY” The problems boiled over in 2007, when Ben Bernanke had been slow to recognize how the subprime mortgage crisis had stretched its tentacles through the entire economy. But after the collapse of Lehman Brothers in September 2008 plunged the financial system into its worst crisis since the Great Depression, Bernanke moved quickly and creatively to prevent a rerun of 1929. The Fed deployed scarcely used emergency-lending authorities—first to rescue the investment bank Bear Stearns, and later the insurance giant American International Group—to stem a financial panic.

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Bernanke’s initial response to the economic turmoil was a standard monetary tool: reducing the federal-funds rate. The Fed moved interest rates down by purchasing short-term Treasury bills with money it created out of thin air to expand the money supply. This standard monetary response would not be enough. The financial panic that followed the collapse of Lehman Brothers in September 2008 ultimately prompted Bernanke to slash the rate to effectively zero by the end of the year—the first time it had ever been so low. With the interest-rate tool maxed out (officials weren’t willing to push the fed-funds rate below zero) but the economy still hobbled by the wreckage from the housing bust, Bernanke moved to deliver more stimulus with a tool dubbed quantitative easing, or QE.

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Technically, the roughly $90 billion in the account was supposed to be used for Treasury intervention in currency markets. Congress and the Roosevelt administration had created it in 1934 to stabilize the value of the dollar after the US went off the gold standard. But at the height of the financial panic after the collapse of Lehman Brothers in 2008, the Treasury Department announced it would temporarily guarantee more than $3 trillion in deposits in certain money-market mutual funds using $50 billion from the ESF. The Treasury acted without congressional approval, and Congress later formalized the guarantee and reimbursed the ESF.

Boomerang: Travels in the New Third World
by Michael Lewis
Published 2 Oct 2011

(Laxness won the 1955 Nobel Prize in Literature, the greatest global honor for an Icelander until the 1980s, when two Icelandic women, in rapid succession, captured Miss World titles.) THE WORLD IS now pocked with cities that feel as if they are perched on top of bombs. The bombs have yet to explode, but the fuses have been lit, and there’s nothing anyone can do to extinguish them. Walking around Manhattan just before the collapse of Lehman Brothers, you saw empty stores, empty streets, and, even when it was raining, empty taxis; the people had fled before the bomb exploded. Reykjavík had the same feel of incipient doom, but the fuse burned strangely. The government mandates three months’ severance pay, and so the many laid-off bankers were paid until early February, when the government promptly fell.

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The Irish bank regulator, for his part, looked as if he had been dragged from a hole into which he badly wanted to return. He wore an insecure little mustache, stammered rote answers to questions he had not been asked, and ignored the ones he had been asked. A banking system is an act of faith: it survives only for as long as people believe it will. Two weeks earlier the collapse of Lehman Brothers had cast doubt on banks everywhere. Ireland’s banks had not been managed to withstand doubt; they had been managed to exploit blind faith. Now the Irish people finally caught a glimpse of the guy meant to be safeguarding them: the crazy uncle had been sprung from the family cellar. Here he was, on their televisions, insisting that the Irish banks’ problems had nothing whatsoever to do with the loans they’d made . . . when anyone with eyes could see, in the vacant skyscrapers and empty housing estates around them, evidence of bank loans that were not merely bad but insane.

The Billionaire's Apprentice: The Rise of the Indian-American Elite and the Fall of the Galleon Hedge Fund
by Anita Raghavan
Published 4 Jun 2013

The deal eventually was announced on October 7, but it wasn’t the home run either Rajaratnam or Michaelson were seeking. Galleon lost money on its investment in AMD. Technology stocks, like much of the market, got clobbered in the wake of Lehman Brothers’ move to file for bankruptcy on September 15. * * * Geetanjali Gupta vividly remembers the weekend after the collapse of Lehman Brothers. She was coming home from Boston to celebrate her thirtieth birthday. The Guptas were actually preparing to celebrate two birthdays that weekend. Her mother’s was on September 21, a day after hers. On Saturday, September 20, Geetanjali was in the library, lined on two walls with books and overlooking a swimming pool, at her parents’ home in Westport talking to her father.

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Geetanjali is an investment analyst at Harvard Management Company, which oversees the university’s endowment, a potential investor in the fund. Gupta told his daughter he was angry because he had reason to believe that Rajaratnam had pulled money out of the fund without telling him. If he had, he wanted to know why he was not allowed to withdraw his money too. And after the collapse of Lehman Brothers, Gupta had come to learn that the $10 million he had invested in the Voyager fund, a vehicle that was managed by Rajaratnam, had evaporated to nothing. He felt that it was Rajaratnam’s responsibility to make him whole; after all, Gupta was only a passive investor in the fund. The unflappable Gupta was so angry that he later contemplated suing Rajaratnam.

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Chapter Thirty “Buy Goldman Sachs, Buy Goldman Sachs” It was around 10 a.m. on September 23, 2008, and Byron David Trott, a tall, silver-haired banker, sat in his New York office on the seventeenth floor of Goldman Sachs’s headquarters building, preparing for a call. As he glanced at the television screen hanging in his office, he saw his former mentor and boss, Hank Paulson, giving testimony before a congressional committee. Ever since the collapse of Lehman Brothers a week earlier, Paulson, who had become Treasury secretary in 2006, was ubiquitous, hitting the airwaves and Capitol Hill in a bid to impress upon Americans the magnitude of the financial crisis facing the country. Trott turned away from the television and gave some thought to the call he was about to place.

Swimming With Sharks: My Journey into the World of the Bankers
by Joris Luyendijk
Published 14 Sep 2015

In his mid thirties, slightly restless but quick to laugh, he is one of the most good-natured people I have met in two years of researching. We met on a grey day in January for lunch. After fighting the urge to order a glass of cider he settled on alcohol-free ginger beer and a pork pie. ‘Those were scary times’, he said about the days, weeks and months after the collapse of Lehman Brothers in 2008. ‘You think: we are in a new paradigm. Nothing works the way it used to. My department’s potential losses were hundreds of millions of pounds and several billions across the whole of the bank. We began to realise: this could sink the bank. If the market had crashed further we would have gone down.’

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Going this far back with someone meant we could skip the small talk and have a truly honest conversation with trust on both sides. This was why I had been so keen to see Peter. I felt almost reluctant to press for the truth. Were the interviewees’ stories about the hours and days following the collapse of Lehman Brothers really true? The hoarding of food, cash and gold, the preparations for the evacuation of the children to the countryside, the alleged stockpiling of arms … If there was anyone who could give me a convincing answer it was Peter. He would set me straight if these anecdotes were crazy exaggerations.

Extreme Money: Masters of the Universe and the Cult of Risk
by Satyajit Das
Published 14 Oct 2011

—Yves Smith, Founder of www.nakedcapitalism.com and Author of ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism “Most books written about the global financial crisis have been written by those who only became wise after the event. Das is not one of them. Long before the collapse of Lehman Brothers, he warned about the flaws in modern finance. Extreme Money is his account of what went wrong. Read it!” —Edward Chancellor, Member of GMO’s Asset Allocation Team and Author of Devil Take the Hindmost: A History of Financial Speculation “A rich analysis told with color and verve.” —Philip Augar, Author of Reckless: The Rise and Fall of the City Praise for Traders, Guns & Money “...a distinctly timely book...tries to reach out to the mathematically challenged to explain how the world of derivatives “really” works...explaining not only the high-minded theory behind the business and its various products but the sometimes sordid reality of the industry, illustrated by lively anecdotes...very up to date, covering some of the new areas of finance, such as credit derivatives...also gives an excellent sense of the all-important cultural aspect of the business, detailing the complexities of trading-floor politics, the dangerously skewed incentive systems, the obsession with money and the cultural chasm that separates derivative traders from many of their clients—and from many other parts of the bank.”

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Financial institutions moved assets to QSPEs (qualified special purpose entities), recording a sale and the amount received as revenue. Securitization and derivatives shifted assets off-balance sheet, but liquidity puts and standby funding arrangements meant that the risk remained with the bank. Following the collapse of Lehman Brothers, a court-appointed examiner found that the investment bank used repos (repurchase agreements) to shift assets off-balance sheet.40 In a repo, the borrower sells an asset, simultaneously agreeing to repurchase it at an agreed price plus interest for funds advanced at a future date. Normally, a repo is treated as a secured loan.

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Blaming the messenger of bad news, short selling was banned or restricted in many countries. The debate was informed by Mark Twain’s observation that: “I am not one of those who in expressing opinions confine themselves to facts.” In South Korea an online blogger, using the pseudonym Minerva, the Roman goddess of wisdom, predicted the imminent collapse of Lehman Brothers and made dire forecasts about the South Korean currency (the won), his site registering 40 million hits. When the won fell 26 percent, an unimpressed Korean government arrested the celebrity blogger, known to netizens as “the Internet Economic President.” Newtonian Economics In 2003, Robert Lucas, a Nobel-Prize-winning economist, declared: “macroeconomics...has succeeded.

Hubris: Why Economists Failed to Predict the Crisis and How to Avoid the Next One
by Meghnad Desai
Published 15 Feb 2015

It had exposed itself in the securitized mortgage market and as the prices fell, its exposure increased and the Fed could not rescue it. It had assets of $400 billion but a debt of $33 per each dollar of its capital. Bear Stearns had already fired its CEO in January. It had to be sold at the low price of $10 per share compared to its recent peak of $133 to JPMorgan Chase, another US bank. This was followed by the collapse of Lehman Brothers in September of that same year: the fourth largest investment firm in the US went bankrupt after the US government refused to bail it out. Soon the collapse was general and AIG, an insurance firm, had to be rescued. US taxpayers had to put up $800 billion to launch the Troubled Assets Recovery Program (TARP).

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Since some of the rentiers may be pension funds, there is an intertemporal aspect to the necessity for the borrower to maintain a good credit rating. The Crisis in the Eurozone This has been shown in the eurozone crisis, which began in 2010 – the second leg of the crisis that had started with the collapse of Lehman Brothers. The European search for stability in exchange rates had climaxed in the decision to have a single currency, the euro, to which the first countries signed up in 1999.10 The European Central Bank (ECB) was set up in the image of the German Bundesbank. It has a mandate to keep inflation low, using an explicitly monetarist strategy.

The Rise of Carry: The Dangerous Consequences of Volatility Suppression and the New Financial Order of Decaying Growth and Recurring Crisis
by Tim Lee , Jamie Lee and Kevin Coldiron
Published 13 Dec 2019

Much of the Swiss franc carry trade at that time was accounted for not by hedge funds or financial speculators but by individuals and families in Eastern Europe who had taken out mortgages in Swiss francs because it was much cheaper than borrowing in their own currencies. At the end of 2006, Swiss franc borrowing by Hungarian residents from their domestic banks totaled about US$20 billion—this in what was a very small economy. The collapse of the total currency carry trade began in earnest in July 2008, two months before the collapse of Lehman brothers. This is fairly clear from the charts shown in this chapter, such as Figure 2.2. But it is even clearer from simply looking at the key exchange rates themselves. Figure 2.1 30 THE RISE OF CARRY suggests that the Australian dollar was probably the biggest carry trade recipient currency prior to the 2007–2009 global financial crisis.

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If a Ponzi scheme is to recover from a run, then it will become even larger; the restoration of confidence following the successful test of confidence suggests this, as also does the requirement for the scheme to continue to grow larger because any outflows need to be financed with new inflows. For example, imagine a hypothetical—admittedly completely unrealistic—alternative scenario for the notorious, and huge, Ponzi scheme run by Bernard (“Bernie”) Madoff. Madoff’s giant Ponzi scheme collapsed in December 2008, during the global carry crash associated with the collapse of Lehman Brothers. At the time of the Madoff scheme collapse, Madoff’s clients had an illusory US$65 billion standing to their credit in the scheme. Madoff’s scheme was a classic Ponzi scheme, operated simply by marking up client accounts to reflect fabricated good and consistent returns, while financing any client withdrawals from the scheme with new client inflows.

The Trade Lifecycle: Behind the Scenes of the Trading Process (The Wiley Finance Series)
by Robert P. Baker
Published 4 Oct 2015

The OIS seller offers the purchaser a fixed leg reflecting his view of how overnight interest rates will average out over a given period of time. By looking at the prices of OIS trades, it is easier to see the likely direction of interest rates (and hence the time value of money) unencumbered by credit effects. One of the problems caused by the collapse of Lehman Brothers and the resulting credit crunch was that even major banks were reluctant to lend to each other. This meant that LIBOR (interbank trading) was trading at 354 basis points (3.54%) above the equivalent OIS. Normally the difference is between 10 and 15 basis points (0.1 to 0.15%) Tradeflow issues The asset underpinning an interest rate trade is simply the currency.

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Counterparty risk control has to balance the legitimate concern of traders to be able to trade as widely as possible, while seeking to protect the company from People 191 unnecessary losses. The appetite for accepting counterparty risk depends on the risk profile of the company’s management and the prevailing financial climate. After the collapse of Lehman Brothers, a state approaching panic swept through the financial services industry and credit risk limits were slashed. This precipitated the credit crunch – nobody wanting to extend credit to anyone else. Finance As in any company, the books and records of the trading activities must be accurately produced and reported.

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Hedge funds typically make use of prime brokers to execute trades on their behalf. The prime broker takes collateral from the hedge fund to secure the transactions and then rehypothicates this collateral when it does its own trades. Although this used to Regulation 213 be common practice, hedge funds became much more wary of it after the collapse of Lehman Brothers and the ensuing credit crunch. The legal status of rehypothication varies between jurisdictions. For example in the United States, the SEC puts a limit of 140% of the loan amount to a client under rule 15c3-3, but in continental Europe there is no restriction. Portfolio-based CVA Regulatory authorities tend to take CVA on a portfolio basis rather than on an individual trade.

How to Speak Money: What the Money People Say--And What It Really Means
by John Lanchester
Published 5 Oct 2014

The thing that’s interesting about his nickname is that “whale” is a term from gambling: a whale is a punter who gets free hospitality from casinos because he (usually a he) bets such huge sums. According to the amazing Senate subcommittee report into the affair, by the time the bets went wrong, Iksil and his colleagues were out on the limb for $157 billion53—this nearly four years after the collapse of Lehman Brothers, when the lessons about excessive risk taking were supposed to have been learned. long and short To be long on something is to think that it’s going to go up in value, and to have invested accordingly. If I’m long on Apple, it means I own the shares and am holding them expecting them to rise in value.

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If you had gone the full monty and used your $100,000 to buy $1,000,000 of wheat on margin, you’d have just used the power of margin to lose all your money, and another $50,000 on top. In finance, a margin call can also be triggered by doubts about an institution’s creditworthiness. In the collapse of Lehman Brothers, one of the short-term triggers was other banks deciding Lehman needed to put up more collateral—in effect to raise more money against the possibility of a margin call. margin, high and low Margin in this sense is the amount of profit a business owner makes by selling something. An Italian restaurant owner once told me that more than anything else in the world, he loves pasta.

Flash Crash: A Trading Savant, a Global Manhunt, and the Most Mysterious Market Crash in History
by Liam Vaughan
Published 11 May 2020

After a few weeks, he made his second career-defining trade and, like the last one, it had less to do with scalping than with sheer conviction and intuition. On Thursday, November 20, 2008, the S&P 500 closed at 752 points, its lowest level in more than a decade. Two months had passed since the collapse of Lehman Brothers and, with the financial system still teetering, reports suggested the U.S. government and the Federal Reserve might have to adopt more drastic measures. Arriving in the office on Friday morning, Nav started loading up on S&P 500 futures, reasoning that markets had only one way to go. Sure enough, after a shaky few hours, U.S. stock prices started to climb.

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The Eurozone crisis continued to roil markets around the world, and by 2011 Nav’s system, an amalgamation of a modified TT algo and his own rapid-fire scalping, was working better than ever. His best day, by some margin, came on August 4, when apocalyptic headlines from Italy and Spain collided with weak U.S. employment figures and speculation about a forthcoming downgrade of U.S. government debt, driving the S&P 500 down 4.8 percent, its biggest drop since the collapse of Lehman Brothers. Nav rode the e-mini all the way down. By the time the market closed, he’d made $4.1 million. With so much money piling in, Nav’s biggest problem was knowing what to do with it all. He liked fast cars and expensive watches and trips to fancy night clubs—in theory—but nowhere near as much as he liked the feeling of accumulating wealth; and he found it hard not to view any purchases, no matter how small, as eating into his trading capital.

Heads I Win, Tails I Win
by Spencer Jakab
Published 21 Jun 2016

That fact tells you a great deal about why the biggest reason so many people live in Lake Moneybegone is zigging when they should zag. They occurred mostly not when things were great but when they were terrifying. Of the ten best days, seven were in the thick of bear markets, with some of the very best in the weeks after the collapse of Lehman Brothers and the emergency bailout of other major financial institutions. Two were in the first few weeks of the bull market that began in 2009—a time when few people believed and no one knew for sure that the worst stock selloff in seventy years had ended. I’d like to be a fly on the wall in a retail brokerage on a day that the bottom falls out of the market.

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Not surprisingly, Luby estimates that the two highest VIX readings ever would have been immediately after 1987’s Black Monday, and Black Tuesday in 1929 when he calculates it reached about 112 and 111, respectively. The third, and also the highest spike since the VIX’s invention, was a reading just below 90 after the collapse of Lehman Brothers in 2008. Other high points include the 9/11 terrorist attacks, Germany’s invasion of Poland (when Templeton was backing up the truck and buying stocks), and the collapse of hedge fund Long Term Capital Management in 1998. As you might have guessed from my reference to Templeton, buying when the fear index is highest can be very profitable.

One Way Forward: The Outsider's Guide to Fixing the Republic
by Lawrence Lessig
Published 12 Feb 2012

Conclusion The Promise In 2008, Iceland, like much of the rest of the world, suffered a major economic collapse after its recently privatized banks suffered a catastrophic default. The legalized gambling that the world’s banking system had become left Iceland’s three major banks holding nine times the country’s GDP in debt. When the collapse of Lehman Brothers ended their ability to refinance that debt, the banks entered bankruptcy—the largest collapse, relative to the size of a nation’s economy, in the history of the world. When a coalition government tried to bail out the banks—with a package that would have required each Icelandic citizen to pay about one hundred euros a month for fifteen years at 5.5 percent interest—the citizens revolted.

Profiting Without Producing: How Finance Exploits Us All
by Costas Lapavitsas
Published 14 Aug 2013

This policy amounted to a public subsidy to banks since it reduced the cost of bank liabilities, and hence raised the profitability of banking, particularly as banks simultaneously acquired public sector debt that carried a low risk of default. In addition to lowering interest rates, and again following the practice of the BoJ in the 1990s and 2000s, central banks supplied public liquidity directly to commercial banks. Both the US and UK central banks adopted quantitative easing after the collapse of Lehman Brothers, and further deployed this policy in subsequent years. Quantitative easing implies the systematic over-expansion of reserves held by banks with the central bank, as was shown in Chapter 4. Unlike the BoJ, however, the Federal Reserve and the Bank of England did not adopt quantitative targets for the reserves of commercial banks.

