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In Ben Bernanke’s Memoir, a Candid Look at Lehman Brothers’ Collapse

98 points by svtrent 11y ago

chollida1 11y ago
The Lehman brothers bankruptcy was a huge cluster fuck! I don't think most people realize just how close it came to stopping the entire worlds economy. The problem with Lehman was that it was a large prime broker for many hegde and pension funds. That essentially means its a bank that holds the holding(cash, stock and bonds) of these funds. When it went bankrupt in the US, what was expected was that each of the funds would pull out their holdings and move them to healthier prime brokers. This would have the double bonus of removing one unhealthy company(Lehman) and at the same time propping up other healthier companies by having them handle the assest of the funds pulling their holdings out of Lehman( sort of like letting a bank fail and having deposits put into other banks. Unfortunately the British financial regulators, who built London on a program of pretty much anything goes style regulation, woke up that day and decided that for the first time ever they needed to actually regulate and they declared Lehman's assets frozen, meaning that otherwise healthy funds (including pension, mutual, and hedge) now had no access to their own assets. So now hedge funds can't trade, pension funds can't pay people and mutual funds can't allow redemption's and the other banks can't take in these assets to prop themselves up. The equity markets started to seize up as funds had no assets to trade. The capital markets nearly seized up. Repo desks are the portion of banks that lend money to each other to ensure everyone has the money they need to operate, suddenly couldn't get money and weren't allowed to lend out money for fear of lending to a company who might go bankrupt. Almost all large companies these days operator on this over night borrowing, using this to smooth out cash flows, similar to using a line of credit. General Electric had 2 days of cash before they couldn't continue operations. We came really, really close to having the entire world stop working! Andrew Ross Sorkin has a great book called Too Big to Fail that goes into this. House of Cards is also a great book on the 2008 crash. The other big firm to go under in 2008 was Bear Sterns. If you like finance read "When Genius Failed" its the history of the rise and fall of Long Term Capital Management. In the book they detail how everyone except for Bear Sterns pitches in to bail out the fund. In 2008 Bear Sterns was the one who needed the bail out and the same people who pleaded with Bear to help with the LTCM bailout just turned their bask of Bear and let them go bankrupt and then get bought for $172 a share at the end of 2006 to being bought for $2 a share in 2008.
- ethbro 11y ago
  > Unfortunately the British financial regulators, who built London on a program of pretty much anything goes style regulation, woke up that day and decided that for the first time ever they needed to actually regulate and they declared Lehman's assets frozen, meaning that otherwise healthy funds (including pension, mutual, and hedge) now had no access to their own assets. I assume that there was reasoning behind this that's a little more nuanced, but even given that then I feel this was the main issue with the crisis. It seems like the financial system is continuously growing in complexity. In that while there were formerly N instruments, a year later there are N+z instruments. Coupled with the increased mobility of capital, and its tendency to seek the highest returns, you end up with large amounts of private money pooling fairly quickly in unexpected and not-broadly understood places (which is kind of self-evident: if everyone perfectly understood a particular instrument, you would not expect its use to outperform the market). And don't get me started on the continual improvement of ML systems: a closed loop where code constructs optimal instruments directly by parsing legislation and legal opinions no longer seems impossible. This seems like a problem in the event that something glitches from business as usual. You now have central bank officials (who while incredibly intelligent, by definition don't know as much about these specialized instruments) tasked with making quick decisions (because HFT and yay automated trading systems) without complete information. Summary: increased machine complexity and speed vs human decision as the only buffer to unintended emerging failure scenarios seems like a recipe for disaster
  - auntienomen 11y ago
    You pivoted pretty quickly here from Lehman to HFT and automated trading. I think you're skipping over something very important by doing so: The mortgage backed securities and CDOs that Lehman and the other big banks got into trouble with are nearly bespoke contracts (more like a small town's bonds than an NYSE stock). Some fancy computing goes into determining what to sell any given contract for, but that's as far as it goes. They're traded by people who chat on the telephone, gather round the conference table, and then fax legalese back and forth. These contracts are not traded on the sorts of highly liquid public exchanges that have HFT. Nor is there much if any automated decision making in this corner of the financial industry. No point in paying nerds a fortune to get instant decisions when implementing said decisions is going to take days or weeks (if it's even possible). Which is to say: The 2008 financial crisis unfolded at human speeds. The public liquid markets didn't move any faster during the crisis than they in Herbert Hoover's day. (Investors already had telephones then.) Public markets react to data as it becomes available, and all the relevant data at the time was generated by humans. In particular, the central bank officials were forced to make quick decisions without complete information not 'because HFT and yay automated trading', but because there were a lot of well-informed and very scared humans telling them the economy was about to collapse.
