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Feds Let Lehman Fail—Then Loaned It $138B Anyway

Paulson & Co. say cash was to 'facilitate orderly wind-down' of trades, but questions persist

By Clay Dillow,  Newser Staff

Posted Dec 16, 2008 9:20 AM CST
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(Newser) – After refusing to bail out Lehman Brothers, the Federal Reserve funneled $87 billion to a subsidiary through JPMorgan Chase on Sept. 15, then another $51 billion the next day. The feds say they aimed to “facilitate an orderly wind-down” of Lehman’s broker-dealer operations, Andrew Ross Sorkin writes in the New York Times, but their changing explanations, and other issues, continue to muddy the waters.

Official documents say the loan was a “carefully thought-out decision” to minimize the ripple effects of Lehman’s collapse. But Treasury Secretary Henry Paulson said the government couldn’t legally lend to Lehman; the collateral simply wasn’t there. There’s no telling if the loan averted a greater financial calamity, Sorkin writes, “but until officials explain what happened, it will remain a mystery.”

In this Sept. 15, 2008, file photo, Lehman Brothers world headquarters is shown in New York.
In this Sept. 15, 2008, file photo, Lehman Brothers world headquarters is shown in New York.   (AP Photo)
In this Sept. 16, 2008, file photo, people work inside the Lehman Brothers headquarters in New York.
In this Sept. 16, 2008, file photo, people work inside the Lehman Brothers headquarters in New York.   (AP Photo)
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Lehman Brothers became a victim. In effect, the only true icon to fall in the tsunami that has befallen the credit markets. And it saddens me.
- Judge James Peck, after approving Lehman's sale to Barclays

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Lehman: crisis to catastrophe
CNN

Unraveling Lehman's legacy, one document at a time
New York Times

 
Wall Street • Barclays • Henry Paulson • Lehman Brothers • bailout • JPMorgan Chase • financial crisis • Andrew Ross Sorkin

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