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The previously noted discrepancy from Bagehot’s historic prescription has once again emerged: liquidity has been provided to banks on poor collateral and at a very low rate of interest. ECB liquidity intervention has in effect meant that private banks have been provided with a substantial subsidy, similarly to the liquidity interventions of the Federal Reserve. Large advances took place in August 2007 as the financial crisis first burst out; in 2008 following the collapse of Lehman Brothers; and at the end of 2011 as the sovereign debt crisis emerged in full earnest.54 The fundamental difference with the earlier phase of the crisis, however, was that at the end of 2009 liquidity shortages also affected peripheral states, which began to face increasing difficulties in issuing bonds in financial markets worried about the risk of sovereign default.

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Controlling finance as a system would acquire a different complexion, if public ownership and control over banks were re-introduced systematically. Note that public ownership of banks and other major financial institutions is not an unusual occurrence in financialized capitalism. After the collapse of Lehman Brothers, the extension of public ownership over stricken banks was publicly discussed even in the US.40 Capital injections in the period that followed, in both the US and the UK, effectively established a strong public ownership stake in banking. However, public ownership has typically been treated as a temporary counter-crisis measure aimed at restoring the solvency of banks with the aim of returning them to private ownership.

When the Money Runs Out: The End of Western Affluence
by Stephen D. King
Published 17 Jun 2013

Three years later, bank rate remained at this – by historic standards – absurdly low level. By that stage, the UK government's long-term borrowing costs had dropped to well below 2 per cent, the lowest since records began in the early 1700s. The UK's experience was hardly unique. At the end of 2008, shortly after the collapse of Lehman Brothers, US Fed funds – the equivalent of UK bank rate – dropped more or less to zero. And, as with the UK, US government borrowing costs plummeted. The same was happening in parts of continental Europe, notably Germany. Initially, central bankers hoped remarkably low borrowing costs would kick-start economic growth.

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The modern-day equivalent would be for the administration to take away the Fed's independence and to insist on a radical redrawing of the rules governing monetary and fiscal policy. Yet, in the absence of earlier deflation, the justification for doing so is not immediately obvious. Whereas, in the 1930s, the value of national income dropped 50 per cent from peak to trough, the value of national income at the end of 2012, four years after the collapse of Lehman Brothers, was already almost 10 per cent higher than it had been at the previous peak. There is simply no comparison. Outside the eurozone periphery, there is no deflation, no depression and no persistent economic collapse. Those who claim otherwise are confusing the disaster of depression with the melancholy of stagnation, two completely different concepts.

How to DeFi
by Coingecko , Darren Lau , Sze Jin Teh , Kristian Kho , Erina Azmi , Tm Lee and Bobby Ong
Published 22 Mar 2020

“Insights from the World Bank's 2017 Global Findex database ....” 20 Apr. 2018, https://www.devex.com/news/insights-from-the-world-bank-s-2017-global-findex-database-92589. 5. “Washington Mutual (WaMu): How It Went Bankrupt.” https://www.thebalance.com/washington-mutual-how-wamu-went-bankrupt-3305620. 6. “The Collapse of Lehman Brothers: A Case ....” 26 Nov. 2019, https://www.investopedia.com/articles/economics/09/lehman-brothers-collapse.asp. 7. “Failed Bank List – FDIC.” https://www.fdic.gov/bank/individual/failed/banklist.html. 8. "financial crisis - GovInfo." https://www.govinfo.gov/content/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf. . 9.

Chaos Kings: How Wall Street Traders Make Billions in the New Age of Crisis
by Scott Patterson
Published 5 Jun 2023

Sans tie as always, clad in brown slacks and a blue jacket, he seemed something akin to a dapper biblical prophet proclaiming doom as the foolhardy fat cats were routed from the temple. It was just one week after the stock market had crashed on Congress’s fateful bailout vote, a month after the collapse of Lehman Brothers. Doom was in the air. He made his apocalyptic pronouncements in a calm, steady voice, occasionally gesticulating toward the crowd with a sweep of his hand. Financial markets, and the world itself, were far more volatile than many believed, as giant institutions toppled like dominoes. His concern with Black Swans, he said, extended beyond financial markets to the scientific method itself.

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On a Wednesday night at the forum, Taleb sat on a podium alongside Niall Ferguson, the British professor of history and bestselling author; Nouriel Roubini, known as Dr. Doom for having forecast the financial collapse; and behavioral finance Nobelist Danny Kahneman. The subject of their discussion: the fateful hours surrounding the collapse of Lehman Brothers and its role in the ensuing crisis. Most agreed that while Lehman had made things worse, the problems in the financial sector were far broader and systemic. Ferguson, looking ahead, said the world was entering a “global lost decade.” Things would be worst in the U.S., he added, leading to “the twilight of the American hegemony.”

The Art of Execution: How the World's Best Investors Get It Wrong and Still Make Millions
by Lee Freeman-Shor
Published 8 Sep 2015

Sadly, nowadays the Royal Bank of Scotland has become synonymous with the credit crunch because it needed to be bailed out by the government, a source of anger for many in the UK. It was deemed too big to fail. At the time of writing the government owns 82% of the shares outstanding, having been forced to recapitalise the bank in order to prevent a run on the banking system. An Assassin bought shares in the Royal Bank of Scotland on 30 May 2008, before the collapse of Lehman Brothers and the onset of the credit crunch, at £22.29. As the credit crisis broke, he actually moved quicker than his stop-loss, killing the investment on 3 October 2008 at £18.62, a loss of 16%. The stock then fell a further 82%. Had he not sold, he would have required his shares in the Royal Bank of Scotland to make a return of 667% just to break even, which equates to 25 years given average market returns.

How to Stop Brexit (And Make Britain Great Again)
by Nick Clegg
Published 11 Oct 2017

The pound, for so long a symbol of pride for champions of Brexit, has suffered one of the largest devaluations in its history. Following steady losses in the months running up to the referendum, the pound saw the biggest one-day fall on record – worse than that caused by the shockwaves from the collapse of Lehman Brothers in 2008, and worse than ‘Black Wednesday’ on 16th September 1992, when the UK tumbled out of the European Exchange Rate Mechanism. A year after the vote, the pound is worth around 15 per cent less against the euro and the dollar. Compared with the summer of 2015, when the reality of the impending referendum set in and the decline in sterling began, it is around 20 per cent lower.32 Let’s be clear why that is: it’s the judgement of the currency markets that the UK’s growth potential is significantly less than it was before the referendum.

The Metropolitan Revolution: How Cities and Metros Are Fixing Our Broken Politics and Fragile Economy
by Bruce Katz and Jennifer Bradley
Published 10 Jun 2013

Over the course of the year, global economic activity would shrink by half a percent—the worst downturn since 1945.1 By the end of the year, 7 million Americans had lost their jobs, and an additional 8.8 million were involuntarily working part-time. The unemployment rate had reached 10 percent nationwide. New York’s large financial sector made the city uniquely vulnerable to the fortunes of the industry where the crisis began. The collapse of Lehman Brothers was a watershed moment for New York City’s economy, as it was for the global financial sector. After it became clear that there would be no buyers or bailouts for Lehman Brothers in September of 2008, the city began to lose jobs rapidly from other financial firms and in other sectors across the economy.

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How can we do things differently to get more out of our limited resources? How can we employ our existing community resources to create good jobs for New Yorkers? In early 2009 people all over the country were asking the same kinds of questions, both about their local economies and about the nation’s economy. While New York struggled with the collapse of Lehman Brothers and related shake-outs in other sectors, cities and metros in Nevada and Florida wondered how to move ahead from the loud and painful bursting of the real estate bubble that had inflated their economies to wondrous but unsustainable size. Communities in Ohio, Kentucky, and Michigan were suddenly mired in their own foreclosure crises, compounded by another deep slide in the auto industry as General Motors and Chrysler wobbled on the precipice of bankruptcy.

13 Bankers: The Wall Street Takeover and the Next Financial Meltdown
by Simon Johnson and James Kwak
Published 29 Mar 2010

Simply asking bankers to behave differently will not work; the solution can only come by changing the rules of the financial system, which requires government action. Five days after President Obama’s election, his chief of staff, Rahm Emanuel, said, “Rule one: Never allow a crisis to go to waste. They are opportunities to do big things.”6 But more than a year after the collapse of Lehman Brothers, even relatively moderate legislation to reform the financial sector was still stuck in Congress. The Obama administration attempted to show that it was serious about change. “The industry needs to show that they get it on the compensation issue,” Obama said at the March 27, 2009, White House meeting discussed in the Introduction.

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Street Fighters: The Last 72 Hours of Bear Stearns, the Toughest Firm on Wall Street. New York: Portfolio, 2009. Lewis, Michael. The Big Short: Inside the Doomsday Machine. New York: W. W. Norton, 2010. McDonald, Lawrence G., and Patrick Robinson. A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers. New York: Crown Business, 2009. Sorkin, Andrew Ross. Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves. New York: Viking, 2009. Tett, Gillian. Fool’s Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe.

Phishing for Phools: The Economics of Manipulation and Deception
by George A. Akerlof , Robert J. Shiller and Stanley B Resor Professor Of Economics Robert J Shiller
Published 21 Sep 2015

Cohan, Money and Power: How Goldman Sachs Came to Rule the World (New York: Doubleday, 2011); Greg Farrell, Crash of the Titans: Greed, Hubris, the Fall of Merrill Lynch, and the Near-Collapse of Bank of America (New York: Crown Business, 2010); Kate Kelly, Street Fighters: The Last 72 Hours of Bear Stearns, the Toughest Firm on Wall Street (New York: Penguin, 2009); Michael Lewis, Boomerang: Travels in the New Third World (New York: W. W. Norton, 2011) and The Big Short: Inside the Doomsday Machine (New York: W. W. Norton, 2010), on financial speculation; Lawrence G. McDonald, with Patrick Robinson, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers (New York: Crown Business, 2009); Gretchen Morgenson and Joshua A. Rosner, Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon (New York: Times Books/Henry Holt, 2011), on Fannie Mae and Freddie Mac; Henry M. Paulson, On the Brink: Inside the Race to Stop the Collapse of the Global Financial System (New York: Business Plus, 2010), on the US Treasury; Raghuram Rajan, Fault Lines: How Hidden Fractures Still Threaten the World Economy (Princeton: Princeton University Press, 2010), on the financial system; Robert J.

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New York Times, May 11, 2005. McCubbins, Mathew D., and Arthur Lupia. The Democratic Dilemma: Can Citizens Learn What They Really Need to Know? New York: Cambridge University Press, 1998. McDonald, Lawrence G., with Patrick Robinson. A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers. New York: Crown Business, 2009. McFadden, Robert D. “Charles Keating, 90, Key Figure in ’80s Savings and Loan Crisis, Dies.” New York Times, April 2, 2014. Accessed May 27, 2015. http://www.nytimes.com/2014/04/02/business/charles-keating-key-figure-in-the-1980s-savings-and-loan-crisis-dies-at-90.html?

How to Run a Government: So That Citizens Benefit and Taxpayers Don't Go Crazy
by Michael Barber
Published 12 Mar 2015

Needless to say, you cannot create a crisis too often because you would then undermine the entire government machine. This book is mainly about making sure that the machine becomes more effective at delivering for the citizens, but, just occasionally, when a problem is at Level 4 or heading that way, it is worth remembering the phrase that became ubiquitous after the collapse of Lehman Brothers in 2008: a crisis is a terrible thing to waste. To summarize, as it becomes apparent there is a problem – you can see it in the data, for example – step one is to acknowledge its existence, step two is to decide what kind of problem it is – both its intensity and its nature – and step three is to do something about it – and to do so without giving the benefit of the doubt.

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Iceland and its banking system were close to collapse and one of its banks would probably fail that day. In Ireland the day before they had, without warning, underwritten all the savings in their banks, causing disarray for everyone else in Europe. Three weeks earlier, in the United States, the collapse of Lehman Brothers, one of the country’s oldest banks, had pushed the rest of Wall Street to the edge. We were looking over the precipice.23 Here you see a finance minister from one of the world’s top economies sensing that he had (almost) lost control. And if Alistair Darling can’t control events, then you can be reasonably confident no one else could.

The Economics of Enough: How to Run the Economy as if the Future Matters
by Diane Coyle
Published 21 Feb 2011

“Free” market outcomes are unlikely to achieve the best outcomes in terms of social welfare when there are important externalities and a growing degree of mutual independence. So in this chapter I’ll argue that markets remain a fundamentally important institution, but the next chapter will look at some of the new challenges of governance. THE MERITS OF MARKETS The economic and financial crisis triggered by the collapse of Lehman Brothers in September 2008 prompted in its turn a wider questioning of the role of markets in the organization of the economy and society. In fact, the questioning of the priority given to markets by the dominant policies in most countries had been under way for some time. The high tide of what some would see as the fetishizing of markets came in the years of Ronald Reagan’s presidency in the United States and Margaret Thatcher’s premiership in the United Kingdom.

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Every commentator agreed that it has been the most serious crisis and recession since the 1930s, and that policy reform is essential. But that reform has moved at a snail’s pace given the need to achieve international agreement on both the principles and the practical details of implementation. Two years from the collapse of Lehman Brothers, as I write, very little financial reform has yet been achieved, and indeed the financial crisis has moved into a new phase with the bailout of Greece and crisis of the euro. It will be another three or four years before relatively minor reforms are implemented. With such difficulty on reforms about which there is such a consensus, but a powerful opposition lobby in the banking industry, how much harder will it be when it comes to far more divisive or political challenges?

The Signal and the Noise: Why So Many Predictions Fail-But Some Don't
by Nate Silver
Published 31 Aug 2012

On the weekend before the 2008 presidential election, for instance, McLaughlin asked his panelists whether John McCain or Barack Obama was going to win.1 That one ought not to have required very much thought. Barack Obama had led John McCain in almost every national poll since September 15, 2008, when the collapse of Lehman Brothers had ushered in the worst economic slump since the Great Depression. Obama also led in almost every poll of almost every swing state: in Ohio and Florida and Pennsylvania and New Hampshire—and even in a few states that Democrats don’t normally win, like Colorado and Virginia. Statistical models like the one I developed for FiveThirtyEight suggested that Obama had in excess of a 95 percent chance of winning the election.

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David Miles, Bank of England, “Monetary Policy in Extraordinary Times,” speech given to the Centre for Economic Policy Research and London Business School, February 23, 2011. http://www.bankofengland.co.uk/publications/Documents/speeches/2011/speech475.pdf 77. Investopedia staff, “Case Study: The Collapse of Lehman Brothers,” Investopedia; April 2, 2009. http://www.investopedia.com/articles/economics/09/lehman-brothers-collapse.asp#axzz1bZ61K9wz. 78. George A. Akerlof, “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism,” Quarterly Journal of Economics 84, no. 3 (Aug. 1970). http://sws.bu.edu/ellisrp/EC387/Papers/1970Akerlof_Lemons_QJE.pdf. 79.

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Akerlof, “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism,” Quarterly Journal of Economics 84, no. 3 (Aug. 1970). http://sws.bu.edu/ellisrp/EC387/Papers/1970Akerlof_Lemons_QJE.pdf. 79. “Lehman Brothers F1Q07 (Qtr End 2/28/07) Earnings Call Transcript,” Seeking Alpha, Mar. 14, 2007. http://seekingalpha.com/article/29585-lehman-brothers-f1q07-qtr-end-2-28-07-earnings-call-transcript?part=qanda. 80. Investopedia staff, “Case Study: The Collapse of Lehman Brothers.” 81. Abigail Field, “Lehman Report: Why the U.S. Balked at Bailing Out Lehman,” DailyFinance, March 15, 2010. http://www.dailyfinance.com/2010/03/15/why-the-u-s-balked-at-bailout-out-lehman/ 82. Summers was also secretary of the treasury under President Clinton. 83.

Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry
by Steven Rattner
Published 19 Sep 2010

Of course, just as we had done with Chrysler and were planning to do with GM, not giving all the creditors of an insolvent institution 100 cents on the dollar is fundamental to the bankruptcy process. But among the differences between banks and car companies is that the banks' creditors included counterparties to trillions of dollars of various derivative and swap transactions. The collapse of Lehman Brothers had nearly brought down the financial system when traders became terrified of being counterparties with anyone. Seeing creditors get more than they deserved was distasteful, to be sure, but compromising the counterparties of Citi and B of A would surely have had even more cataclysmic results.

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Congress yields authority only under the direst of circumstances, as the example of TARP shows. As Rahm had presciently urged his team at the outset, "Never let a crisis go to waste." Congress had been bludgeoned into passing TARP by Hank Paulson and the Bush administration in the midst of the near panic caused by the collapse of Lehman Brothers. At Paulson's insistence, TARP granted the White House and the Treasury unprecedented discretion over the use of $700 billion, bypassing Congress's customary role in approving individual appropriations. Almost immediately, Congress tried to walk back the cat. The Democratic leadership appointed an oversight panel, led by Elizabeth Warren, a professor at Harvard Law School, that seemed to spend most of its time second-guessing tough calls that the administration had made (including those on autos).

What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences
by Steven G. Mandis
Published 9 Sep 2013

They wanted to invest in the business. In contrast, the more-senior partners had reached their highest ownership percentage and were likely incentivized to maximize the value and liquidity of their shares. Swedberg notes that in the case of Lehman (see R. Swedberg, “The Structure of Confidence and the Collapse of Lehman Brothers,” in Markets on Trial: The Economic Sociology of the U.S. Financial Crisis, ed. M. Lounsbury and P. M. Hirsch [Bingley, UK: Emerald, 2010], 81), CEO Richard Fuld ran Lehman in an authoritarian manner, “setting his own distinct mark on the aggressive and competitive type of corporate culture that seems to be characteristic of modern investment banks.”

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“Without question, direct government support helped stabilize the financial system. We believe that the government action was critical, and we benefited from it.” Testimony by Lloyd Blankfein, www.goldmansachs.com/media-relations/in-the-news/archive/1-13-testimony.html. 3. R. Swedberg, “The Structure of Confidence and the Collapse of Lehman Brothers,” in Markets on Trial: The Economic Sociology of the U.S. Financial Crisis, ed. M. Lounsbury and P. M. Hirsch (Bingley, UK: Emerald, 2010), 69–112. 4. My analysis as a sociologist focusing on the organizational factors should not detract from serious questions and concerns raised by many people, such as the Senate Subcommittee on Investigations, chaired by Carl Levin (D.

Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis
by Anatole Kaletsky
Published 22 Jun 2010

The scorched-earth economics always demanded by free-market ideologues at times of crisis are rejected, and central bankers ensure that the day of reckoning for past excesses is postponed. In short, democracy usually offers capitalism a breathing space that allows the system and its institutions to evolve. Capitalism doesn’t break because it bends. What does this approach imply about the crisis that reached its climax in the weeks after the collapse of Lehman Brothers on September 15, 2008? Rather than destroying or permanently crippling the international financial system, as many commentators suggested at the time, this crisis probably marked the start of a fourth great transition in the 250-year history of modern capitalism. Far from suffering extinction, the capitalist system has started evolving into a new species, which will presumably be better suited for life in the early twenty-first century.