pmorici 11y ago
Perhaps it is explained further in the book but what brings up questions more than anything is what prompted them to save AIG 2 days after Lehman's bankruptcy. A cynical person looks at the circumstances and says that AIG owed Goldman Sachs a ton of money on credit default swaps and since Hank Paulson, the Treasury secretary, was the former CEO of Goldman he was sympathetic to that situation. The stated reason is often that AIG was so huge that it had to be saved to avoid disaster. Yet, this article seems to argue that the exact reason Lehman wasn't saved 2 days earlier was because it was just too large for the government to handle and that it didn't have the authority to do so until a month later when TARP was passed. You have to wonder how candid memoirs by former officials are vs attempts to influence the historical record. Wikipedia says that Bernanke now advises Citadel which benefited to the tune of $200 million from the bailout of AIG.
- deleted 11y ago
  [deleted]
- roymurdock 11y ago
  The reluctance of the Federal Reserve to lend to Lehman contrasts with its actions regarding Bear Stearns and A.I.G. The difference is that in the other two cases, the Fed saw itself as lending against reasonable collateral. See my comment below for further explanation. Of course, at the end of the day it's all somewhat arbitrary - the Fed was just placing (decently-educated) bets on risk-laden firms: "Hmmm...this bank is probably too important for us to let it fail, this one might pay us back if we pump money into it, this one looks rotten, if we let this one fail now it might trigger a death spiral..."
- nickbauman 11y ago
  Agree! This whole narrative that the govt couldn't save Lehaman's doesn't even touch the fact that: a) Hank Paulson and Dick Fuld are arch enemies, have been vicious rivals for all of the prominent careers and this was an opportunity for Paulson to destroy Fuld utterly. b) AIG's instability was in fact because of its ties to the very markets that Lehman's was a major pendentive for. If Lehman's went down AIG would be next and everyone knew this.
roymurdock 11y ago
Here is the Treasury's Assistant Secretary for Economic Policy on why the Fed bailed out plenty of other institutions, but did not bail out Lehman: The reluctance of the Federal Reserve to lend to Lehman contrasts with its actions regarding Bear Stearns and A.I.G. The difference is that in the other two cases, the Fed saw itself as lending against reasonable collateral. In the case of the Fed’s loans that facilitated the acquisition of Bear Stearns by JPMorgan Chase, $29 billion of Fed money was at risk against a collection of Bear Stearns assets thought to be worth $30 billion. JPMorgan would absorb the first $1 billion if the value of those assets declined, providing a cushion ahead of the Fed (that is, ahead of taxpayers). Those assets were good in the end, with the Fed fully repaid with interest. In the case of A.I.G., the Fed’s loans were collateralized by the entire assets of the firm, based on the observation that A.I.G. had potentially huge losses at its unit that sold credit default swaps but the rest of the firm was a successful insurer. The latter parts — the rest of the company — provided the collateral for the Fed’s initial loans, and eventually TARP funds were substituted for the Fed resources to provide the company with a better capital base rather than Fed loans. To be sure, it was hard to know in September 2008 that the value of the company would offset the potential losses in A.I.G.’s financial products division, but this turned out to be the case, with both the Treasury and the Fed turning considerable profits on their investments in A.I.G. Such a successful outcome was simply less imaginable with Lehman than with either Bear Stearns or A.I.G. To all eyes, the problem at Lehman was one of solvency while the issue in the other two cases was liquidity. The Fed’s actions on Bear and A.I.G. were thus appropriate in its role as a lender of last resort and the same with its caution at Lehman. Indeed, after Lehman had filed for bankruptcy, the Fed did extend loans to allow the firm’s broker-deal subsidiary to function, but in bankruptcy these loans could be fully collateralized by assets within the brokerage subsidiary and not encumbered by obligations in other parts of the larger firm. [1] Basically, Bernanke knew that Lehman owned a bunch of worthless paper whereas firms like AIG, GM, Fannie Mae + Freddie Mac, Goldman, etc. owned actual valuable assets that they could use as collateral against taxpayer loans, and operated in profitable segments outside of risky IB and junk-debt securitization. He was tight-lipped about saving Lehman Bro's because he wanted the private sector to step up and do it themselves, and also so that they wouldn't know whether or not to expect handouts from the Fed down the road. Although I disagree with Bernanke's decision to adhere to Keynesian economics during the economic crisis, valuing short-term stability over properly setting precedents for long-term prosperity and growth, I have to respect the man for his intelligence and thoughtfulness. Looking forward to reading his account of the crisis and why he made the decisions that created the economic environment as it currently stands. [1] http://economix.blogs.nytimes.com/2013/09/13/why-lehman-wasnt-rescued/ http://economix.blogs.nytimes.com/2013/09/13/why-lehman-wasn...
