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The one that slipped through the cracks | Advantage zyaada

The House Committee on Financial Services  go back to reviewing the Lehman bankruptcy and fix the blame for “neglecting signs of a fixed up balance sheet” with Ben Bernanke’s testimony and take Dick Fuld on another emotional ride. Lehman’s case was rather unfortunate, much like Goldman Sachs when action has been taken by a wafer thin majority, almost on the whim of one single person. Back in September 2008 also, no one understood the complete scenario – what was going on, how will it unfold next week, exactly who’s in charge [exactly ripe for us to set in and set things right, right now it could be you to turn it around for us] A lot of the actions did not count the men that were to be counted. Dick Fuld was one of them. We were another.

It seems obvious to us that Lehman just became the unwitting scapegoat in the sequence of events leading to September 2008 as regulators, Tim Geithner and Hank Paulson went about trying to imagine the unimaginable and actioning each item in the unfolding crisis to utopian “free market rules” for which only Bear and Lehman went down in bankruptcy.

Lehman’s possible deals were arranged with British Barclays without having long dreamtime sleepover chats or so say some of the memoirs of 2008, i.e. British regulators made it clear on the weekend when Barclays was invited and Lehman was being patched up and ended up declaring bankruptcy that they would not allow Barclays the pleasure and perhaps rightfully so but much later into the final stage of the deal.

Nomura walked away with the real estate after Chapter XI was announced. Others were simpler to handle once Lehman had been shod, leaving regulators with simpler deals at 5-10% of the 2006 values of portfolios and showing the light for TARP to be set up and cleared by the Congress.

Also Lehman has legal structures apart from Repo 105 or rather caused by Repo 105 deals that made it impossible for counterparties to close out trades in advance of the failure leaving the Global Financial System stranded. It is not any one single entity that could hold the crowd to ransom, but everything was to fall together and thus it was important for someone to have a bigger picture of this scenario.

Maybe we will learn that from the crisis than spend time in trying to fix the blame on us high finance guys just for things Wall Street or Main Street did not understand. The senate champions and even super regulator congress men Barney and Dodd sometimes do not understand the ramifications of their own speech, even Ben Bernanke – leaving others high and dry without cause.

[If you are interested, Ben Bernanke, slept over most of the crisis asking everyone to keep hands off in our great tradition and almost refused to open any Discounting window for a NBFC like Lehman, that being the week before when he knew Lehman was not pulling through. The Discount window could be a critical stop to avoid the rolling moss]

3 comments on “The one that slipped through the cracks | Advantage zyaada

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This entry was posted on April 20, 2010 by in Financial Markets and tagged , , .


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