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In the end, the total losses from Lehman’s bankruptcy came to about $75 billion.17 This was a lot of money by the standards of normal business bankruptcies, but modest in comparison with the multitrillion dollar write-downs already suffered by banks around the world before Lehman went down. The collapse of Lehman Brothers was much more catastrophic than the raw numbers might have suggested—or Henry Paulson expected—partly because Lehman was a participant in many of the lending chains that had been gradually unraveling since the start of the credit crunch. Once Lehman defaulted, the orderly unwinding of these mutual obligations, which the Fed had tried to facilitate with the Bear Stearns bailout, become impossible.

The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order
by Paul Vigna and Michael J. Casey
Published 27 Jan 2015

As if learning from the Renaissance merchant bankers, Wall Street had again found an effective way to take sovereign money and multiply it many times over through a form of private money built on debt. But it was happening in an area that was far more thinly regulated than the traditional banking system. When it finally dawned on people how important this shadow system was, it was too late. With the collapse of Lehman Brothers, this fragile edifice came tumbling down. The Great Moderation had carried a curse. Not only did it foster a false sense of security, but also it caused us to forget our responsibilities as a society to use our political process to change unwelcome economic circumstances. Everyone from voters to Wall Street traders to congressmen to the president wanted to believe the financial system could be left in the hands of the Fed.

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Because the banks had become so very, very large and interconnected within the global financial system, governments worldwide felt compelled to put up trillions of taxpayer dollars, pounds, and euros to avoid bringing down that entire system. The rise of cryptocurrencies can properly be understood only in relation to those cataclysmic events. * * * On the Wednesday after the September 15 collapse of Lehman Brothers in 2008, Mohamed El-Erian, then co-CEO of the massive asset manager Pacific Investment Management Co. and at that time working around the clock to try to extract his firm from the swirling financial maelstrom, took the time to call his wife from PIMCO’s headquarters in Newport Beach, California.

The Divide: American Injustice in the Age of the Wealth Gap
by Matt Taibbi
Published 8 Apr 2014

Simultaneously, the insiders from Lehman who had come up with the idea took lucrative jobs at Barclays, taking hundreds of millions in future bonus payments to do so. This is a hard story to follow. But if you keep that one image in mind, of a shopkeeper fleeing town in the middle of the night with borrowed profits, the collapse of Lehman Brothers—one of the great unpunished swindles of all time—starts to make sense. Lehman Brothers succumbed to fraud, bad decisions, and book-cooking, dying not of any one specific thing but more generally of corruption itself, in the manner of elderly mobsters or Soviet rulers. The company was founded by a pair of Bavarian-born immigrants to the American South, Henry and Emmanuel Lehman, who in 1850 set up a cotton-trading business based in Montgomery, Alabama.

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So in the end, after hundreds of thousands of pages of motions and depositions, after all that harried effort scouring emails and documents in search of evidence, and after the long hearing in which it was all formally presented, this was the final excuse that all those expensive minds collectively used to wash away the Lehman case: Shit happens! Years after the collapse of Lehman Brothers, many of the company’s creditors were still feeling the sting. The city of Long Beach, for instance, has been enacting sweeping budget cuts ever since the crash. In the first year after Lehman’s collapse, the Long Beach school system cut summer school classes and bus routes for one thousand students.

The Populist Explosion: How the Great Recession Transformed American and European Politics
by John B. Judis
Published 11 Sep 2016

When the major center-left and center-right parties, hobbled by their country’s membership in the Eurozone, failed to revive their nation’s economies, voters began looking to the new populist parties in these countries for answers. The Eurocrisis The financial crash, which surfaced in the United States in September 2008 with the collapse of Lehman Brothers, spread by the year’s end to European banks, which had heavily invested in American derivatives. Credit dried up, borrowers defaulted, investment lagged, and unemployment rose. By 2009, the EU’s average unemployment rate was 9.6 percent; in 2012, it would be 11.4 percent. And it would be far worse in Southern Europe—18 percent in Spain in 2009 and 25.1 percent in 2012.

Start It Up: Why Running Your Own Business Is Easier Than You Think
by Luke Johnson
Published 31 Aug 2011

As the wheel inevitably turns and conditions deteriorate, so credit tightens, companies fail and assets are recycled. This is an irresistible sequence of events. Mere mortals cannot resist the tide of history. Markets and exchanges are merely mechanisms that reflect the temperament of man. Witnessing and participating in such upheaval can be traumatic. Take the collapse of Lehman Brothers and the forced sell-offs of Merrill Lynch and HBoS. For the staff, their families, and other stakeholders, this classic example of Schumpeter’s ‘creative destruction’ is hardly something to be celebrated. Here is a sudden and jolting reallocation of resources. Overnight, venerable institutions are destroyed, and new ones spring up, phoenix-like, to fill the gap.

The Tyranny of Metrics
by Jerry Z. Muller
Published 23 Jan 2018

Harvard Journal of Law and Public Policy 33, no. 2 (2010), pp. 507–18, and Arnold Kling, Specialization and Trade (Washington, D.C., 2016). 17. Kling, “The Financial Crisis”; and Kling, Specialization and Trade, pp. 182–83. 18. Lawrence G. McDonald with Patrick Robinson, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers (New York, 2009), pp. 106–9. 19. Amar Bhidé, “Insiders and Outsiders,” Forbes, September 24, 2008. 20. The paragraphs that follow draw upon Jerry Z. Muller, “Capitalism and Inequality: What the Right and the Left Get Wrong,” Foreign Affairs (March–April 2013), pp. 30–51. 21. Hyman P.

The Price of Tomorrow: Why Deflation Is the Key to an Abundant Future
by Jeff Booth
Published 14 Jan 2020

It is becoming abundantly clear that we are in the midst of a serious global meltdown.” Janet Yellen Federal Reserve transcripts4 One of the few economists to correctly forecast what was happening at the time was Nouriel Roubini, an economics professor at New York University. In 2006, two years before the collapse of Lehman Brothers and the rescue of the financial system, Roubini “stood before an audience of economists at the International Monetary Fund and announced that a crisis was brewing.” In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession.

European Spring: Why Our Economies and Politics Are in a Mess - and How to Put Them Right
by Philippe Legrain
Published 22 Apr 2014

They have done too little to boost investment and implement reforms to open up healthier future growth. And at a time when the private sector was cutting back and non-Europeans were not in a position to take up all the slack, they embarked on premature, front-loaded, slash-and-burn fiscal austerity. When the world economy went into freefall after the chaotic collapse of Lehman Brothers, the leaders of the Group of Twenty (G-20) most important economies in the world agreed in London in April 2009 to embark on a big fiscal stimulus to support growth.86 This was a success, not least thanks to bold pre-emptive action by the Chinese government. But after Greece’s public-debt problems led it to seek an EU-IMF loan in April 2010, eurozone governments took fright at rising debt levels and slammed on the brakes.

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Back home, banks’ reckless lending, mostly against the perceived security of booming house prices, saw British households pile on record amounts of debt, rising from 108 per cent of their disposable income in 2000 to a whopping 170 per cent in early 2008.391 When the US housing bubble burst, bank lending froze and then UK house prices slumped too, one bank after another toppled. The first was Northern Rock, an overextended local bank that pumped out cheap, risky mortgages financed by short-term debt, which suffered a run in September 2007 and was eventually nationalised in February 2008. Days after the collapse of Lehman Brothers in September 2008, HBOS, a retail bank similarly laid low by wild mortgage lending financed with fickle debt, was rescued through a government-brokered takeover by Lloyds TSB, a more conservative lender seduced by the prospect of dominating high-street banking. But swallowing HBOS dragged Lloyds down too: to save it from collapse the following month, the British government took a 43 per cent stake in the bank.

Money: 5,000 Years of Debt and Power
by Michel Aglietta
Published 23 Oct 2018

In this account, there would be nothing left to do except observe prices on the financial markets, in order to act in accordance with the most complete knowledge – which, as a bonus, is affirmed as ‘true’. We are thus presented with a portrayal of the best of possible worlds. Let us go further into the events of the crisis that we all remember (because we lived through it). After the collapse of Lehman Brothers, finance in the so-called advanced countries had entered into a process of self-destruction, lacking the capacity to stabilise itself by its own means. Finance itself produced the devastating contagion that was now spreading unopposed. Everything was unfolding as if the counterfactual horizon of the future had disappeared.

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The banks become reticent to continue opening up lines of credit to one another. That is how the international interbank market froze in mid-August 2007, thus obliging the central banks to mount a coordinated last-resort intervention. But the interbank market did not truly recover, and its paralysis became much more serious in September 2008 after the collapse of Lehman Brothers. The deregulation of finance in the 1980s initiated the transition to market finance. This further weakened the banks in all countries. Indeed, the enormous boom in securities transactions was financed by debt levers provided by bank credit, which repeatedly proved excessive. Errors in appreciating asset price movements translated into massive undervaluations of credit risk, insufficient reserves, inadequate own funds, and distorted maturities.

Willful: How We Choose What We Do
by Richard Robb
Published 12 Nov 2019

We persuaded some contractors to continue working and others to delay enforcement on sizeable obligations—the Belgian manufacturers of the steel foundations were owed €46.5 million but agreed to continue rolling 50,000 tons so that installation could start in December. Johan and I put most of our own money into the project to keep it afloat a few more days. What else could we do? Then came the collapse of Lehman Brothers on September 15. My overall terror that day was heightened by fear for this deal. On the afternoon of Friday, September 26, we were informed that Iberdrola’s CEO wanted to postpone the deal due to market conditions. The following Tuesday morning, he came to London to negotiate. We struck a revised deal, with our fund leaving its money in the project alongside Iberdrola’s.

The Participation Revolution: How to Ride the Waves of Change in a Terrifyingly Turbulent World
by Neil Gibb
Published 15 Feb 2018

The problem came when the world was tipped upside down and those models were ill-equipped to making sense of behaviours” Andrew Haldane, chief economist, Bank of England, 2017 When Andy Haldane addressed the Institute of Government in London in early 2017, he described his profession’s inability to foresee the collapse of Lehman Brothers or the ensuing global financial crisis as its “Michael Fish moment” – referring to an infamous incident in 1987 when a BBC weather forecaster confidently predicted that a hurricane was going to miss the UK, only for it to hit the country with full-force the next day, causing devastation and mayhem; the worst storm in a century.

The Great Economists Ten Economists whose thinking changed the way we live-FT Publishing International (2014)
by Phil Thornton
Published 7 May 2014

Seeing the threat to their own industries, other governments retaliated with tariffs, with the result that international trade fell by half. More than 1,000 economists signed a petition to the US government warning that the Smoot-Hawley Tariff Act would have disastrous economic repercussions. Fast forward to 2009 when the world was seen as teetering on the brink of a new depression in the wake of the collapse of Lehman Brothers. This time world leaders took a leaf out of Ricardo’s books and agreed not to embark on protectionist measures. As then British prime minister Gordon Brown said in the run-up to the London summit of the G20: ‘Protectionism must be rejected as protectionism is the politics of defeatism, retreat and fear and in the end protects no one at all.’2 2. http://www.europarl.europa.eu/sides/getDoc.do?

Crash of the Titans: Greed, Hubris, the Fall of Merrill Lynch, and the Near-Collapse of Bank of America
by Greg Farrell
Published 2 Nov 2010

The program would allow each of these banks access to capital at relatively low rates, since the banks would only have to pay a 5 percent annual dividend to the government for several years, at which point a rising dividend would encourage the banks to buy back the preferred shares. But there was one catch to the program: Executive compensation at the banks receiving the funds would be restricted. The economic devastation wreaked by the bursting of the real estate bubble and the collapse of Lehman Brothers had exacerbated public outrage at the multimillion-dollar pay packages common on Wall Street. To address that contentious topic, the $700 billion bailout fund—known as the “troubled asset relief program” or TARP—placed restrictions on the types of golden parachute payments that could be made to top executives.

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McCain’s defeat also foreclosed any chance that existed for John Thain to succeed Hank Paulson as U.S. treasury secretary. Thain had emerged a year earlier as McCain’s primary fundraiser and leading supporter on Wall Street. The Arizona senator’s short-lived lead in the polls, in early September, evaporated with the collapse of Lehman Brothers and the subsequent government bailout of AIG. The creation of the $700 billion TARP fund, by a Republican administration, fueled populist anger at the banking industry to the point where McCain and his running mate, Alaska governor Sarah Palin, blamed “greed on Wall Street” as the driving force behind the financial crisis and the nation’s economic woes.

Manias, Panics and Crashes: A History of Financial Crises, Sixth Edition
by Kindleberger, Charles P. and Robert Z., Aliber
Published 9 Aug 2011

Henry Paulson, the US Secretary of the Treasury from 2007 to 2009 and previously the head of Goldman Sachs, authored On the Brink: Inside the Race to the Stop the Collapse of the Global Financial System. Lawrence McDonald wrote A Colossal Failure of Common Sense; the Inside Story of the Collapse of Lehman Brothers, his former employer. William D. Cohan, a former banker turned journalist, brought out House of Cards: A Tale of Hubris and Wretched Excess on Wall Street, while Alex Pollock, another former banker, published Boom and Bust: Financial Cycles and Human Prosperity. George Cooper, a financial analyst, wrote The Origin of Financial Crises.

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The United States experienced a much sharper decline in household wealth in 2008 and 2009; prices of residential real estate declined by more than 30 percent and stock prices fell by nearly 50 percent – before a partial recovery. Property prices began to decline at the end of 2006 and economic growth was positive throughout 2007 and in the first half of 2008; the first negative quarter was the third quarter of 2008 – and even then the decline was modest. Then the collapse of Lehman Brothers in September 2008 triggered a panic and a crash. The credit system froze; interest rate spreads surged, and LIBOR increased by 500 basis points relative to the Federal Funds rate whereas the traditional spread had been 10 to 20 basis points. The combination of the more restrictive supplies of credit and the greater cautiousness by households led to a very sharp decline in GDP.

Ethics in Investment Banking
by John N. Reynolds and Edmund Newell
Published 8 Nov 2011

The ethics of speculation will be considered later. Ethical problems and the financial crisis Despite their strategic importance to the economy, investment banks have faced hostility and come under particular scrutiny during the recent financial crisis, in which three of the largest and best-known went out of business. The collapse of Lehman Brothers in September 2008 sent shock waves around the world and proved to be the tipping point of the “credit 16 Ethics in Investment Banking crunch”, which also saw the fall of Bear Stearns (acquired by JP Morgan with US Government support) and Merrill Lynch (which was bought by the Bank of America).

The Payoff
by Jeff Connaughton

Thanks to Josh’s intrepid research and synthesis, tutorials from our covert industry insiders, and our own exhaustive (and exhausting) reading, Ted and I became extremely knowledgeable about these practices and how they affect market stability. In fact, Ted even predicted the flash crash—when the market dropped one thousand points in just minutes on May 6, 2010—eight months before it happened. In a speech on September 14, 2009, the anniversary of the collapse of Lehman Brothers, Ted warned of a flash crash and how HFT would fuel it: [U]nlike specialists and traditional market-makers that are regulated, some of these new high-frequency traders are unregulated, though they are acting in a market-maker capacity. They have no requirements to “maintain a fair and orderly” market.

The Rare Metals War
by Guillaume Pitron
Published 15 Feb 2020

China, too, is the target of trade retaliation measures orchestrated by Western states and corporations. Since 2011, protectionist measures against China have tripled, according to the Global Trade Alert (GTA) in its report ‘The Global Trade Disorder’ (2014). The financial crisis triggered by the collapse of Lehman Brothers was unquestionably a turning point. States went from their traditional role of safeguarding international trade to becoming one of its harshest critics. In this context, ‘China has to manage a shift in the globalisation paradigm at a time when the former winners thereof — the West — are in the process of becoming the losers’, says Brian Jackson, an analyst at the Beijing bureau of IHS group.

Adaptive Markets: Financial Evolution at the Speed of Thought
by Andrew W. Lo
Published 3 Apr 2017

Beginning on January 1, 2005, Merrill Lynch was the first to volunteer, followed by Goldman Sachs, then Bear Stearns, Lehman Brothers, and Morgan Stanley at the beginning of fiscal year 2006.8 As we’ll see shortly, this chronology is important for understanding the narrative. Normally, this rule change would be a minor bit of regulatory history. However, on August 8, 2008, in that nervous month before the collapse of Lehman Brothers, the former director of the SEC’s Division of Trading and Markets, Lee Pickard, published an article in American Banker with a shocking claim: the rule change by the SEC in 2004 allowed broker-dealers to greatly increase their leverage, thereby creating the conditions for the financial crisis.9 This was the smoking gun that crisis watchers had been looking for.

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Journal of Applied Social Psychology 39: 2809–2839. McCulloch, Warren, and Walter Pitts. 1943. “A Logical Calculus of the Ideas Immanent in Nervous Activity.” Bulletin of Mathematical Biophysics 7: 115–133. McDonald, Lawrence G., and Patrick Robinson. 2009. A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers. New York: Three Rivers Press. McDougall, Ian, Francis H. Brown, and John G. Fleagle. 2005. “Stratigraphic Placement and Age of Modern Humans from Kibish, Ethiopia.” Nature 433: 733–736. Merton, Robert C. 1973. “Theory of Rational Option Pricing.” Bell Journal of Economics and Management Science 4: 141–183. ___. 1989.

Money and Government: The Past and Future of Economics
by Robert Skidelsky
Published 13 Nov 2018

The Bank of England was slow to respond to the growing signs of banking crisis. In Howard Davies’s words, ‘[it] lectured on moral hazard, while the banking system imploded round it’. Unlike the US Federal Reserve, the European Central Bank also worried about ‘imaginary inflationary dangers’.21 But following the collapse of Lehman Brothers in September 2008 the policy rates of the main central banks were rapidly slashed towards zero. 253 M ac roe c onom ic s i n t h e C r a s h a n d A f t e r , 2 0 0 7 – Figure 40. Cutting interest rates: central banks’ base rates22 (per cent) 7 European Central Bank Bank of England Federal Reserve 6 5 4 3 2 1 16 nJa 15 nJa 14 13 nJa nJa 12 11 nJa nJa 10 n- 09 Ja nJa 08 07 nJa nJa 06 nJa 05 04 nJa nJa Ja n- 03 0 This was the traditional response.

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The fairy is the satirical creation of Paul Krugman (Krugman (2010)) to depict the unsubstantial character of this argument. Mackenzie (2010). The ‘short view’ of Mackenzie’s title accurately describes the view of bond-market traders. ‘You should have just asked a Swabian housewife,’ said Angela Merkel in October 2008, in response to a question about the collapse of Lehman Brothers. The distributional effects may not be considered desirable, but they do not impose a net burden on the future generation considered as a whole. Office for Budget Responsibility (2012), p. 33. Data: International Monetary Fund (2008, 2012, 2017a). Graph: author’s own. HM Treasury (2010), p. 8.