peter303 11y ago
I heard they wanted to see what would happen if they did NOT bail out a major institution, as part of the mix of reasons.
arca_vorago 11y ago
Lehman didn't fall, it was pushed, by Goldman Sachs. A veritable scapegoat, the meat of which was then eaten by the remaining players. Take a look at Henry Paulsons activities surrounding them for more insight. Financial terrorists, the bankers are.
- arbitrage 11y ago
  When you're that overleveraged, a slight breeze is enough of a push to send you over the cliff. Nobody set out to snipe Lehman, it fell due to its own incompetence.
  - arca_vorago 11y ago
    So explain the difference between it and the other banks that were in the same state, but the others got rescued...?
    - saryant 11y ago
      The other banks weren't in the same state as Lehman.
    - mannykannot 11y ago
      It was the first to reach the end of its rope.
blazespin 11y ago
Pure and complete lying. The government could have rescued Lehman Brother's. It would have created very bad problems with TBTF, but they could have rescued them. He's just trying to make it seem as if all the things they did were right by pretending he was wrong in this one narrow instance. I'm not saying that what they did was wrong. But the guy here is just making up this pretend honesty to solidify all the choices he made afterwards. Anyone who swallows this self serving nonsense is naive.
- roymurdock 11y ago
  > It would have created very bad problems with TBTF That's one of the reasons that both Paulson and Bernanke cite for not bailing out Lehman. Technically the government can bail out whoever they want for whatever amount they want. Bernanke isn't dumb - he knows this. He is saying that the bailout was impossible from a cost-benefit perspective. Setting a TBTF precedent so early on and putting the garbage debt-profile of Lehman's underlying assets on the government's balance sheet were too risky to justify bailing the bank out. I'm also willing to reserve judgement until I read the full book rather than a few quotes picked out by the NYT.
- blumkvist 11y ago
  Well, can you back up your claims with something of substance? Believing Bernanke is naive, but believing a random person on the internet, who provides no argumentation whatsoever is prudent?
zeeshanm 11y ago
Going a little bit off on a tangent here but this article reminded me of how the gold price against the dollar has historically been set: >Every morning at nine o'clock, [acting treasury secretary] Morgenthau; Jesse Jones, the head of the RFC; and George Warren would meet with the president over his breakfast of soft-boiled eggs, to determine the price of gold for that day. They began at $31.36 an ounce. The next morning this increased to $31.54, then $31.76 and $31.82. No one had a clue how they went about setting the price, although everyone presumed that some subtle analyses of the world bullion and foreign exchange markets went into the calculations. In fact, the choice of price was completely random. All they were trying to do was to push the price a little higher than the day before. The exercise brought out the juvenile in Roosevelt. One day he picked an increase of 21 cents, and when asked why, replied that it was a lucky number, three times seven. Source: "Lords of Finance"
slavik81 11y ago
When I was visiting Hiroshima in 2010, I stopped at a 'Japanese pizza' shop. It was nothing like actual pizza, but the staff and other customers in there were incredibly friendly, and we ended up trying to explain to each other where we from and what our hobbies were, among other things. One of them was a man who sat down at the table next to me. We talked for a bit, and he explained that he worked at the Bank of Tokyo. I think he was trying to practice his English. He asked me 'What is the most famous bank in Canada?' After thinking about the most famous Canadian bank for a bit, I told him it was probably Toronto Dominion (TD). Or maybe the Royal Bank of Canada (RBC). Then I thought for a moment and said 'Though, the bank most famous in Canada is probably Lehman Brothers.' He had such a look of sadness on his face when I said that.
- drak0n1c 11y ago
  In Japan, the popular noun for the economic crisis is "Lehman-shock". A lot of weight is attached to Lehman - appropriately so, but it has the effect of sticking around in Japanese memory.
snake_plissken 11y ago
If you remove the Goldman Sachs alumni connections, and look at it from the perspective that the Fed and Treasury really did not want to perform any bail outs or rescues unless absolutely necessary, then the whole thing (sort of) makes sense. The tentacles of AIG reached far and wide, to such things as insurance on commercial jet liners and if AIG had gone under, those planes would have contractually been not allowed to fly. Yet it's incredibly difficult to believe the Fed and Treasury were completely against any bailouts, considering that 6 months before, a rescue package was offered to Bear Stearns, and the eventual purchase of Bear by JP Mogran was effectively guaranteed via the NY Fed's backing. I want to believe it was for reasons other than influence by GS and their alumni, but that is a hard sell.
elevenfist 11y ago
Want the real story? Inside Job - Charles Ferguson

98 points by svtrent 11y ago

The Lehman brothers bankruptcy was a huge cluster fuck! I don't think most people realize just how close it came to stopping the entire worlds economy. The problem with Lehman was that it was a large prime broker for many hegde and pension funds. That essentially means its a bank that holds the holding(cash, stock and bonds) of these funds. When it went bankrupt in the US, what was expected was that each of the funds would pull out their holdings and move them to healthier prime brokers. This would have the double bonus of removing one unhealthy company(Lehman) and at the same time propping up other healthier companies by having them handle the assest of the funds pulling their holdings out of Lehman( sort of like letting a bank fail and having deposits put into other banks. Unfortunately the British financial regulators, who built London on a program of pretty much anything goes style regulation, woke up that day and decided that for the first time ever they needed to actually regulate and they declared Lehman's assets frozen, meaning that otherwise healthy funds (including pension, mutual, and hedge) now had no access to their own assets. So now hedge funds can't trade, pension funds can't pay people and mutual funds can't allow redemption's and the other banks can't take in these assets to prop themselves up. The equity markets started to seize up as funds had no assets to trade. The capital markets nearly seized up. Repo desks are the portion of banks that lend money to each other to ensure everyone has the money they need to operate, suddenly couldn't get money and weren't allowed to lend out money for fear of lending to a company who might go bankrupt. Almost all large companies these days operator on this over night borrowing, using this to smooth out cash flows, similar to using a line of credit. General Electric had 2 days of cash before they couldn't continue operations. We came really, really close to having the entire world stop working! Andrew Ross Sorkin has a great book called Too Big to Fail that goes into this. House of Cards is also a great book on the 2008 crash. The other big firm to go under in 2008 was Bear Sterns. If you like finance read "When Genius Failed" its the history of the rise and fall of Long Term Capital Management. In the book they detail how everyone except for Bear Sterns pitches in to bail out the fund. In 2008 Bear Sterns was the one who needed the bail out and the same people who pleaded with Bear to help with the LTCM bailout just turned their bask of Bear and let them go bankrupt and then get bought for $172 a share at the end of 2006 to being bought for $2 a share in 2008.