The Handbook of Personal Wealth Management
by Reuvid, Jonathan.
Published 30 Oct 2011

The sub-prime debacle illustrated the fragility of the banking system and the perceived security of capital lent to or invested in banks. The reason that structured products use bank notes is twofold; the first is that banks are regulated in such a way that assets should always exceed liabilities. The second is that it provides cheap funding to the issuing banks. The collapse of Lehman Brothers, which issued many structured products to retail investors through financial advisers, reminded all investors that capital-protected does not mean guaranteed nor safe. In the UK, the capital structure of most financial institutions is constructed as shown in Figure 1.4.3, representing the priority for repayment in the event of default.

The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse
by Mohamed A. El-Erian
Published 26 Jan 2016

But it is even more costly not to think about a crisis that does occur (Type II). In taking this approach, I have been heavily influenced not just by my fifteen-year tenure at the IMF, where involvement in tricky crisis management situations was quite common, but also by what I lived through during the disorderly collapse of Lehman Brothers in September 2008. Conventional wisdom is that PIMCO must have predicted Lehman’s collapse. After all, the vast majority of the firm’s clients not only avoided large losses but also outperformed by making money on the funds that had been entrusted to us for investment management services.

The Great Reset: How the Post-Crash Economy Will Change the Way We Live and Work
by Richard Florida
Published 22 Apr 2010

Chapter Seven Unraveling Now, we all know what it feels like to live through the bursting of a huge economic and financial bubble. We can literally feel the demise of the old suburban way of life all around us. But how exactly did it come to this? Others have chronicled the financial shenanigans and policy blunders that led to the collapse of Lehman Brothers and the onset of the economic and financial crisis. But, to a surprising degree, the causes of the crash are also geographic in nature. The bursting bubble that sparked this crisis signaled a system of economic organization and spatial fix long past its sell-by date. Suburbanization worked well for a time.

Broken Markets: A User's Guide to the Post-Finance Economy
by Kevin Mellyn
Published 18 Jun 2012

During the Great Moderation, individuals and institutions learned that the market was back-stopped by the state, their profits were theirs to keep, and their losses would be picked up by the taxpayer. The Great Panic: Cause and Effect Much 20/20 hindsight lavished on the financial market meltdown revolves around the collapse of Lehman Brothers and the market freefall that ensued. What made the event so shocking was that the Great Moderation had taught the global financial economy that a large market player with huge obligations to and from other key players would somehow be saved. Certainly Lehman’s management must have made this assumption.

Smart Money: How High-Stakes Financial Innovation Is Reshaping Our WorldÑFor the Better
by Andrew Palmer
Published 13 Apr 2015

One HSBC veteran happily recounted stories of the financial crisis that gripped Asia in the late 1990s, when tellers were instructed to bring piles of cash into view to reassure people that banks were overflowing with money. Tales of improvisation from Asia were not supposed to be relevant to the West’s ultrasophisticated financial system. But far worse was to come. A chain of events was under way that would lead in time to the collapse of Lehman Brothers, a huge US investment bank, state takeovers of swaths of the rich world’s banking systems, a deep global recession, and the Eurozone debt crisis. I observed these later phases of the crisis from the position of the Economist’s finance editor, a post that I held from July 2009 until October 2013.

The Fix: How Bankers Lied, Cheated and Colluded to Rig the World's Most Important Number (Bloomberg)
by Liam Vaughan and Gavin Finch
Published 22 Nov 2016

The following day he packed his bags and caught a flight back to Washington to tell his colleagues they had a case on their hands. The Fix: How Bankers Lied, Cheated and Colluded to Rig the World’s Most Important Number By Liam Vaughan and Gavin Finch © 2017 Liam Vaughan and Gavin Finch Chapter 10 Goodbye, Big Nose A fter single-handedly saving UBS tens of millions of dollars following the collapse of Lehman Brothers, Hayes saw out the year in style with a trip to Las Vegas with Sarah Tighe. The couple had been together just over a year, and Hayes had never been happier. What he’d done to deserve this intelligent, attractive woman he didn’t know, but he was smitten. As the clock counted down to midnight on New Year’s Eve, amid the bright lights of the Strip, Hayes asked Tighe to marry him.

Unhappy Union: How the Euro Crisis - and Europe - Can Be Fixed
by John Peet , Anton La Guardia and The Economist
Published 15 Feb 2014

Those involved speak only in guarded terms about precisely what they would have done. Would the departure of, say, Greece have required Cyprus to leave as well, given their close interconnection? The ECB would have flooded the financial system with liquidity to try to ensure that credit markets did not dry up, as they had done after the collapse of Lehman Brothers, and to forestall runs on both banks and sovereigns. Large quantities of banknotes would have been made available in the south to reassure anxious depositors especially if, as during the Cyprus crisis, banks were shut down and capital controls imposed. The ECB would probably have engaged in unprecedented bond-buying to hold down the borrowing costs of vulnerable countries.

The Growth Delusion: Wealth, Poverty, and the Well-Being of Nations
by David Pilling
Published 30 Jan 2018

In the hope that he was wrong about that, I hope you’ll read on. * * * — We all sense instinctively that something is wrong. But we struggle to put our finger on it. The global financial crisis of 2008 was the ultimate signal that economics had let us down. In the run-up to the collapse of Lehman Brothers and the onset of recession in virtually the whole Western world, the cult of growth had led us to celebrate our economies. People like Alan Greenspan, chairman of the Federal Reserve, said everything was going swimmingly and that the markets should be left alone to create ever more wealth.

Fully Automated Luxury Communism
by Aaron Bastani
Published 10 Jun 2019

Even that paled into insignificance, however, when in 2016 Britain voted to leave the European Union, becoming the first member-state in its history to do so. While ‘Brexit’ was the most important political moment in Europe for a generation, it was soon outdone by events across the Atlantic when, just a few months later, Donald Trump was elected the forty-fifth president of the United States. Less than a decade after the collapse of Lehman Brothers in 2008, it was now undeniable. An expansionist Russia, isolationist Britain and broken economic model had all been outdone by a reality TV star becoming the most powerful person on Earth. History was back. Trump’s inauguration speech the following February stood in defiant contrast to the heady rhetoric of his predecessor, Barack Obama, when he assumed office eight years earlier.

Kanban: Successful Evolutionary Change for Your Technology Business
by David J. Anderson
Published 6 Apr 2010

By aligning all the groups up and down the value stream with the same goals, there is an incentive for swarming behavior to emerge. Everyone wins when idle people volunteer to collaborate to resolve an issue that affects them even though it is not in their immediate work area or area of responsibility. Other Market Factors In October 2008, following the collapse of Lehman Brothers and series of related traumatic events in the financial sector, banks and investment firms in leading financial centers such as London and New York started to cancel or significantly modify IT projects in development. The reason was that their world had been turned upside down. They were fighting for their survival.

How Boards Work: And How They Can Work Better in a Chaotic World
by Dambisa Moyo
Published 3 May 2021

The 2020 global pandemic and economic shutdown has offered an unnerving idea of what economic carnage might look like in terms of spiking unemployment and plummeting growth prospects, especially in the most affected sectors of travel, tourism, and retail. Recent memory provides plenty of examples of the fallout of individual corporate failure. Kmart’s bankruptcy and restructuring in 2002–2003 led to over sixty thousand job losses. The collapse of Lehman Brothers at the start of the financial crisis in 2008 destroyed nearly $700 billion and paralyzed the financial system. That crisis writ large had a devastating effect across the whole economy. A huge number of families defaulted on their mortgages and had their homes repossessed, with disastrous consequences for communities.

The Dark Cloud: How the Digital World Is Costing the Earth
by Guillaume Pitron
Published 14 Jun 2023

In 2017, Hibernia Atlantic sold its cable to GTT Communications for 590 million US dollars — almost precisely 10 million US dollars per millisecond. 49 Electronic equipment resembling torpedoes used to relay digital signals every 80 kilometres. 50 Interview with Bertrand Clesca, founder of OpticalCloudInfra and consultant with Pioneer Consulting, 2020. 51 ‘L’Ifremer mesure l’impact des câbles sous-marins’ [‘Ifremer measures the impact of undersea cables’], Mer et Marine, 25 June 2019. 52 ‘Submarine cables and the oceans: Connecting the world’, op. cit. 53 Ibid. 54 Interview with Alwyn du Plessis, CEO of Mertech Marine, 2020. 55 The list of cables the company has recovered is available on its website mertechmarine.co.za. 56 The first cable recovered by Mertech Marine was a section of the 350-kilometre TAT-1 cable. The company chartered a ship in August 2008 with a view to selling the copper. By the time it came back to port, the collapse of Lehman Brothers and the ensuing financial recession sent copper prices into a tailspin, severely jeopardising the company. 57 Interview with Bertrand Clesca, 2020. 58 Interview with Laurent Campagne, 2020. 59 ‘YouTube and Netflix are cutting streaming quality in Europe due to coronavirus lockdowns’, CNBC, 20 March 2020. 60 Interview with Laurent Campagne, 2020. 61 ‘Is the internet on the brink of collapse?

The Social Life of Money
by Nigel Dodd
Published 14 May 2014

What began as a crisis in the U.S. subprime mortgage market in 2007 was now manifesting itself as a slow-motion bank run. This problem was not confined to Greece but was happening throughout the Eurozone amid widespread doubt about the future of a project that had been launched with such optimism a little more than a decade before. Since the collapse of Lehman Brothers in September 2008, the world’s major central banks have been plowing vast quantities of money into the banking system. The U.S. Federal Reserve has made commitments totaling some $29 trillion, lending $7 trillion to banks during the course of one single fraught week. The Bank of England has spent around £325 billion on quantitative easing alone—a figure that could yet rise to £600 billion—while the U.K. government has committed a total of £1.162 trillion to bank rescues.

…

In block capitals drawn in black felt tip pen were the words, “If Karl Marx was alive he would say ‘I told you so.’ ”2 Five days earlier, financial services firm Lehman Brothers had filed for Chapter 11 bankruptcy protection in a case that remains the biggest in U.S. history. The firm held more than $600 billion in assets. The Financial Times headline warned of a “Day of Reckoning on Wall Street”; the Telegraph called it “Meltdown Monday”; and Hong Kong’s South China Morning Post simply said, “Wall Street Crumbles.” One month after the collapse of Lehman Brothers, The Times (London) carried a feature on Marx under the headline, “Did he get it all right?”3 And as sales of Capital increased threefold, a quotation from the book, suggesting that Marx had shown prescience worthy of Nostradamus, went viral on the Internet. It read, “Owners of capital will stimulate the working class to buy more and more of expensive goods … until their debt becomes unbearable.

The Crisis of Crowding: Quant Copycats, Ugly Models, and the New Crash Normal
by Ludwig B. Chincarini
Published 29 Jul 2012

Claims against Lehman executives, Richard Fuld, Chris O’Meara, Erin Callan, Ian Lowitt, and against the auditor, Ernst & Young, for failing to adequately disclose the practice of Repo 105. 6. Claims against J.P. Morgan and CitiBank due to their modifications of guarantee agreements and demands for extra collateral from Lehman Brothers in the final days of Lehman’s existence. They found these demands directly impacted Lehman’s liquidity pool and were central in the collapse of Lehman Brothers. Who Would Have Been Next? Once Lehman Brothers failed, the stock prices of remaining investment banks immediately began collapsing (see Figure 11.5). From September 15 to September 18, Goldman Sachs fell 30% and Morgan Stanley fell 39%. By September 15, 2008, the residential real estate market had fallen a total of 23% from its peak.

…

Associated Press Online, September 15, 2008. Martin, Timothy. “Atlanta School Scandal Sparks House Cleaning.” BusinessWeek, July 13, 2011. McDermott, Daniel. “In Search of Certainty.” Wall Street Journal, June 27, 2011. McDonald, Lawrence G. and Patrick Robinson. A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers. Crown Publishing Group, 2009. McGeehan, Patrick. “Lehman Offers a Rare Glimpse of Risk Profile.” Wall Street Journal, October 6, 1998. McGrane, Victoria and Deborah Salomon. “CFTC Chief Feels Need for Speed.” Wall Street Journal, December 14, 2010. McGrane, Victoria and Robin Sidel.

The Power Law: Venture Capital and the Making of the New Future
by Sebastian Mallaby
Published 1 Feb 2022

Now would Yu see him? Surprised, curious, even a little bit impressed, Yu suggested a meeting at the Starbucks in Palo Alto. It was his job to raise capital for Facebook, after all, and these days even implausible investors were worth seeing. In the wake of the financial crisis triggered by the collapse of Lehman Brothers, U.S. pension funds and endowments were scared. The VCs who invested their money were holding back from new commitments. Yu arrived at the Starbucks and found Milner already there, together with a business partner who had flown in from London.[2] The Russian ordered black tea and proceeded to lay out his proposal.

…

“There was no whiteboard discussion about ‘Hey, let’s be private-equity investors,’” Coleman said later.[27] But by moving sideways from hedge-fund stock picking into private technology bets, Tiger had created the template for Milner’s later Facebook investment. The Tiger tool kit featured the global tabulation of tech business segments, the modeling of earnings and fair value, and rapid intercontinental opportunism in response to a shock—in Tiger’s case, SARS; in Milner’s case, the collapse of Lehman Brothers. Yet in order for Milner to learn from Tiger’s template, he had to know of its existence. At the end of 2003, around the time that Ctrip went public, Shleifer flew to Moscow. He was looking, again, for “the this of the that”: he had heard that Russia had two Yahoos and a Google. His first meeting took place at a bar on the roof of a hotel.

The Alpha Masters: Unlocking the Genius of the World's Top Hedge Funds
by Maneet Ahuja , Myron Scholes and Mohamed El-Erian
Published 29 May 2012

That year turned out to be the turbulent 2008. Sensing a period of difficulty, Weinstein’s group was positioned cautiously. Consequently, says Weinstein, “all through the Bear Stearns collapse and into the summer, we were slightly ahead for the year, which was a decent result.” Then came the collapse of Lehman Brothers. “That in itself wasn’t the problem for a fund that is both long and short, but it was the secondary effect, where people actually thought Goldman Sachs and Morgan Stanley could go under, that was stunning.” As part of Deutsche’s senior management, Weinstein spent that dramatic “Lehman Weekend” at the Federal Reserve Bank in New York, in the company of senior government officials and the top executives of the other large banks, attempting to work out contingency plans.

The Global Minotaur
by Yanis Varoufakis and Paul Mason
Published 4 Jul 2015

Marx, K. (1972) Capital, Vols. I–III, London: Lawrence and Wishart. Marx, K. (1973) Grundrisse: Foundations of the Critique of Political Economy (Rough Draft), trans. Martin Nicolaus, Harmondsworth: Penguin. McDonald, L. with P. Robinson (2009) A Colossal Failure of Common Sense: The inside story of the collapse of Lehman Brothers, London: Ebury Press. Minsky, H. (2008) Stabilizing an Unstable Economy, New York: McGraw-Hill. Parker, D. (2009) The Official History of Privatisation, Vol. 1, The Formative Years 1970–1987, London: Routledge. Reinhart, C. and K. Rogoff (2009) This Time Is Different: Eight centuries of financial folly, Princeton, NJ: Princeton University Press.

Twilight of the Elites: America After Meritocracy
by Chris Hayes
Published 11 Jun 2012

.: Greenwood Publishing Group Inc., 2004), p. 122. 3 only 18 percent of respondents in a CBS News/New York Times poll: See Robin Toner, “Poll Shows Price Bush Pays for Tough Economic Times,” New York Times, January 10, 1992. 4 “I think—I’ll have my staff get to you”: Jonathan Martin and Mike Allen, “McCain Unsure How Many Houses He Owns,” Politico, August 21, 2008. 5 “The fact that John McCain”: Spokesman Hari Sevugan, cited in “Dems Pounce on McCain Admission He Doesn’t Know How Many Houses He Owns,” washingtonpost.com, August 21, 2008. 6 Among those who ranked “cares about people like me” … Obama beat McCain 73–19: See “FOX News Poll: Obama’s Edge Over McCain Narrows,” October 30, 2008. 7 “He has forbidden his Governors to pass Laws of immediate and pressing importance”: See http://www.archives.gov/exhibits/charters/declaration_transcript.html, accessed January 23, 2012. 8 “A small representation can never be well informed as to the circumstances of the people”: See http://www.constitution.org/afp/fedfar07.htm, accessed January 23, 2012. 9 Chicago has the fourth highest level of black-white segregation in the entire nation: See Matthew Hall et al., “Racial and Ethnic Residential Segregation in the Chicago Metropolitan Area, 1980–2009,” in Institute of Government & Public Affairs, University of Illinois, Changing American Neighborhoods and Communities Report, Series 2, p. 2. 10 26 percent of Americans lived in what Bishop calls “landslide counties”: Bill Bishop, The Big Sort: Why the Cluster of Like-Minded America Is Tearing Us Apart (Boston: Houghton Mifflin Harcourt, 2009), p. 9. 11 Dick Fuld … had a separate elevator that was commandeered: See “A Look Back at the Collapse of Lehman Brothers,” PBS NewsHour, http://www.pbs.org/newshour/bb/business/july-dec09/solmanlehman_09-14.html, accessed January 23, 2012. 12 “They help him focus on the real problems people are facing”: See Stephen Splane, “ ‘Dear President Obama’: The President Reads 10 Letters a Day from the Public, with Policy Ramifications,” ABC News, February 23, 2009. 13 The high-power group were far more likely to draw an “E” as if they were reading it themselves: Adam Galinsky et al., “Power and Perspectives Not Taken,” Psychological Science 17, no. 12 (2006): 1069, http://www.kellogg.northwestern.edu/faculty/galinsky/power%252520and%252520perspective-taking%252520psych%252520science%2525202006.pdf, accessed January 23, 2012. 14 “made more accurate inferences about emotion”: Michael W.

Rethinking Money: How New Currencies Turn Scarcity Into Prosperity
by Bernard Lietaer and Jacqui Dunne
Published 4 Feb 2013

Said another way, banks would have to apply a 100 percent compulsory reserves rule, and since no bank-debt money could be created at all, banks would de facto be limited to the role of money brokers.17 The Glass-Steagall Act was repealed with the Gramm-Leach-Bliley Act, signed by President Clinton. Since then, this repeal has been blamed for triggering the subprime crisis and the collapse of Lehman Brothers in September 2008, which in turn precipitated the global banking scramble, leaving so many governments overindebted. The 1930s debate—whether to reinstate some form of the GlassSteagall Act or implement some version of the Chicago Plan—is now starting all over again. Although unofficial reports have surfaced that several nations are discussing the latter strategy, there are clear reasons that the Chicago Plan isn’t the best solution available, given the current understanding of systems.