ethbro 11y ago
> Unfortunately the British financial regulators, who built London on a program of pretty much anything goes style regulation, woke up that day and decided that for the first time ever they needed to actually regulate and they declared Lehman's assets frozen, meaning that otherwise healthy funds (including pension, mutual, and hedge) now had no access to their own assets. I assume that there was reasoning behind this that's a little more nuanced, but even given that then I feel this was the main issue with the crisis. It seems like the financial system is continuously growing in complexity. In that while there were formerly N instruments, a year later there are N+z instruments. Coupled with the increased mobility of capital, and its tendency to seek the highest returns, you end up with large amounts of private money pooling fairly quickly in unexpected and not-broadly understood places (which is kind of self-evident: if everyone perfectly understood a particular instrument, you would not expect its use to outperform the market). And don't get me started on the continual improvement of ML systems: a closed loop where code constructs optimal instruments directly by parsing legislation and legal opinions no longer seems impossible. This seems like a problem in the event that something glitches from business as usual. You now have central bank officials (who while incredibly intelligent, by definition don't know as much about these specialized instruments) tasked with making quick decisions (because HFT and yay automated trading systems) without complete information. Summary: increased machine complexity and speed vs human decision as the only buffer to unintended emerging failure scenarios seems like a recipe for disaster
- auntienomen 11y ago
  You pivoted pretty quickly here from Lehman to HFT and automated trading. I think you're skipping over something very important by doing so: The mortgage backed securities and CDOs that Lehman and the other big banks got into trouble with are nearly bespoke contracts (more like a small town's bonds than an NYSE stock). Some fancy computing goes into determining what to sell any given contract for, but that's as far as it goes. They're traded by people who chat on the telephone, gather round the conference table, and then fax legalese back and forth. These contracts are not traded on the sorts of highly liquid public exchanges that have HFT. Nor is there much if any automated decision making in this corner of the financial industry. No point in paying nerds a fortune to get instant decisions when implementing said decisions is going to take days or weeks (if it's even possible). Which is to say: The 2008 financial crisis unfolded at human speeds. The public liquid markets didn't move any faster during the crisis than they in Herbert Hoover's day. (Investors already had telephones then.) Public markets react to data as it becomes available, and all the relevant data at the time was generated by humans. In particular, the central bank officials were forced to make quick decisions without complete information not 'because HFT and yay automated trading', but because there were a lot of well-informed and very scared humans telling them the economy was about to collapse.

pmorici 11y ago

Perhaps it is explained further in the book but what brings up questions more than anything is what prompted them to save AIG 2 days after Lehman's bankruptcy. A cynical person looks at the circumstances and says that AIG owed Goldman Sachs a ton of money on credit default swaps and since Hank Paulson, the Treasury secretary, was the former CEO of Goldman he was sympathetic to that situation. The stated reason is often that AIG was so huge that it had to be saved to avoid disaster. Yet, this article seems to argue that the exact reason Lehman wasn't saved 2 days earlier was because it was just too large for the government to handle and that it didn't have the authority to do so until a month later when TARP was passed. You have to wonder how candid memoirs by former officials are vs attempts to influence the historical record. Wikipedia says that Bernanke now advises Citadel which benefited to the tune of $200 million from the bailout of AIG.

deleted 11y ago
[deleted]
roymurdock 11y ago
The reluctance of the Federal Reserve to lend to Lehman contrasts with its actions regarding Bear Stearns and A.I.G. The difference is that in the other two cases, the Fed saw itself as lending against reasonable collateral. See my comment below for further explanation. Of course, at the end of the day it's all somewhat arbitrary - the Fed was just placing (decently-educated) bets on risk-laden firms: "Hmmm...this bank is probably too important for us to let it fail, this one might pay us back if we pump money into it, this one looks rotten, if we let this one fail now it might trigger a death spiral..."
nickbauman 11y ago
Agree! This whole narrative that the govt couldn't save Lehaman's doesn't even touch the fact that: a) Hank Paulson and Dick Fuld are arch enemies, have been vicious rivals for all of the prominent careers and this was an opportunity for Paulson to destroy Fuld utterly. b) AIG's instability was in fact because of its ties to the very markets that Lehman's was a major pendentive for. If Lehman's went down AIG would be next and everyone knew this.

roymurdock 11y ago

Here is the Treasury's Assistant Secretary for Economic Policy on why the Fed bailed out plenty of other institutions, but did not bail out Lehman: The reluctance of the Federal Reserve to lend to Lehman contrasts with its actions regarding Bear Stearns and A.I.G. The difference is that in the other two cases, the Fed saw itself as lending against reasonable collateral. In the case of the Fed’s loans that facilitated the acquisition of Bear Stearns by JPMorgan Chase, $29 billion of Fed money was at risk against a collection of Bear Stearns assets thought to be worth $30 billion. JPMorgan would absorb the first $1 billion if the value of those assets declined, providing a cushion ahead of the Fed (that is, ahead of taxpayers). Those assets were good in the end, with the Fed fully repaid with interest. In the case of A.I.G., the Fed’s loans were collateralized by the entire assets of the firm, based on the observation that A.I.G. had potentially huge losses at its unit that sold credit default swaps but the rest of the firm was a successful insurer. The latter parts — the rest of the company — provided the collateral for the Fed’s initial loans, and eventually TARP funds were substituted for the Fed resources to provide the company with a better capital base rather than Fed loans. To be sure, it was hard to know in September 2008 that the value of the company would offset the potential losses in A.I.G.’s financial products division, but this turned out to be the case, with both the Treasury and the Fed turning considerable profits on their investments in A.I.G. Such a successful outcome was simply less imaginable with Lehman than with either Bear Stearns or A.I.G. To all eyes, the problem at Lehman was one of solvency while the issue in the other two cases was liquidity. The Fed’s actions on Bear and A.I.G. were thus appropriate in its role as a lender of last resort and the same with its caution at Lehman. Indeed, after Lehman had filed for bankruptcy, the Fed did extend loans to allow the firm’s broker-deal subsidiary to function, but in bankruptcy these loans could be fully collateralized by assets within the brokerage subsidiary and not encumbered by obligations in other parts of the larger firm. [1] Basically, Bernanke knew that Lehman owned a bunch of worthless paper whereas firms like AIG, GM, Fannie Mae + Freddie Mac, Goldman, etc. owned actual valuable assets that they could use as collateral against taxpayer loans, and operated in profitable segments outside of risky IB and junk-debt securitization. He was tight-lipped about saving Lehman Bro's because he wanted the private sector to step up and do it themselves, and also so that they wouldn't know whether or not to expect handouts from the Fed down the road. Although I disagree with Bernanke's decision to adhere to Keynesian economics during the economic crisis, valuing short-term stability over properly setting precedents for long-term prosperity and growth, I have to respect the man for his intelligence and thoughtfulness. Looking forward to reading his account of the crisis and why he made the decisions that created the economic environment as it currently stands. [1] http://economix.blogs.nytimes.com/2013/09/13/why-lehman-wasnt-rescued/ http://economix.blogs.nytimes.com/2013/09/13/why-lehman-wasn...

peter303 11y ago

I heard they wanted to see what would happen if they did NOT bail out a major institution, as part of the mix of reasons.

arca_vorago 11y ago

Lehman didn't fall, it was pushed, by Goldman Sachs. A veritable scapegoat, the meat of which was then eaten by the remaining players. Take a look at Henry Paulsons activities surrounding them for more insight. Financial terrorists, the bankers are.