Stolen: How to Save the World From Financialisation
by Grace Blakeley
Published 9 Sep 2019

They lived through the death of the world of neoliberal prosperity, and the birth of the world of post-crisis stagnation. They could see the contingency of the existing order. Suddenly, another world was possible again. But what kind of world would it be? Ten and a half years to the day after the collapse of Lehman Brothers, the planet was presented with two potential futures. On 15 March 2019, a white supremacist opened fire on a mosque in Christchurch, New Zealand, killing forty-nine people, from young children to the elderly. The killer, Brenton Tarrant, posted a “manifesto” on Twitter before the shooting, in which he claimed that it was necessary to create a “climate of fear” for Muslims living in the West to prevent a “white genocide”.

Smarter Investing
by Tim Hale
Published 2 Sep 2014

12.4 Gold Gold has always been an asset that has attracted significant attention, particularly as a store of value at times of extreme uncertainty. A case can certainly be made for holding some physical gold, perhaps in the form of coins or ingots, in the liquidity reserves of those who fear the breakdown of fiat currencies at times of extreme market events such as those surrounding the collapse of Lehman Brothers. In the extreme collapse of the financial system, paper gold (e.g. via a gold fund) would be less favourable given the counterparty risk of failure and inability to access the value of the gold. This is a purely personal decision that sits outside a long-term investment portfolio. Does it have a strategic role in your portfolio?

DIY Investor: How to Take Control of Your Investments & Plan for a Financially Secure Future
by Andy Bell
Published 12 Sep 2013

The UK fared worse than most in that crash, with the FT30, then the leading index in this country, falling 73 per cent top to bottom. Since then we have lived through 1987’s Black Monday, 1992’s Black Wednesday, 1997’s Asian Crisis, 1998’s Russian Crisis, 2000’s dot.com bubble, the 9/11 market falls and the 2002 downturn, among others. Then, of course, there was the credit crunch of 2008, kicked off by the collapse of Lehman Brothers, which triggered the global financial crisis that developed economies are still struggling to extricate themselves from to this day. And it is fairly certain there will be more along in the future. But don’t let that put you off. Easy to say, you might think, but with all that bad news, why would anyone want to invest in equities?

The Rise of the Outsiders: How Mainstream Politics Lost Its Way
by Steve Richards
Published 14 Jun 2017

The crash changed the dynamics of politics immediately. What was the right thing to do not only became politically possible, but urgently necessary. Yet the centre left was trapped by its immediate past and its failure to form accessible arguments about what needed to be done next. In the days leading up to the collapse of Lehman Brothers, the then Cabinet minister, Ed Miliband, caught the end of a radio interview with two guests pleading for governments to intervene, in order to prevent a financial crash across the globe. He assumed that the interviewees were two left-wingers. To his delighted amazement, one was from Goldman Sachs and the other was from Lehman’s, which was heading towards the cliff’s edge.

Wait: The Art and Science of Delay
by Frank Partnoy
Published 15 Jan 2012

Francesco Guerrera was born in Milan and has a first-class degree from City University in London. He has won numerous awards, including a Foreign Press Association Award for his investigation of “blood diamonds,” an Overseas Press Award for his scoop on CNOOC’s takeover bid for Unocal, and a SABEW Award for a video series on the collapse of Lehman Brothers.23 He is widely considered one of the world’s leading business reporters and is editor of the Wall Street Journal’s respected “Money and Investing” section. He is twenty-eight years younger than Kroft. When Guerrera began working as a journalist during the 1990s, technology had not yet transformed journalism, but it was about to.

The Post-American World: Release 2.0
by Fareed Zakaria
Published 1 Jan 2008

In the two decades since the end of the Cold War, we have lived through a paradox, one we experience every morning when reading the newspapers. The world’s politics seems deeply troubled, with daily reports of bombings, terror plots, rogue states, and civil strife. And yet the global economy forges ahead. As the events beginning with the collapse of Lehman Brothers reminded us, markets do panic—but over economic, not political news. The front page of the newspaper often seems unconnected to the business section. I remember speaking to a senior member of the Israeli government a few days after the war with Hezbollah in July 2006. He was genuinely worried about his country’s physical security.

The 100-Year Life: Living and Working in an Age of Longevity
by Lynda Gratton and Andrew Scott
Published 1 Jun 2016

Further, even those who do invest in equities tend not to diversify enough; in other words, they invest in just a few specific companies. Second, when households do invest in equities they tend to have a ‘local’ bias, investing in stocks that are familiar to them or based nearby. Third, households tend to hold concentrated portfolios in the shares of their own employers and, as the collapse of Lehman Brothers demonstrated, by doing so they risk losing both their jobs and their wealth. Fourth, when it comes to selling assets, households tend to sell assets that have been rising in price and hold on to those that have fallen. Finally, there is the question of inertia. Households tend to have a ‘status quo bias’ and do not revisit their portfolios.

Leading From the Emerging Future: From Ego-System to Eco-System Economies
by Otto Scharmer and Katrin Kaufer
Published 14 Apr 2013

Sadly, the emerging failures of the EU prove the same point. Bad economics and bad politics result from defining one’s self-interest too narrowly. In the euro crisis, we can see in a nutshell how a narrowly defined self-interest translates into poor economic and political decision-making. In September 2008, after the collapse of Lehman Brothers, the German finance minister claimed in front of the parliament that this was an American problem, not a European or German problem.13 The second and bigger error of judgment happened on October 12, 2008, when the German chancellor and finance minister met with their EU colleagues in Paris at the first crisis summit and decided that each country would develop its own rescue mechanism rather than a joint European mechanism that could have taken care of all of them.14 What is missing from how this story unfolded is a moment of reflective disruption in which all players would have come together, looked in the mirror, and realized what they were doing to themselves.

Barometer of Fear: An Insider's Account of Rogue Trading and the Greatest Banking Scandal in History
by Alexis Stenfors
Published 14 May 2017

According to FSA transcripts,23 on Monday 17 March 2008, a LIBOR submitter at Barclays asked a manager: ‘I presume that you want me now to set LIBORs … exactly where the market is setting them?’ The manager confirmed that he did. Two days later, a submitter was instructed to lower Barclays’ submissions: ‘Just set it where everyone else sets it, we do not want to be standing out.’ A couple of weeks after the collapse of Lehman Brothers, on 8 October 2008, a submitter was asked about LIBOR in a phone conversation. The submitter responded that ‘[Manager E]’s asked me to put it lower than it was yesterday … to send the message that we’re not in the shit.’ The banks wanted to look good and sound relative to the others, but at the same time imitate the crowd to be ‘part of the pack’.

No Such Thing as a Free Gift: The Gates Foundation and the Price of Philanthropy
by Linsey McGoey
Published 14 Apr 2015

The value of pro-market solutions particularly during times of economic catastrophe has been one of the most common themes to emerge out of the 2008 collapse, a crisis which initially led to questions over whether the private sector was, as Georgia Keohane writes, ‘the best exemplar of corporate governance, accountability, or long-term investment savvy’.39 At the 2009 Skoll World Forum, just months after the collapse of Lehman Brothers and Bear Stearns, there was very little acknowledgement of the role that business played in destabilizing markets. Rather, there was a remarkably self-congratulatory, proselytizing tenor to proceedings, a sense that the ‘new’ socially oriented entrepreneurship offered salvation in dark times.

Lying for Money: How Fraud Makes the World Go Round
by Daniel Davies
Published 14 Jul 2018

Other markets rose and fell, stock exchanges mutated and were taken over by super-fast robots, but the LIBOR rate for the day was still determined by a process that could only slightly unfairly be termed ‘a quick ring-around’. Nobody noticed until it was too late that hundreds of trillions of dollars* of the world economy rested on a number compiled by the few dozen people in the world with the greatest incentive to fiddle it. It all fell apart in the immediate aftermath of the collapse of Lehman Brothers in 2008, when banks were so scared that they effectively stopped lending to each other. Although the market was completely frozen, the daily LIBOR ring-around still took place, and banks still gave, almost entirely speculatively, answers to the question ‘If you were to borrow a reasonable size, what would you expect to pay?’.

Boundless: The Rise, Fall, and Escape of Carlos Ghosn
by Nick Kostov
Published 8 Aug 2022

Alain Dassas was just the type. Before bringing him to Japan, Ghosn had put him in charge of Renault’s Formula One team and tasked him with ensuring that the program wasn’t a financial black hole. The accounting whiz was a year into his job at Nissan when the wheels of global finance seized up. The shocking collapse of Lehman Brothers in September 2008 shattered the bonds of trust that linked banks and corporations, pushing the world into a brutal economic recession. Consumers were afraid to buy cars, and banks were afraid to lend money. Vehicle sales collapsed, leaving carmakers in Detroit, Europe, and Asia scrambling to cut costs and fighting for survival.

Everything Is Obvious: *Once You Know the Answer
by Duncan J. Watts
Published 28 Mar 2011

McCotter, Trent. 2008. “Hitting Streaks Don’t Obey Your Rules.” New York Times, March 30. McDonald, Ian. 2005. “Bill Miller Dishes on His Streak and His Strategy.” Wall Street Journal, Jan. 6. McDonald, Lawrence G., and Patrick Robinson. 2009. A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers. New York: Crown Business. McFadden, Daniel. 1999. “Rationality for Economists?” Journal of Risk and Uncertainty 19 (1–3):73–105. McPherson, Miller J., and Lynn Smith-Lovin. 1987. “Homophily in Voluntary Organizations: Status Distance and the Composition of Face-to-Face Groups.” American Sociological Review 52:370–79.

The greatest trade ever: the behind-the-scenes story of how John Paulson defied Wall Street and made financial history
by Gregory Zuckerman
Published 3 Nov 2009

Carrick Mollenkamp, Susanne Craig, Jeffrey McCracken, and Jon Hilsenrath, “"The Two Faces of Lehman’'s Fall—--Private Talks of Raising Capital Belied Firm’'s Public Optimism,”" The Wall Street Journal, October 6, 2008; Lawrence G. McDonald with Patrick Robinson, A Colossal Failure of Common Sense—--The Inside Story of the Collapse of Lehman Brothers, New York: Crown Business, 2009. 3. Kate Kelly, “"The Saga of Bear’'s Fund Chiefs—--In a Jail Cell, One Asks, ‘'How Did We End Up in This Spot?,’'”" The Wall Street Journal, June 21, 2008. Epilogue1.Cityfile.com, “"Security Precautions: John Paulson Beefs Up the Hedges,”" http://cityfile.com/dailyfile/4361, February 11, 2009.

The Butterfly Defect: How Globalization Creates Systemic Risks, and What to Do About It
by Ian Goldin and Mike Mariathasan
Published 15 Mar 2014

At the Risk Center at the Swiss Eidgenössische Technische Hochschule Zürich (Federal Institute of Technology), Zurich, or in the Complex Agent-Based Dynamic Network at the University of Oxford, first steps toward a paradigm shift have been taken. We draw on the lessons from this research. Following the collapse of Lehman Brothers, the world continues to struggle with the consequences of the first systemic crisis of the twenty-first century. Yet larger and potentially more harmful risks are lurking. These include climate change and pandemics. We see fragility in global supply chains and the interdependent physical infrastructure on which they rely.

Why It's Still Kicking Off Everywhere: The New Global Revolutions
by Paul Mason
Published 30 Sep 2013

But once you see Spain’s unemployment figures, there is no mystery to the anger: by mid-2011 youth unemployment was running at 46 per cent. As in Cairo, Athens and beyond, it’s economic disruption—joblessness, price rises, austerity—that has driven the unrest. To most people it may feel as though this period of disruption started with the collapse of Lehman Brothers. But the real disruption began much earlier, with the onset of globalization, and in particular after 2001. Once you grasp this, you can grasp the scale of the challenge facing those in power. How we came to the crisis The first decade of the twenty-first century saw an uncontrolled expansion of credit, during which the major financial actors’ understanding of the risks involved in lending became—and was encouraged by governments to become—detached from reality.

Better, Stronger, Faster: The Myth of American Decline . . . And the Rise of a New Economy
by Daniel Gross
Published 7 May 2012

The American tendency to add fuel to the fire helps explain the epic, unexpected job losses of early 2009. In six months, between November 2008 and April 2009, the U.S. economy shed 4.4 million jobs, an average of 738,000 per month, or about 25,000 a day. But after the worst of the downturn, procyclicality can also hasten recovery. In the months after the collapse of Lehman Brothers in September 2008, companies were ruthless about cutting payroll, idling factories, wiggling out of commitments, and shirking burdens. Borrowers turned over factories, hotels, and office towers to lenders, who in turn wrote off debts. Companies diluted shareholders’ existing holdings as they raised new capital, jettisoned long-cherished assets, and didn’t hesitate to seek the shelter of bankruptcy protection.

The Corruption of Capitalism: Why Rentiers Thrive and Work Does Not Pay
by Guy Standing
Published 13 Jul 2016

In early 2008, the Money Advice Trust, a British debt charity, estimated that the average person had only enough money to survive for fifty-two days if they lost their job; a third would run out of cash in just two weeks. So, there was little scope for resilience even before the financial crash. The subsequent shift of the debt burden onto households has made another financial crisis more likely. Adair Turner, former head of the UK’s Financial Services Authority, who took over days after the collapse of Lehman Brothers in 2008, has also argued that the 2008 crash was due to the stoking of household debt by the financial sector, especially to buy property.9 Traditionally, banks took deposits from households and lent to businesses to invest to expand production. These days, most lending is for property, mainly to buy existing assets rather than create new ones.

SUPERHUBS: How the Financial Elite and Their Networks Rule Our World
by Sandra Navidi
Published 24 Jan 2017

Within just five days, one of the smallest economies in Europe had sparked a crisis that threatened to spread to Portugal and Spain, leading to fears of a currency breakup with incalculable consequences. A disorderly currency implosion, or only the fear thereof, triggering a run on the banks and a market crash was everyone’s worst nightmare. Following the traumatic collapse of Lehman Brothers in 2008, the U.S. administration was particularly worried about contagion in the global financial system spreading to U.S. shores. Therefore, it took the liberty of volunteering unsolicited advice and exerting gentle pressure on Europeans. From the perspective of their own more unified system and proactive mentality, they could not understand why the Europeans seemed so lethargic.

Chavs: The Demonization of the Working Class
by Owen Jones
Published 14 Jul 2011

The key slogan of the Occupy movement, 'We are the 99 per cent', reflected that the interests of the overwhelming majority of people conflicted with those of the elite 1 per cent at the top. It may not have been an accurate figure, but that wasn't the point: the slogan tapped into a deep sense of injustice that had taken root since the collapse of Lehman Brothers in September 2008. Above all, it served as a reminder of who had caused the economic crisis and who was actually being made to pay for it.And itresonated. A poll conducted by ICM in October 2011 revealed that 38 per cent believed 'the protesters are naive; there is no practical alternative to capitalism-the point is to get it moving again'.

The Myth of Capitalism: Monopolies and the Death of Competition
by Jonathan Tepper
Published 20 Nov 2018

Stock buybacks were illegal following the 1929 financial markets crash. It was considered stock manipulation. Inequality is both a result of, and driven by, stock ownership. Chapter Ten The Missing Piece of the Puzzle Something is rotten in the state of Denmark. —Hamlet, Act 1, Scene 4, Marcellus to Horatio In the months after the collapse of Lehman Brothers and the bailout of almost all global banks, politicians, businessmen, and pundits were convinced that we were in the midst of a crisis of capitalism that would bring about far reaching reforms. Nothing would ever be the same again, we were told. “Another ideological god has failed,” the dean of financial commentators, Martin Wolf, wrote in the Financial Times.

Why We're Polarized
by Ezra Klein
Published 28 Jan 2020

Revamping the budget process to make budgeting more automatic, with predictable spending changes that trigger in the absence of a new budget, would be a more sensible way to finance the government and would permit Congress to fight at less cost to the American people and the services they depend on. Similarly, a lesson of the Great Recession was that the relationship between polarization and extended economic suffering is dangerously dysfunctional. Moments of emergency, like the collapse of Lehman Brothers, might temporarily puncture the system’s inertia, but as the crisis drags on, it becomes tempting for the minority party to cease cooperating and commence criticizing—the public anger that recessions generate is a potent electoral weapon. An expansion of automatic economic stabilizers offers a possible answer: as the unemployment rate rises, the federal government can automatically absorb more state Medicaid costs, boost unemployment and food stamp spending, and begin lowering payroll taxes or expanding Social Security checks.

A Bit of a Stretch: The Diaries of a Prisoner
by Chris Atkins
Published 6 Feb 2020

Mr Hart locks up the tramp for his own safety, and the situation immediately deteriorates. Foley owes much of this canteen to his new cellmate, who is in turn heavily indebted around the wing. News of their insolvency quickly spreads, and a complex network of prison debt begins to unravel. It reminds me of the collapse of Lehman Brothers, where the contagion from toxic loans swiftly infected the entire economy. The landings descend into uproar, and Martyn and I retreat from the field of battle. Hours later, I gingerly return to deliver the visit slips. G Wing is still reeling from the recent economic crash, and dozens of inmates have been trying to exact retribution on the occupant of G4-24.

Thinking About It Only Makes It Worse: And Other Lessons From Modern Life
by David Mitchell
Published 4 Nov 2014

We, as customers and taxpayers, can make or break them; they know it and will pay to subvert that power. This causes immense waste and injustice, much of which would be obviated if our political system enjoyed the comparatively modest state funding that would protect it from lobbyists’ cash. * By December 2011, over three years after the collapse of Lehman Brothers, the country still felt like shit … Sometimes it’s down to the director-general of the British Retail Consortium to sum up the national mood. “Non-food is having a thoroughly miserable and difficult time,” he said. He’s so right – it really is. And, of all the non-foods, the humans are particularly depressed, with more than 2.64 million of us now out of work.