arbitrage 11y ago
When you're that overleveraged, a slight breeze is enough of a push to send you over the cliff. Nobody set out to snipe Lehman, it fell due to its own incompetence.
- arca_vorago 11y ago
  So explain the difference between it and the other banks that were in the same state, but the others got rescued...?
  - saryant 11y ago
    The other banks weren't in the same state as Lehman.
  - mannykannot 11y ago
    It was the first to reach the end of its rope.

blazespin 11y ago

Pure and complete lying. The government could have rescued Lehman Brother's. It would have created very bad problems with TBTF, but they could have rescued them. He's just trying to make it seem as if all the things they did were right by pretending he was wrong in this one narrow instance. I'm not saying that what they did was wrong. But the guy here is just making up this pretend honesty to solidify all the choices he made afterwards. Anyone who swallows this self serving nonsense is naive.

roymurdock 11y ago
> It would have created very bad problems with TBTF That's one of the reasons that both Paulson and Bernanke cite for not bailing out Lehman. Technically the government can bail out whoever they want for whatever amount they want. Bernanke isn't dumb - he knows this. He is saying that the bailout was impossible from a cost-benefit perspective. Setting a TBTF precedent so early on and putting the garbage debt-profile of Lehman's underlying assets on the government's balance sheet were too risky to justify bailing the bank out. I'm also willing to reserve judgement until I read the full book rather than a few quotes picked out by the NYT.
blumkvist 11y ago
Well, can you back up your claims with something of substance? Believing Bernanke is naive, but believing a random person on the internet, who provides no argumentation whatsoever is prudent?

zeeshanm 11y ago

Going a little bit off on a tangent here but this article reminded me of how the gold price against the dollar has historically been set: >Every morning at nine o'clock, [acting treasury secretary] Morgenthau; Jesse Jones, the head of the RFC; and George Warren would meet with the president over his breakfast of soft-boiled eggs, to determine the price of gold for that day. They began at $31.36 an ounce. The next morning this increased to $31.54, then $31.76 and $31.82. No one had a clue how they went about setting the price, although everyone presumed that some subtle analyses of the world bullion and foreign exchange markets went into the calculations. In fact, the choice of price was completely random. All they were trying to do was to push the price a little higher than the day before. The exercise brought out the juvenile in Roosevelt. One day he picked an increase of 21 cents, and when asked why, replied that it was a lucky number, three times seven. Source: "Lords of Finance"

slavik81 11y ago

When I was visiting Hiroshima in 2010, I stopped at a 'Japanese pizza' shop. It was nothing like actual pizza, but the staff and other customers in there were incredibly friendly, and we ended up trying to explain to each other where we from and what our hobbies were, among other things. One of them was a man who sat down at the table next to me. We talked for a bit, and he explained that he worked at the Bank of Tokyo. I think he was trying to practice his English. He asked me 'What is the most famous bank in Canada?' After thinking about the most famous Canadian bank for a bit, I told him it was probably Toronto Dominion (TD). Or maybe the Royal Bank of Canada (RBC). Then I thought for a moment and said 'Though, the bank most famous in Canada is probably Lehman Brothers.' He had such a look of sadness on his face when I said that.

drak0n1c 11y ago
In Japan, the popular noun for the economic crisis is "Lehman-shock". A lot of weight is attached to Lehman - appropriately so, but it has the effect of sticking around in Japanese memory.

snake_plissken 11y ago

If you remove the Goldman Sachs alumni connections, and look at it from the perspective that the Fed and Treasury really did not want to perform any bail outs or rescues unless absolutely necessary, then the whole thing (sort of) makes sense. The tentacles of AIG reached far and wide, to such things as insurance on commercial jet liners and if AIG had gone under, those planes would have contractually been not allowed to fly. Yet it's incredibly difficult to believe the Fed and Treasury were completely against any bailouts, considering that 6 months before, a rescue package was offered to Bear Stearns, and the eventual purchase of Bear by JP Mogran was effectively guaranteed via the NY Fed's backing. I want to believe it was for reasons other than influence by GS and their alumni, but that is a hard sell.

elevenfist 11y ago

Want the real story? Inside Job - Charles Ferguson