Why Aren't They Shouting?: A Banker’s Tale of Change, Computers and Perpetual Crisis
by Kevin Rodgers
Published 13 Jul 2016

Appendix 1: Euromoney FX Survey – Market Shares 1996–2015 Appendix 2: A Timeline of Events Mentioned in the Text Date Event 1973, May Black and Scholes option-pricing paper 1986, October ‘Big Bang’ regulatory regime in the UK 1987, October Stock market crash 1990, August Iraq invades Kuwait 1992, September ERM crisis, ‘Black Wednesday’ 1993, Summer Second ERM crisis 1993, Autumn Hedge fund LTCM set up 1994, February Federal Reserve unexpected rate rise; bond crash 1995 Deutsche Bank investment banking build-out starts 1996, May Bankers Trust settles with Procter and Gamble 1997, May Election of Tony Blair’s New Labour government in UK 1997, July Thailand devalues the baht 1997, October First big sell-off in Russian bonds 1998, August Russia defaults and devalues 1998, September Failure of LTCM 1998, November Deutsche Bank bids for Bankers Trust 1999, January Creation of the euro 1999 Merger of Prebon Yamane and Marshalls 1999, June Bankers Trust taken over by Deutsche Bank 1999, November Gramm–Leach–Bliley Act in the US repeals Glass–Steagall 2000, Spring Deutsche Bank wins Euromoney FX poll for first time 2001, September 9/11 attacks on World Trade Center and Pentagon 2003, Autumn EBS launches dealing API 2004, Spring Launch of EBS Prime 2005, May Deutsche Bank wins 2004 Euromoney poll 2005, Summer Barclays launch Precision Pricing; EBS opens to funds 2006, April EBS bought by ICAP 2006, July Deutsche Bank buys MortgageIT 2007, July Ratings agencies begin to downgrade CDOs 2007, September Run on Northern Rock 2008, September Collapse of Lehman Brothers 2008, October Introduction of the TARP; start of global recession 2010, May Flash Crash 2012, August Failure of Knight Capital; Collapse of EURCHF to 1.0000 2012, September SNB imposes EURCHF floor (cap on value of Swiss franc) 2013, December Closure of Deutsche Bank’s Commodities department 2015, January SNB abandons the EURCHF floor Notes Chapter 1 1 ‘Deutsche Bank Guide to Currency Indices’, George Saravelos et al., October 2007, p14, http://cbs.db.com/new/docs/DBGuideToFXIndices.pdf 2 ‘Interdealer Broking History’, Tullett Prebon, http://www.tullettprebon.com/about/about_ourstory.aspx Chapter 3 1 ‘Electronic Platforms in Foreign Exchange Trading’, Celent E-Forex Report 2007, Figure 10, https://forex-pdf.com/doc/1610--electronic-platforms-in-foreign-exchange-trading/?

Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty
by Abhijit Banerjee and Esther Duflo
Published 25 Apr 2011

There is so much risk in the everyday lives of the poor that somewhat paradoxically, events that are perceived to be cataclysmic in rich countries often seem to barely register with them. In February 2009, the World Bank’s president, Robert Zoellick, warned the world’s leaders: “The global economic crisis [sparked by the collapse of Lehman Brothers in September 2008] threatens to become a human crisis in many developing countries unless they can take targeted measures to protect vulnerable people in their communities. While much of the world is focused on bank rescues and stimulus packages, we should not forget that poor people in developing countries are far more exposed if their economies falter.”5 The World Bank note on the subject added that with the drop in global demand, the poor would lose the market for their agricultural products, their casual jobs on construction sites, and their jobs in factories.

Fault Lines: How Hidden Fractures Still Threaten the World Economy
by Raghuram Rajan
Published 24 May 2010

Trimbath, and Glenn Yago, The Savings and Loan Crisis: Lessons from a Regulatory Failure (Los Angeles: Milken Institute, 2004). 29 Bethany McLean, “Fannie Mae’s Last Stand,” Vanity Fair, February 2009. 30 Steven Holmes, “Fannie Mae Eases Credit to Aid Mortgage Lending,” New York Times, September 30, 1999. 31 Wayne Barrett, “Andrew Cuomo and Fannie and Freddie: How the Youngest Housing and Urban Development Secretary in History Gave Birth to the Mortgage Crisis,” Village Voice, August 5, 2008. 32 National Home Ownership Strategy (Washington, DC: Department of Housing and Urban Development, 1995), chapter 4. I thank Professor Joseph Mason of Louisiana State University for bringing my attention to this document and for first highlighting these issues. 33 See Lawrence McDonald and Patrick Robinson, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers (New York: Crown Business, 2009). 34 Neil Bhutta, “Giving Credit Where Credit Is Due? The Community Reinvestment Act and Mortgage Lending in Lower-Income Neighborhoods,” Federal Reserve Board Working Paper 2008–61, Washington, DC, 2008. Also see Peter Wallison, “Deregulation and the Financial Crisis: Another Urban Myth,” American Enterprise Institute, www.aei.org/outlook/100089, October 2009. 35 George W.

Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock Market
by Scott Patterson
Published 11 Jun 2012

“What happens is, everyone tries to sell at the same time and the bids and the buyers that you see in the market now will disappear,” he told Bloomberg host Carol Massar. “The price vacuum will start, and we’re going to plunge down. That’s my big fear.” High-speed backers pointed to the stock market’s resilience after the collapse of Lehman Brothers in the fall of 2008, when it seemed as if every other corner of Wall Street was shattering. “We believe that the current national market system is performing extremely well,” John McCarthy, general counsel for Getco, wrote in a letter to the SEC. “For instance, the performance during the 2008 financial crisis suggests that our equity markets are resilient and robust even during times of stress and dislocation.”

Creative Intelligence: Harnessing the Power to Create, Connect, and Inspire
by Bruce Nussbaum
Published 5 Mar 2013

CEOs and top managers trained in metrics and analytics understand the process of squeezing more and more profits out of existing products. What they don’t get is that the profits from innovative new products can have greater value, support higher prices, and generate even greater profits. THE RISE OF FINANCIAL CAPITALISM I attended the World Economic Forum in 2008, just months before the collapse of Lehman Brothers. Hedge fund managers had taken over the tiny village of Davos, Switzerland. They were booking the best hotel rooms, throwing the biggest parties, running the most important panels, and squiring the most beautiful models in the fanciest cars. That year, the influence of hedge fund managers eclipsed that of the old global elite of high-tech hotshots, corporate CEOs, and presidents and premiers from around the world.

Money: The Unauthorized Biography
by Felix Martin
Published 5 Jun 2013

As a result, the level of credit insurance that sovereigns had implicitly been providing had ballooned. Only when the crisis had struck, and the policy-makers’ initial efforts to control moral hazard collapsed, had the true scale of the subsidy become clear. In November 2009, a year after the collapse of Lehman Brothers, total sovereign support for the banking sector worldwide was estimated at some $14 trillion—more than 25 per cent of global GDP.20 This was the scale of the downside risks, taxpayers realised, that they had been bearing all along—whilst all the upside went to the shareholders, debt investors, and employees of the banks themselves.

High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems
by Irene Aldridge
Published 1 Dec 2009

Measuring Credit and Counterparty Risk The credit and counterparty risk reflects the probability of financial loss should one party in the trading equation not live up to its obligations. An example of losses due to a counterparty failure is a situation in which a fund’s money is custodied with a broker-dealer, and the broker-dealer goes bankrupt. The collapse of Lehman Brothers in October 2008 was the most spectacular counterparty failure in recent memory. According to Reuters, close to $300 billion was frozen in bankruptcy proceedings as a result of the bank’s collapse, pushing many prominent hedge funds to the brink of insolvency. Credit risk is manifest in decisions to extend lines of credit or margins.

Rewriting the Rules of the European Economy: An Agenda for Growth and Shared Prosperity
by Joseph E. Stiglitz
Published 28 Jan 2020

For instance, the capital requirements imposed on shadow banks were much lower than on commercial banks, in the misguided belief that public money was not at risk because there was no systemic risk that would necessitate a public bailout. The government could easily let one of the investment banks collapse, went the theory, without the dire consequences that would follow from the failure of a large commercial bank. The consequences of the collapse of Lehman Brothers put these beliefs to rest. The shadow banking system should operate under regulations as tough as those imposed on commercial banks, and indeed, the rules for banks that financed lending with wholesale funds should be far higher—such funding can, and did, disappear overnight. Moreover, mutual funds that pretend to be virtually a bank—promising depositors (actually investors) a sure return plus a higher interest rate than commercial banks—need to make clear that there is no guaranteed return, there is no free lunch.

Deaths of Despair and the Future of Capitalism
by Anne Case and Angus Deaton
Published 17 Mar 2020

Beyond that, although some states in America are much less equal than others, the epidemic of deaths of despair is no worse in less equal states. New Hampshire and Utah, two states with the lowest levels of income inequality, have been much harder hit than New York and California, two states with the highest. The Great Recession began in 2008 with the collapse of Lehman Brothers and quickly led to large-scale unemployment and distress, not only in the United States but also in other rich countries. The US unemployment rate, which had been less than 5 percent in February 2008, was nearly 10 percent by the end of 2009, and it did not regain the 5 percent level until September 2016.

Risk: A User's Guide
by Stanley McChrystal and Anna Butrico
Published 4 Oct 2021

The structure of an organization informs who can work with whom, who exerts influence, and who is subject to power. Healthy Risk Immune Systems acknowledge this very fact, and leaders do well to recognize the ways in which structures impose power dynamics that may determine how effective individuals are—and how successful teams may be. Burying Responsibility The collapse of Lehman Brothers in 2008 is a well-known story of corporate mismanagement: Lehman Brothers made some ill-fated investment choices for a good part of the first decade of the twenty-first century, accumulating high-risk mortgage-backed securities. Andrew Ross Sorkin’s excellent account, Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves, presents a startling truth: Lehman Brothers couldn’t manage risk properly because its risk management functions were buried in corporate hierarchy.

Billion Dollar Whale: The Man Who Fooled Wall Street, Hollywood, and the World
by Tom Wright and Bradley Hope
Published 17 Sep 2018

Few punishments were meted out and, as a result, banks and regulators didn’t enforce these regulations all that stringently. More often than not, compliance departments were a weak appendage of a bank’s ecosystem, isolated under legal affairs. The subprime crisis, starting in 2007, changed the picture. U.S. regulators had been caught napping, and the collapse of Lehman Brothers and Bear Stearns, under the weight of bad mortgage loans, led to tighter scrutiny of banks’ actions. That extended to anti–money laundering, as Treasury and the Justice Department began to hand out heftier punishments to transgressors. Wachovia Bank, in early 2010, agreed to pay $160 million in penalties for failing to report $8 billion in dodgy transfers.

Bean Counters: The Triumph of the Accountants and How They Broke Capitalism
by Richard Brooks
Published 23 Apr 2018

Their consultancy-driven slogans tell of transformation from financial watchdogs to professional jacks-of-all-trades, offering the answers on everything from complying with regulations to IT systems, mergers and acquisitions and corporate strategy. KPMG goes with ‘Cutting Through Complexity’, while EY captures virtue and success with ‘Building a Better Working World’ (having ditched ‘Quality in Everything We Do’ as part of a rebrand following its implication in the 2008 collapse of Lehman Brothers). PwC leaves no room for doubt about what matters: ‘Building Relationships, Creating Value’. Deloitte simply has an enigmatic dot after its name. There is vanishingly little evidence that the world is any better for the consultancy advice that now provides almost two thirds of the firms’ income.

The Reckoning: Financial Accountability and the Rise and Fall of Nations
by Jacob Soll
Published 28 Apr 2014

On his deathbed in 1715, Louis admitted that he had in effect bankrupted France with his spending. Rather than some relic of a bygone age, the story of Louis’s rise and decline seemed to me all too familiar as I digested the parable of the Sun King’s golden notebooks. That very week in September, a startling parallel story was taking place during the collapse of Lehman Brothers Bank. A monument of American and world capitalism, Lehman was suddenly exposed now as little more than a mirage. Just as Louis had held onto his power through snuffing out good accounting in his government, so U.S. investment banks had made untold riches, even as they destroyed their own institutions by cooking their books through trading overvalued bundles of worthless subprime mortgages and credit default swaps.

Boom and Bust: A Global History of Financial Bubbles
by William Quinn and John D. Turner
Published 5 Aug 2020

In return for a stream of payments, it agreed to reimburse investors in the event of default.31 This business had grown from a notional amount insured of $20 billion in 2002 to $533 billion in 2007.32 The default of many MBSs and CDOs meant that AIG was having to pay out substantial sums on its credit default swaps – sums that it had made little provision for. The failure of AIG would have had major consequences for the solvency of many financial institutions that had bought credit default swaps from it. Following the collapse of Lehman Brothers and AIG, the US Treasury and Federal Reserve came up with a plan to stave off the implosion of the banking system: the Troubled Assets Relief Plan (TARP). The TARP authorised expenditures of $700 billion to help the Treasury buy or insure ‘toxic’ assets (i.e. mortgages, MBSs and CDOs) from banks.

The Data Detective: Ten Easy Rules to Make Sense of Statistics
by Tim Harford
Published 2 Feb 2021

Weekly, daily, hourly—the metronome of the news clock changes the very nature of what is news. Now imagine a much slower rhythm of news: a twenty-five-year newspaper, say. What would the latest edition say? It would be packed with updates, some hopeful and some grim; it would describe the rise of China, the World Wide Web and smartphones, the emergence of al-Qaeda and the collapse of Lehman Brothers. There might be a small feature article on crime, noting that the murder count had fallen in London, but not nearly as much as in New York. Nobody would spare a syllable on the idea that London was experiencing a killing spree; such an observation could only make sense in a fast-twitch media outlet.

The Key Man: The True Story of How the Global Elite Was Duped by a Capitalist Fairy Tale
by Simon Clark and Will Louch
Published 14 Jul 2021

“Give us a sense of what kind of opportunities and also what kind of challenges exist in a region of the world which some people have had great hopes for but where a lot of those hopes seem to be embroiled now in a level of uncertainty and political risk that makes it look extremely risky.” Arif dodged the question by turning the tables on the professor. Surely Western countries were far riskier than people assumed, Arif said. Didn’t the global financial crisis of 2008 start in New York, the center of the capitalist West, with the collapse of Lehman Brothers, the investment bank where Garten had worked? “Guess what?” Arif said. “When risk came into the global financial system, it came at the heart of global capitalism. It came on Wall Street, right? “That level of risk practically gave us a cataclysmic heart attack to the global financial system.

The Glass Half-Empty: Debunking the Myth of Progress in the Twenty-First Century
by Rodrigo Aguilera
Published 10 Mar 2020

Virtually no banking crises took place while the Bretton Woods system was in place and there was also a decline in the number of external debt crises (Figure 5.1). But aside from a few marginal attempts at re-regulating the financial system like the Frank-Dodd Act (now partly rolled back by the Trump administration), it has been business as usual for the global economy since 2008–2009. In November 2008, just weeks after the collapse of Lehman Brothers and still months before the global economy would hit rock bottom, US president George W. Bush remained steadfast in his belief that liberal capitalism was not up for criticism even in its hour of shame: The answer is not to try to reinvent that system. It is to fix the problems we face, make the reforms we need, and move forward with the free market principles that have delivered prosperity and hope to people all across the globe.11 The irony that the global economy was saved thanks to state intervention — in the form of trillions of dollars in bailouts, guarantees, and stimulus by the US along with other governments — did not go unnoticed.

Capital in the Twenty-First Century
by Thomas Piketty
Published 10 Mar 2014

This is a crucial point: the facts show quite clearly that the financial crisis as such cannot be counted on to put an end to the structural increase of inequality in the United States. To be sure, in the immediate aftermath of a stock market crash, inequality always grows more slowly, just as it always grows more rapidly in a boom. The years 2008–2009, following the collapse of Lehman Brothers, like the years 2001–2002, after the bursting of the first Internet bubble, were not great times for taking profits on the stock market. Indeed, capital gains plummeted in those years. But these short-term movements did not alter the long-run trend, which is governed by other forces whose logic I must now try to clarify.

…

The fact is that all economists—monetarists, Keynesians, and neoclassicals—together with all other observers, regardless of their political stripe, have agreed that central banks ought to act as lenders of last resort and do whatever is necessary to avoid financial collapse and a deflationary spiral. This broad consensus explains why all of the world’s central banks—in Japan and Europe as well as the United States—reacted to the financial crisis of 2007–2008 by taking on the role of lenders of last resort and stabilizers of the financial system. Apart from the collapse of Lehman Brothers in September 2008, bank failures in the crisis have been fairly limited in scope. There is, however, no consensus as to the exact nature of the “unconventional” monetary policies that should be followed in situations like this. What in fact do central banks do? For present purposes, it is important to realize that central banks do not create wealth as such; they redistribute it.

The Quants
by Scott Patterson
Published 2 Feb 2010

More than a thousand listeners were on the line waiting for Griffin and Beeson to explain what had become of Citadel. Rumors of Citadel’s collapse were spreading rapidly, even hitting TV screens on the financial news network CNBC. Citadel, traders said, was circling the drain. The market turmoil after the collapse of Lehman Brothers had led to massive losses in its giant convertible bond portfolio. If Citadel went under, many feared, the ripple effects would be catastrophic, causing other funds with similar positions to tumble like so many dominoes. According to former senior executives at Citadel, Griffin had started to force out employees as Citadel’s fortunes grew more precarious.

Planet Ponzi
by Mitch Feierstein
Published 2 Feb 2012

The issue is not the net levels of debt. The net levels of debt are always going to be OK, those things will always cancel out. The issue is the structure. The quantity of debt we have in our financial system creeps through it like some deadly ivy: poisoning, choking, constricting, and killing. The collapse of Lehman Brothers proves better than anything why it’s not the net levels of debt that count. As we’ve noted before, Lehman collapsed with net debt of ‘just’ $129 billion. In the context of the entire world’s financial system, that $129 billion was a pinprick, nothing more. But it wasn’t the net debt that counted.

Seventeen Contradictions and the End of Capitalism
by David Harvey
Published 3 Apr 2014

It operates more like the Vatican or the Kremlin than like an open and transparent institution. It assumes a human face only at times of difficulty, when, for example, Hank Paulson (Secretary of the Treasury) and Ben Bernanke (Chair of the Federal Reserve) jointly took to the airwaves to dictate national policy in the wake of the collapse of Lehman Brothers in September 2008, when both the Executive Branch and Congress appeared paralysed and fearful. ‘When the financial system and the state–finance nexus fails, as it did in 1929 and 2008, then everyone recognises there is a threat to the survival of capital and of capitalism and no stone is left unturned and no compromise left unexamined in the endeavours to resuscitate it.’2 But all is not always harmonious in the relation between the capitalist state and private property.

The Everything Store: Jeff Bezos and the Age of Amazon
by Brad Stone
Published 14 Oct 2013

That year, Bezos learned that Zappos was advertising on the bottoms of the plastic bins at airport-security checkpoints. “They are outthinking us!” he snapped at a meeting. But inside Zappos, a big problem had emerged. It had been acquiring inventory with a revolving $100 million line of credit, and the financial crisis, which intensified with the collapse of Lehman Brothers in the fall of 2008, froze the capital markets. With consumer spending declining, Zappos’ inventory constrained by new borrowing limits, and the competition with Amazon cutting into the company’s profit margins, Zappos’ previously spectacular annual growth rate collapsed to a modest 10 percent.

The Digital Doctor: Hope, Hype, and Harm at the Dawn of Medicine’s Computer Age
by Robert Wachter
Published 7 Apr 2015

“You never want a serious crisis to go to waste,” Rahm Emanuel, chief of staff to President-elect Obama, told the Wall Street Journal on November 19, 2008. “It’s an opportunity to do things that you think you could not do before.” The crisis that Emanuel was referring to, of course, was the global recession that had begun with the collapse of Lehman Brothers two months earlier. The Obama administration knew that time was short; it needed to get money flowing through the veins of the American economy promptly or the damage might become irreparable. But if the money appeared to end up lining the pockets of the same Wall Street moneymen who were being blamed for the crisis, or if it failed to have the desired stimulatory effect, the political fallout would be devastating.

The End of Power: From Boardrooms to Battlefields and Churches to States, Why Being in Charge Isn’t What It Used to Be
by Moises Naim
Published 5 Mar 2013

Despite fuzziness as to what exactly defines the elite (Wealth? Status measured some other way? Particular professions?), the notion of a resurgent elite further strengthening its hold on government is very much alive. In 2008, days after the massive US bank bailout was announced and a few short weeks after the collapse of Lehman Brothers and the rescue of the insurance giant American International Group (AIG), the critic Naomi Klein described the era as “a revolt of the elites . . . and an incredibly successful one.” She argued that both the long neglect of financial regulation and the sudden bailout reflected elite control over policy.

Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist
by Kate Raworth
Published 22 Mar 2017

In the words of the political economist Orit Gal, ‘complexity theory teaches us that major events are the manifestation of maturing and converging underlying trends: they reflect change that has already occurred within the system’.11 From this perspective, the 1989 fall of the Berlin Wall, the 2008 collapse of Lehman Brothers and the imminent collapse of the Greenland ice sheet have much in common. All three are reported in the news as sudden events but are actually visible tipping points that result from slowly accumulated pressure in the system – be it the gradual build-up of political protest in Eastern Europe, the build-up of sub-prime mortgages in a bank’s asset portfolio, or the build-up of greenhouse gases in the atmosphere.

Green Tyranny: Exposing the Totalitarian Roots of the Climate Industrial Complex
by Rupert Darwall
Published 2 Oct 2017

Damaging as the economic consequences of renewable energy were proving for Europe, global warming spoke to the highest purpose of the European polity, a cause tailor-made for the European Union’s postdemocratic, supranational administrative form of governance. To make its claim on America, global warming in turn asserts its uniqueness—that nothing like it has ever happened before, that dealing with it requires an unprecedented response; in short, that global warming is different. In the boom years before the subprime crisis and the collapse of Lehman Brothers, financial experts would explain that the economy had changed and that the past offered no insight into the present and no guide to the future. It was a self-serving delusion. “More money has been lost because of four words than at the point of a gun. Those words are ‘This time is different.’”4 Is this time different?

Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens
by Nicholas Shaxson
Published 11 Apr 2011

London provides endless loopholes for U.S. financial corporations, and many U.S. banking catastrophes can be traced substantially to those companies’ London offices. The unit that blew up the insurance company American International Group (AIG), putting the U.S. taxpayer on the hook for $182.5 billion, was its four hundred–strong AIG Financial Products unit, based in London. The court-appointed examiner looking into the collapse of Lehman Brothers in September 2008 found it had used a trick called Repo 105 to shift $50 billion in assets off its balance sheet, and that while no U.S. law firm would sign off on the transactions, a major law firm in London was delighted to oblige, without breaking the rules.15 When the United States introduced the Sarbanes-Oxley regulations to protect Americans against the likes of Enron or Worldcom, the City of London did not follow, and more U.S. financial business flowed to London.

Faster, Higher, Farther: How One of the World's Largest Automakers Committed a Massive and Stunning Fraud
by Jack Ewing
Published 22 May 2017

The prosecution in the Wiedeking and Härter trial was handicapped by a lack of witnesses who would testify that Porsche had been less than honest with investors about its plans for Volkswagen. Some of the former Porsche bankers suffered memory losses on the witness stand. Executives from Maple Bank said it wasn’t true that Porsche was about to run out of money. In the chaos that followed the collapse of Lehman Brothers, the defense lawyers argued, it was impossible to demonstrate that the press release Porsche issued in October 2008 was responsible for the violent fluctuations in Volkswagen’s share price that followed. Still, there was some suspense in the weeks leading up to March 18, 2016, when Judge Maurer was scheduled to deliver the verdict by a five-judge panel.

On the Road: Adventures From Nixon to Trump
by James Naughtie
Published 1 Apr 2020

It had come to think itself drained, shaken cold by 9/11 and then frozen by a financial crash seven years later. An age of excess was over, and an era of decline had begun. Theirs were the arguments that shaped the country for the new century. But Obama was hobbled from the start. He lived his whole time in office under the shadow of the global panic that followed the collapse of Lehman Brothers in mid-September 2008, seven weeks before his election, and all its miserable consequences. The crisis helped him get elected, because Republicans had to shoulder much of the blame, but it weakened his presidency. As voters made up their minds, all Americans were facing up to the truth that in the preceding nine months under George W.

Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else
by Chrystia Freeland
Published 11 Oct 2012

Other diners included Julian Robertson, legendary founder of the Tiger Management hedge fund; Donald Marron, the former chief executive of PaineWebber and now boss of Lightyear Capital; and Leon Black, cofounder of the Apollo private equity group. In a memo about the luncheon discussion he distributed a few weeks later, Wien wrote that the talk focused on one issue: “Were we about to experience a recession?” We all know the answer today. But just over a year before the collapse of Lehman Brothers definitively plunged the world into the most profound financial crisis since the Great Depression, the private consensus among this group of Wall Street savants was that we were not. According to Wien’s memo, “The conclusion was that we were probably in an economic slowdown and a correction in the market, but we were not about to begin a recession or a bear market.”

The Establishment: And How They Get Away With It
by Owen Jones
Published 3 Sep 2014

When the coalition government pledged to introduce legislation based on the findings, banks were given until 2019 to implement a proposed weak ring-fencing of high street and investment banking – so that investment banks could no longer use ordinary customers’ money to bet on risky products – over a decade after the collapse of Lehman Brothers. Even the Conservative MP Andrew Tyrie claimed that government amendments had reduced the powers of the financial watchdog to enforce such a separation. In opposition, Vince Cable of the Liberal Democrats had called for the total separation of high street and investment banking, but this demand was abandoned by the coalition government.

Naked Economics: Undressing the Dismal Science (Fully Revised and Updated)
by Charles Wheelan
Published 18 Apr 2010

Money that was stuffed under a mattress or locked in a bank vault could not be loaned back into the economy. The Fed did nothing while America’s credit dried up (and actually raised interest rates sharply in 1931 to defend the gold standard). Fed officials should have been doing just the opposite: pumping money into the system. In September 2009, the one-year anniversary of the collapse of Lehman Brothers, the chair of the Council of Economic Advisers, Christina Romer, gave a talk ominously entitled “Back from the Brink,” which laid much of the credit for our escape from economic disaster at the door of the Federal Reserve. She explained, “The policy response in the current episode, in contrast [to the 1930s], has been swift and bold.

Buy Now, Pay Later: The Extraordinary Story of Afterpay
by Jonathan Shapiro and James Eyers
Published 2 Aug 2021

The global financial crisis led Guinness Peat to sell out of some of its technology investments. In April 2008, GPG punished MYOB founder and chief executive Craig Winkler for rejecting a $735 million bid from private-equity firm Archer. GPG used its 15 per cent stake to block a lucrative options package. Archer returned in October, after the markets had cratered following the collapse of Lehman Brothers, with a vastly lower bid of $440 million. The hurt of being forced to agree to sell the highly successful company he’d spent years building at a distressed price to private-equity buyers was too much for Winkler to bare. By then Winkler had already stepped down as CEO. But in February 2009 he left the company altogether, and in April 2009 he ploughed $14.7 million into a rival accounting software start-up called Xero, giving him a 24 per cent stake.

This Land: The Struggle for the Left
by Owen Jones
Published 23 Sep 2020

Movements emerged against economic injustice, war, austerity, student debt, tax avoidance, the climate emergency and the onslaught against workers’ living standards; together, they helped give a voice to hundreds of thousands of British citizens who felt increasingly unrepresented by an ever more remote political class in Westminster. Younger people were at the forefront, and little wonder: theirs was a generation robbed of the optimism which had been an article of faith for those who came before them, that a better lot in life than their parents’ beckoned. The financial crash that followed the collapse of Lehman Brothers in September 2008 proved a searing experience for many younger people. In an instant, their futures seemed to be snatched away: by 2011, youth unemployment surpassed a million. As they were expected to pick up the tab for the financial calamity, their living standards fell more acutely than in any industrialized country other than Greece.15 Home-ownership plummeted among the young – between the mid-1990s and the mid-2010s, it was cut by more than half among young, middle-income adults16 – and the failure to replace lost council housing stock meant the only other option was a rip-off, poorly regulated private rental sector.

The Powerful and the Damned: Private Diaries in Turbulent Times
by Lionel Barber
Published 5 Nov 2020

Yet there were clues to the coming crisis, notably the excess leverage in the system highlighted by the FT’s Gillian Tett, the paper’s award-winning financial markets reporter and commentator. The second section, covering the years 2008–9, conveys the drama of the Great Crash of 2008 when the collapse of Lehman Brothers triggered a crisis of confidence in the credit markets and the wider banking system. For a brief few weeks it felt as if the global financial system was melting down. Passages draw on conversations with some of Wall Street’s players such as Lloyd Blankfein of Goldman Sachs, Jamie Dimon of JPMorgan Chase, Steve Schwarzman of Blackstone and Dick Fuld of Lehman Brothers.

Billionaires' Row: Tycoons, High Rollers, and the Epic Race to Build the World's Most Exclusive Skyscrapers
by Katherine Clarke
Published 13 Jun 2023

He trusted his gut and invested a modest $2.7 million of his personal funds. It would be a test to see whether the partnership worked—Juracich would put up some cash and the “reassuring, very confident” Stern would “steer the ship.” * * * — THE FOLLOWING YEAR, when the financial markets went into free fall following the collapse of Lehman Brothers, Juracich thought the sky was falling. “I was leaving work every night and I’d see people walking the streets and eating in restaurants and I’d want to shake them and yell at them that the end of the world is coming.” He assumed the economic carnage—which, of course, traced its origins to the real estate industry, in the form of subprime mortgages—would spell the end of his brief foray into property investing.

Madoff: The Final Word
by Richard Behar
Published 9 Jul 2024

… He has mentioned a team of 12 in the past but are these people dedicated to such accounts?… How can he moved $20bn of equities in/out of the market without affecting prices? Has anyone spoken to any of his counterparties [buyers and sellers on the opposite sides of trades]….” Of note, after the collapse of Lehman Brothers but before Madoff was exposed, Optimal sent a letter to all its investors to assure them that the fund has “actively monitored” its brokers, “as well as other counterparties and potential exposure.” But they weren’t, because they would have found that Madoff had no counterparties. In his 2004 email to his colleagues, Burnaby-Atkins eventually stated the unthinkable: “SUPPOSE this was the largest Ponzi scheme in history—unpalatable but we are not the first to suggest it….

The End of Alchemy: Money, Banking and the Future of the Global Economy
by Mervyn King
Published 3 Mar 2016

As in so many crises, the point of greatest vulnerability was in the banking sector. It had become so highly leveraged that, as described in Chapter 1, relatively small items of news from the housing market in the United States in 2006 and the position of some European banks in 2007 led to nervousness about the state of the sector. After the collapse of Lehman Brothers in September 2008, there was both a full-blown banking crisis and an enormous shock to confidence around the world. The stability heuristic was no longer appropriate. The narrative changed. It was now far from obvious how to estimate lifetime income. All that was clear was that spending patterns would have to change.

The Euro: How a Common Currency Threatens the Future of Europe
by Joseph E. Stiglitz and Alex Hyde-White
Published 24 Oct 2016

Some banks that had not lent to Greece may have lent money to other banks that had, so they, too, might be at risk. Some banks had bought insurance against losses, but some banks had gambled, taking bets that Greece would not default. It was a mess. And it was a mess that could spread. The world had just experienced a dose of this kind of contagion: in the aftermath of the collapse of Lehman Brothers, the entire world went into an economic recession, as financial markets froze. It was not clear whether Greece was small or large relative to Lehman Brothers; most importantly, it was not clear whether it was systemically significant. In chapter 1, I described how as each country went into crisis, the Troika formulated a program supposedly designed to bring the country back to health, and for the countries that had lost access to international credit markets, to regain access.

Masters of Management: How the Business Gurus and Their Ideas Have Changed the World—for Better and for Worse
by Adrian Wooldridge
Published 29 Nov 2011

Yet the timing of the birthday bash was less than perfect. Lehman Brothers was already looking shaky (the company lost 73 percent of its share-price in the first six months of 2008). And as the school continued to celebrate its birthday over the rest of the year, the capitalist system began to unravel. The collapse of Lehman Brothers almost took down the rest of the banking system, and the world was plunged into the most gut-wrenching depression since the 1930s. The crisis brought down many of the school’s most celebrated products, such as Stan O’Neal, the head of Merrill Lynch, and Andy Hornby, the head of HBOS (who, incidentally, had graduated top of his class).

Kleptopia: How Dirty Money Is Conquering the World
by Tom Burgis
Published 7 Sep 2020

‘This is the same police force that did nothing to tackle the large-scale market manipulation taking place within the banks located in the City. Nor did their political masters, in the shape of the Corporation of London, do anything to protect the millions of consumers conned into buying services that were of no value to them.’ Three years had passed since the collapse of Lehman Brothers, three years since Nigel extracted a thousand pages of confidential documents from inside the financial secrecy industry and alerted the agencies entrusted with preventing abuses of money to what appeared to be glaring examples of such abuses taking place in the heart of the City. Apart from that one furtive meeting with agents from the tax authority, nothing had happened.

Failures of State: The Inside Story of Britain's Battle With Coronavirus
by Jonathan Calvert and George Arbuthnott
Published 18 Mar 2021

In the meantime, Johnson and those around him would spend the next seven days defending their inaction – while the news became grimmer and grimmer. The week started particularly badly on Monday 9 March, the day before the Cheltenham Festival. The stock market’s fear that something seismic was happening was escalating rapidly. That day, the virus caused the steepest global stock market fall since the collapse of Lehman Brothers, which had triggered the global recession in 2008. Almost £125bn was wiped off the value of the FTSE 100 in an 8 per cent plummet that represented the fifth-worst day in its history. The exchange finished the day below 6,000 points, which was the lowest level since share prices had tumbled following the Brexit vote in 2016.

The World for Sale: Money, Power and the Traders Who Barter the Earth’s Resources
by Javier Blas and Jack Farchy
Published 25 Feb 2021

It became a self-reinforcing cycle: hedge funds bet against Xstrata, knowing that doing so would put further pressure on Glencore and make a fire sale of its Xstrata shares more likely. At the same time, they were betting against Glencore on the credit markets. The cost of insuring against a Glencore bankruptcy skyrocketed. In the wake of the collapse of Lehman Brothers, when every company in the world was worrying about who might be next, that caused deep concern among Glencore’s banks and trading counterparties. Credit is the lifeblood of commodity trading. It’s what allows traders to handle vast quantities of raw materials without having to pay upfront every time.

Seven Crashes: The Economic Crises That Shaped Globalization
by Harold James
Published 15 Jan 2023

Rupert Cornwell, “Massive Deficit Looms as America Ages,” Independent, October 3, 2013; see also John Cassidy, “Bushonomics Comment,” New Yorker 79, no. 11 (2003): 37–38. 7. King, speech at the University of Exeter. 8. Lawrence G. McDonald with Patrick Robinson, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers (New York: Random House, 2009), 198, 223. 9. Simon Goodley, “Goldman Sachs ‘Muppet’ Trader Says Unsophisticated Clients Targeted,” Guardian, October 22, 2012. 10. See Hyun Song Shin, “Global Banking Glut and Loan Risk Premium,” paper presented at the 12th Jacques Polak Annual Research Conference, International Monetary Fund, Washington, D.C., November 10 –11, 2011; Tamim Bayoumi, Unfinished Business: The Unexplored Causes of the Financial Crisis and the Lessons Yet to Be Learned (New Haven: Yale University Press, 2018); J.

Vulture Capitalism: Corporate Crimes, Backdoor Bailouts, and the Death of Freedom
by Grace Blakeley
Published 11 Mar 2024

AIG’s executives believed this would be a one-way bet, so the company never bothered to insure itself against the risk that it might one day have to pay out on the insurance contracts it had sold. This was a great way to make a lot of money very quickly for as long as the mortgage market was stable—but as soon as things turned sour, AIG found itself on the hook to the big investment banks for eye-watering sums of money. Within a few months of the collapse of Lehman Brothers, the firm’s credit rating had been downgraded and it found itself on the brink of bankruptcy. AIG owed billions in insurance payments to some of the largest investment banks in the world, including Goldman Sachs, to whom the insurer owed at least $20 billion.42 AIG’s liabilities to Goldman were particularly significant because the bank had been selling its clients dodgy mortgage-backed securities before taking out insurance against the risk that the value of these securities would fall.

India's Long Road
by Vijay Joshi
Published 21 Feb 2017

Not only did they serve to cover payments deficits but their very presence inspired confidence and prevented capital flight. Since 2008, however, India’s adherence to its payments regime has become more hesitant. D. Subbarao came in as RBI governor at a difficult time, only a week before the collapse of Lehman Brothers in September 2008. For India, the immediate effect of the global turmoil was that capital inflows dried up for six months. Subbarao responded with a mixture of running down reserves and letting the rupee depreciate. So far, his policy was entirely in consonance with Reddy’s. Then, strong inward capital flows resumed because a) it looked as if the worst of the crisis was over and India had come out of it in better shape than many countries; and b) Western governments slashed interest rates to very low levels and started ‘quantitative easing’, which raised the relative return on Indian assets.

War and Gold: A Five-Hundred-Year History of Empires, Adventures, and Debt
by Kwasi Kwarteng
Published 12 May 2014

Central banks ‘buy long-term government bonds with newly printed money’.56 The theory was that this purchase of government debt, by which the central bank was effectively printing money and lending it to its own government, would keep bond prices high. High bond prices meant lower interest rates, which would help boost growth. Between November 2010, a full two years after the collapse of Lehman Brothers, and March 2011, the US Treasury issued $589 billion of debt, of which the Federal Reserve bought $514 billion, or 87 per cent. In Britain, from ‘early 2009 through to March 2010’ Her Majesty’s Treasury issued ‘£247 billion ($396 billion) of extra long-term gilts [UK government bonds], of which the Bank of England bought £199 billion’, or 80 per cent.57 In the United States, it was significant that Ben Bernanke, an academic economist who specialized in the history of the Great Depression, had taken over the chairmanship of the Federal Reserve from Alan Greenspan.

After the Music Stopped: The Financial Crisis, the Response, and the Work Ahead
by Alan S. Blinder
Published 24 Jan 2013

That date was exquisitely bad timing for one of the primary dealers that was fighting for its life at the time: an investment bank named Bear Stearns. 5 FROM BEAR TO LEHMAN: INCONSISTENCY WAS THE HOBGOBLIN A foolish consistency is the hobgoblin of little minds. —RALPH WALDO EMERSON The six months between the collapse of Bear Stearns into the waiting arms of JP Morgan Chase and the collapse of Lehman Brothers into bankruptcy was interesting, in the sense of the apocryphal Chinese curse. (May you live in interesting times.) In March the Federal Reserve, supported by the Treasury, kicked in almost $30 billion to facilitate the shotgun marriage of Bear to JP Morgan, presumably because a disorderly failure of Bear might have devastated the financial system.

The Lost Bank: The Story of Washington Mutual-The Biggest Bank Failure in American History
by Kirsten Grind
Published 11 Jun 2012

Around the world, banks large and small were borrowing from the Federal Reserve’s discount window, a sign of the panic spreading in financial institutions everywhere, not just at WaMu. Usually banks tap the Fed only in an emergency. But during the first week in September, banks borrowed a collective $19 billion, compared with an average of less than $50 million a week in prior years.46 The borrowing volume continued to grow after the collapse of Lehman Brothers and the government bailout of AIG. Some of the largest borrowers were companies that weren’t in the headlines at all. Right after the government forced Fannie Mae and Freddie Mac into conservatorship, U.S. Bancorp, another large consumer bank like WaMu, took out a $3.4 billion overnight loan.

Tailspin: The People and Forces Behind America's Fifty-Year Fall--And Those Fighting to Reverse It
by Steven Brill
Published 28 May 2018

Years of lobbying had eliminated the guardrails of regulations restricting the spread of their activities and the risks that they could take. So they now had to be bailed out of all those disastrous gambles in mortgage-backed securities, credit default swaps, and synthetic credit default swaps because, in the wake of the collapse of Lehman Brothers, it was clear that letting another big bank go under would take them all down in a calamity no responsible official wanted to allow. Hundreds of billions of taxpayer dollars were allocated to save them, even as individual mortgage holders were thrown out of their homes because they couldn’t or wouldn’t write checks to cover the ballooning payments due on homes suddenly worth less than the money they owed because of the collapse of the housing market.

Radical Uncertainty: Decision-Making for an Unknowable Future
by Mervyn King and John Kay
Published 5 Mar 2020

This outcome ‘displeased Jonah exceedingly, and he was very angry’, feeling (unlike many modern forecasters) despondent at the very public refutation of his prediction. But God persuaded Jonah that the happy outcome was more important than the failure of his forecast. The King of Nineveh wore sackcloth and sat in ashes; the titans of Wall Street had no similar opportunity or inclination. The collapse of Lehman Brothers on 15 September 2008 could not have been widely predicted because if it had been it would not have happened on that date. Either the bank would have collapsed earlier, or the regulators or Lehman itself would have taken steps to avoid, or at least minimise, the event. And because beliefs influence behaviour the economic system is forever changing.

The Euro and the Battle of Ideas
by Markus K. Brunnermeier , Harold James and Jean-Pierre Landau
Published 3 Aug 2016

But when a central banker said exactly the same words, the markets knew that the promise was credible. Central banks had in fact become the stars of the global financial crisis. They knew they needed to respond decisively and innovatively to problems that could not easily be tackled by governments, finance ministries, and politicians. In the aftermath of the collapse of Lehman Brothers in September 2008, the US administration and the Congress were paralyzed by the upcoming presidential election, and consequently the government lacked the possibility to act. But the Federal Reserve System could be very decisive. It injected liquidity into the banking system. The New York Fed intervened in a very unorthodox way to prop up a systemically vital financial institution whose collapse would have destroyed the global financial system: it lent AIG $85 billion in return for 80 percent of its stock as well as providing $20.9 billion in the commercial credit program and a $38 billion facility providing liquidity for the company’s securities.

MacroWikinomics: Rebooting Business and the World
by Don Tapscott and Anthony D. Williams
Published 28 Sep 2010

Regulators, if not bankers, are getting the message. “Changes in financial rules and accounting standards . . . must be coordinated globally in the effort to help avoid a recurrence of the economic crisis,” said Federal Reserve governor Elizabeth Duke to an accounting industry audience on the first anniversary of the collapse of Lehman Brothers. “Accounting standard setters, regulators and policy makers around the world are discussing and proposing preventative measures. Now the challenge lies in integrating those changes smoothly and seamlessly,” she said.10 The Securities and Exchange Commission has also been pushing for a single, global set of rules for financial services.

The Price of Inequality: How Today's Divided Society Endangers Our Future
by Joseph E. Stiglitz
Published 10 Jun 2012

Now our creditability is gone: we are seen to have a political system in which one party tries to disenfranchise the poor, in which money buys politicians and policies that reinforce the inequalities. We should be concerned about the risk of this diminished influence. Even if things had been going better in the United States, the growth of the emerging markets would necessitate a new global order. There was just a short period, between the fall of the Berlin Wall and the collapse of Lehman Brothers, when the United States dominated in virtually every realm. Now the emerging markets are demanding a larger voice in international forums. We moved from the G-8, where the richest industrial countries tried to determine global economic policy, to the G-20, because we had to: the global recession provided the impetus, but one could not deal with global issues, like global warming or global trade, without bringing others in.

The Alchemists: Three Central Bankers and a World on Fire
by Neil Irwin
Published 4 Apr 2013

Rather, they require people like Bernanke, King, and Trichet to safeguard them, often by doing things that are wildly unpopular. It may seem like damning by faint praise, but a catastrophe averted is no small thing. The central bankers’ judgments were far from perfect, and their mistakes—allowing the collapse of Lehman Brothers, endorsing early fiscal austerity in Britain, moving with such hesitation and delay in the face of the eurozone crisis—will do lasting economic damage. Each will be leaving his institution a very different place from the one he inherited, more deeply entrenched in the vagaries of politics, more thoroughly intertwined in the workings of high finance, with so many Rubicons crossed that there can be no hope of going back.

America's Bitter Pill: Money, Politics, Backroom Deals, and the Fight to Fix Our Broken Healthcare System
by Steven Brill
Published 5 Jan 2015

For as Santelli screamed into his microphone, a group of capital insiders representing multiple factions of America’s biggest industry—healthcare—was negotiating exactly the kinds of secret deals that would have made Santelli scream louder had he known about them. CHAPTER 8 DEAL TIME March–April 2009 FOR THE SENATE FINANCE COMMITTEE, THERE WAS A SILVER LINING in the collapse of Lehman Brothers that had accelerated the financial meltdown: Antonios “Tony” Clapsis, a bearded, wiry twenty-eight-year-old who loved crunching numbers. When Lehman collapsed in September 2008, Clapsis had been working at the investment bank for about six years as a stock analyst concentrating on the healthcare industry.

The Bankers' New Clothes: What's Wrong With Banking and What to Do About It
by Anat Admati and Martin Hellwig
Published 15 Feb 2013

“New Issues in Corporate Finance.” European Economic Review 32: 1167–1188. Mayo, Mike. 2011. Exile on Wall Street: One Analyst’s Fight to Save the Big Banks from Themselves. Hoboken, NJ: John Wiley and Sons. McDonald, Lawrence G. 2010. A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers. New York: Three Rivers. McDonald, Robert L. 2010. “Contingent Capital with a Dual Price Trigger.” Working paper. Kellogg School of Management, Northwestern University. McLean, Bethany, and Peter Elkind. 2004. The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron.

Bernie Madoff, the Wizard of Lies: Inside the Infamous $65 Billion Swindle
by Diana B. Henriques
Published 1 Aug 2011

Aside from the hundreds of millions that Madoff diverted for his own use over the years, the cash handed over by investors had been paid out to other investors as bogus investment earnings. Picard had the bank records showing when the cash was withdrawn and by whom; and he knew whose account in which country received the money. By his estimate, more than $6 billion was withdrawn from the Ponzi scheme between the collapse of Lehman Brothers in September 2008 and Madoff’s arrest in December. In the scheme’s final year, withdrawals totalled nearly $13 billion—most of which had flowed in since early 2006. Still, knowing where the money went was one thing, and getting it back was another. While the federal bankruptcy code allowed Picard to seek the return of cash withdrawn within two years of the Madoff firm’s bankruptcy filing, New York State law extended that window to six years.

A Generation of Sociopaths: How the Baby Boomers Betrayed America
by Bruce Cannon Gibney
Published 7 Mar 2017

The financial establishment now dominated by Boomers had to persuade the accounting profession (also dominated by Boomers) to accept the consignment of these derivatives off balance sheet. Accountants, who had only a generation before set the standard for fairness, prudence, and transparency, rolled over.* The collapses of Lehman Brothers and Bear Stearns were both linked to OBS practices and similar practices would have killed AIG, the giant “insurer,” had the government not bailed it out. The private sector, as its proponents trumpet (and in a different context, I’m a fan of the private sector), is an engine for innovation, though under the Boomers inventiveness slid quickly into fraud, helped in substantial part by a sustained deregulatory push.

The Joys of Compounding: The Passionate Pursuit of Lifelong Learning, Revised and Updated
by Gautam Baid
Published 1 Jun 2020

A big bear market needs to be preceded by complete euphoria, a major unexpected negative dislocation, and a complete drying up of liquidity. The 2008 bear market happened because financial institutions were going bankrupt. The market was euphoric (India’s Nifty index went up 7× between 2003 and 2007), and liquidity dried up completely (credit markets froze after the collapse of Lehman Brothers). How can excessive booms and busts take place so frequently in an efficient market whose primary foundation is rooted in the combined assumptions of utility-maximizing behavior, market equilibrium, and stable preferences? The answer is found in what Daniel Kahneman describes as the “availability heuristic” (one of the most insidious and potent cognitive biases): People tend to assess the relative importance of issues by the ease with which they are retrieved from memory—and this is largely determined by the extent of coverage in the media.

More Money Than God: Hedge Funds and the Making of a New Elite
by Sebastian Mallaby
Published 9 Jun 2010

In July 2007, a credit hedge fund called Sowood blew up, and the following month a dozen or so quantitative hedge funds tried to cut their positions all at once, triggering wild swings in the equity market and billions of dollars of losses. The following year was more brutal by far. The collapse of Lehman Brothers left some hedge funds with money trapped inside the bankrupt shell, and the turmoil that followed inflicted losses on most others. Hedge funds needed access to leverage, but nobody lent to anyone in the weeks after the Lehman shock. Hedge funds built their strategies on short selling, but governments imposed clumsy restrictions on shorting amid the post-Lehman panic.

Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown
by Philip Mirowski
Published 24 Jun 2013

Feds, Neel Kashkari and Phillip Swagel drafted a memo entitled “Break the Glass: Bank Recapitalization Plan.”120 In this memo, Kashkari and Swagel identified alternative emergency measures, argued in favor of using asset auctions to remove mortgage-related assets from bank balance sheets, and set forth a timeline for completing the asset purchases. Secretary of the Treasury Henry Paulson would eventually second their judgment to purchase on ideological grounds, but at that juncture essentially ordered that the plan be set aside.121 So when the emergency did eventually arrive, following the September collapse of Lehman Brothers, breaking the glass was something Paulson and the Federal Reserve chairman, Ben Bernanke, attempted to do. They began to make rounds to convince members of congress of the need for an emergency asset purchase plan, solicited an auction plan from the New York Fed, and approached academic market designers to fill in the details.122 But they almost immediately began to encounter difficulties.

Aftershocks: Pandemic Politics and the End of the Old International Order
by Colin Kahl and Thomas Wright
Published 23 Aug 2021

GDP.”23 Japan was already on the brink of a recession at the turn of the new year—a new consumption tax had caused a sharp drop in GDP (an annualized decline of 6.3 percent) in the fourth quarter of 2020—and was considering a fiscal stimulus.24 With little room to cut already low interest rates, the Bank of Japan announced early on that it would pump liquidity into the economy by buying unlimited amounts of government bonds and providing zero-interest-rate financing to banks so they could lend to businesses.25 However, the pandemic did negatively impact the Bank of Japan’s long-term goal of halting deflation—with declining demand, low oil prices, and a government campaign to subsidize travel, prices would fall at their fastest rate in ten years.26 All told, the central banks of the G7 economies, including the U.S. Federal Reserve, would increase their assets by $7 trillion in just eight months—over double the increase in their assets in the year following the collapse of Lehman Brothers in 2008. They did this individually and without much coordination between them, unlike in 2008.27 One reason for this was the fact that the United States was not pressing for a collective response by the G7 or G20. But as a senior ECB official told us, this was less important than it might have been in 2008.

The Price of Time: The Real Story of Interest
by Edward Chancellor
Published 15 Aug 2022

Peter Garber, a professor of economics at Brown University, claims that Law’s credit theory ‘is the centerpiece of most money and macroeconomics textbooks produced in the last two generations and the lingua franca of economic policymakers concerned with the problem of underemployed economics’. Garber believes that Law’s System had every chance of success.59 William Goetzmann of Yale credits Law’s belief that too little money constrains economic activity as ‘the essential principle underlying the decisions by the U.S. Federal Reserve Bank today’.60 The collapse of Lehman Brothers in September 2008 produced economic and financial conditions – a toxic mixture of deflation, high unemployment and soaring government debt – somewhat similar to France’s after the death of Louis XIV. Monetary policymakers responded to these conditions by taking a leaf from Law’s copybook, pushing down interest rates and acquiring large chunks of their national debt (although not going quite so far as Law) with newly printed money.

Power and Progress: Our Thousand-Year Struggle Over Technology and Prosperity
by Daron Acemoglu and Simon Johnson
Published 15 May 2023

Not just too big to jail, these banks were also “too big to fail.” Generous bailouts were provided because, amid the crisis, the banks and other large financial corporations convinced policy makers that what was good for these firms and their executives was good for the economy. After the collapse of Lehman Brothers in September 2008, the prevailing argument became that further failures among leading financial firms would translate into system-wide problems, harming the entire economy. Hence, it was critical to protect the big banks and other large financial firms—their shareholders, creditors, executives, and traders—as much as possible and with few conditions.

Slouching Towards Utopia: An Economic History of the Twentieth Century
by J. Bradford Delong
Published 6 Apr 2020

In fact, a standard playbook has been in existence ever since the British journalist Walter Bagehot, the editor of The Economist, wrote his book about financial crises, Lombard Street, in the 1870s. Call it the Bagehot-Minsky playbook.23 In a Minskyite depression, such as the one that followed the collapse of Lehman Brothers, a government’s best bet is to immediately combat the shortage of safe assets by lending freely on collateral that is good in normal times, but to do so at a penalty rate. The “lending freely” part means to create enough safe assets that they are no longer in short supply. The “good in normal times” part means to try to distinguish institutions that are in trouble and face bankruptcy only because of the financial crisis from institutions that are permanently insolvent and need to be put into receivership.

Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present
by Jeff Madrick
Published 11 Jun 2012

Their highest total purchases of subprime mortgages by far reached 44 percent of the market in 2004 and 33 percent in 2005, before falling back to 20 percent of subprime purchase in 2006, when the frenzy became extreme. 35 FULD’S DREAM HAD COME TRUE: Andrew Ross Sorkin, Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves (New York: Viking, 2009), pp. 19–23. 36 FULD’S AMBITION COULD NOW BE FULLY UNLEASHED: Lawrence G. McDonald with Patrick Robinson, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers (New York: Crown, 2009), pp. 136–38. 37 AT A MANAGEMENT MEETING: Ibid., pp. 268–69. 38 IN THE FACE OF GROWING RISK: Ibid., pp. 274–75. 39 IT WAS PROBABLY THE MOST BRILLIANT TRADE: Lewis, The Big Short, pp. 206–14, 128. 40 LEWIS RANIERI HIMSELF … WARNED: Paul Muolo and Mathew Padilla, Chain of Blame: How Wall Street Caused the Mortgage and Credit Crisis (Hoboken, N.J.: John Wiley, 2008), pp. 223–25. 41 ECONOMISTS AT THE BANK FOR INTERNATIONAL SETTLEMENTS: Tett, Fools’ Gold, p. 154. 42 DESPITE THE RUSE: Michael J. de la Merced, “Findings on Lehman Take Even Experts by Surprise,” Wall Street Journal, March 13, 2010, p.

Accessory to War: The Unspoken Alliance Between Astrophysics and the Military
by Neil Degrasse Tyson and Avis Lang
Published 10 Sep 2018

Asked by a BBC interviewer for a “big thought” on the crisis and whether it constituted “a permanent indictment of capitalism,” he responded, “My big thought is, we desperately need capitalism in order to create interesting work to be done, for ordinary people—unless maybe we can go to war against Mars or something as an alternative.”1 A vibrant economy, in other words, depends on at least one of the following: the profit motive, war on the ground, or war in space. On September 14, 2009, just a few months after the satellite smashup and a few blocks from where the World Trade Center’s Twin Towers had stood eight years and four days earlier, President Barack Obama spoke to Wall Street movers and shakers to mark the first anniversary of the collapse of Lehman Brothers, the investment firm whose bankruptcy is often presented as having triggered the avalanche of financial failures in 2008–2009. That same morning, China laid the cornerstone for its fourth space center on an island close to the equator—the latitude of choice for exploiting Earth’s rotation speed, thereby minimizing the fuel necessary for a launch and maximizing the potential payload.

Too big to fail: the inside story of how Wall Street and Washington fought to save the financial system from crisis--and themselves
by Andrew Ross Sorkin
Published 15 Oct 2009

Tearing Down the Walls: How Sandy Weill Fought His Way to the Top of the Financial World…and Then Nearly Lost It All. New York: Simon & Schuster, 2003. Lowenstein, Roger. When Genius Failed: The Rise and Fall of Long-Term Capital Management. New York: Random House Trade Publishing, 2000. McDonald, Lawrence G., and Patrick Robinson, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers. New York: Crown Business, July 2009. Partnoy, Frank. Fiasco: The Inside Story of a Wall Street Trader. New York: Penguin, 1999. Schroeder, Alice. The Snowball: Warren Buffett and the Business of Life. New York: Bantam Books, 2008. Shelp, Ronald. Fallen Giant: The Amazing Story of Hank Greenberg and the History of AIG.

Political Order and Political Decay: From the Industrial Revolution to the Globalization of Democracy
by Francis Fukuyama
Published 29 Sep 2014

America today has a vast, diverse, complex national economy, connected to a globalized world economy that moves with extraordinary speed and that takes a great deal of expertise to master. It faces serious external security threats. During the acute phase of the financial crisis that unfolded after the collapse of Lehman Brothers in September 2008, the Federal Reserve and Treasury Department had to make massive decisions literally overnight, decisions that involved flooding the market with trillions of dollars of liquidity, propping up individual banks, and imposing new regulations. The severity of the crisis led Congress to an emergency appropriation of $700 billion for the Troubled Asset Relief Program, largely on the say-so of the Treasury Department and the Bush administration.

Private Empire: ExxonMobil and American Power
by Steve Coll
Published 30 Apr 2012

Plus, by 2009, it held in its “treasury” more than 3.2 billion shares of its own stock, with a market value of more than $220 billion, which it had repurchased over the years from the open market and set aside for possible use in acquisitions.15 During the great recession and financial panic that followed the collapse of Lehman Brothers in 2008, many American banks, corporations, and their employees worried week by week about whether their businesses might go under. Rex Tillerson’s greatest worry during the dark September of Lehman’s collapse, he later confessed, was whether ExxonMobil’s massive cash deposits were parked in banks that would survive the crisis.