I’ve spilled so many pixels on Lehman Brothers, I have almost nothing new left to add.

For those of you newer to the site, however, here are a few of the Big Picture’s “Greatest Hits” regarding Lehman:

• 2 years ago today, we wrote: The Terrible Lessons of Bear Stearns (as applied to LEH)

•  Dick Fuld’s Fantastic Revisionism ! (September 2nd, 2010)

2008 Bailout Counter-Factual (August 17th, 2010)

Charlie Gasparino Owes David Einhorn (and me) an Apology (March 12th, 2010)   (Video here)

Financial Sector: Beware LEH, CIT (June 3rd, 2008)

• There’s lots of Lehman related analysis in Bailout Nation, published May 2009 (reviews here).

Causation Analysis: What “But Fors” Caused the Crisis ? (February 3rd, 2010)

Bailout Skyline (February 2nd, 2010)

Who Bears the Costs of Post-Crisis Recovery ? (January 20th, 2010)

Wages of Failure: Exec Comp at Bear, Lehman 2000-08 (January 11th, 2010)

Bear Stearns, Lehman Execs Kept Billions . . . (November 23rd, 2009)

Anyone interested in an exhaustive review can see every bailout post — all 1,534 of them — by clicking here

Category: Bailout Nation, Bailouts

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

10 Responses to “Lehman’s Bankruptcy: 2 Year Anniversary”

  1. AHodge says:

    good judgement for downplaying
    those “commemorating” like it was THE thing— are celebrating the two year anniversary of their own ignorance.

    here is a tedious but exhaustive proof that lehman was more an effect. And small. Not THE cause. We were already going over the falls by August

    Proofs Lehman’s Sept. 14 bankruptcy was not prime cause of the late 2008 great recession.

    1.Other drivers fully explain the faster US downturn in 4Q 2008

    a.Housing collapse: prices, starts and foreclosures and lagged effect.
    b.Energy shock through July with $100+ bbl oil prices
    c.State and Local govt shrinkage related to tax revenue loss and March 2008 shutdown of auction rate market for project finance
    d.Securitization credit collapse: unguaranteed market was shrinking since March.
    e.Global export collapse. US exports down a real -3.6% and -19.5% in 3Q 4Q, far larger than the real GDP Decline. Trade finance dries up.
    f.CAPEX contraction. This had already started in 3Q with Business fixed down 6.1%.
    g.Income loss. Jobs had shrunk slightly all year
    h.Stimulus unwound: Stimulus package #1 was small and temporary: It worked 2Q, outweighed the jobs related income losses: then unwound in the third and fourth quarter.

    2.Other problems besides Lehman pressured the financial sector in Septembera.
    a WAMU bonds also default in Sept.
    b. Fannie and Freddie faced default risk threatening $5.2 trillion of paper and guarantees.
    c.Mortgage insurers and pool insurers faced insolvency threat. Insurance for mortgages and CDS were realized to be fake and unreserved.
    d.Good commercial paper started to dry up before Lehman. Confidence had been poisoned by earlier Asset Backed Commercial Paper (ABCP) losses

    3.Lehman bankruptcy stressed the financial sector further, but banking had, in many respects, shut down supplying credit already. Securitization dried up by June

    a.Lets stipulate that commercial paper, money market mutual funds, the stock market, bank funding and CDS markets showed further stress in September, partly Lehman related
    b.Only the first two directly supply credit.
    c.The Treasury formally announced blanket money market guarantees Sept 19, printed regs Sep 28.
    d.The treasury also ramped up the CP guarantee program to $130 bio in Sept/Oct. Nonfinancial CP outstandings ROSE over $1 trillion in 4Q
    e.Securitization and shadow banking, already having collapsed by the summer, SLOWED its rate of decline after Lehman

    4.The real economy data showed an accelerating rate of decline in August-September. Lehman was SEPT 14

    a.A Lehman caused credit crunch would take at least 1-2 months to affect real activity
    b.Initial unemployment claims breached 400 thousand in early august.
    c.Exports and capex data showed declines larger than the overall -2.5% 3Q GDP trend
    d.Commodity prices, after spiking to a peak in late July, had collapsed by Sep 14.
    e.Industrial production fell a disastrous 4.0% in Sept, far worse than any other month.
    f.Auto sales falling all year. July alone down about 10%. Real consumer spending fell -0.5% in September, the recession’s largest monthly decline.

    No statistical proof has been offered by anyone that further credit withdrawals beginning late September drove down activity further in credit starved sectors. There was clearly credit starving going on. That began a year earlier, completely dried up by summer in most areas Were there some sentiment effects from stock market and CP and wall st wetting their pants? No doubt. But how much of even that is reasonably Lehman, much less provably Lehman? If someone says that Lehman was 10% of total negative drivers, I would not quarrel. Otherwise the only “proofs” of this largely mythic Tale of Lehman are thousands of self serving Wall St types intoning it to each other.

  2. Yah, good list —

    I discussed the word “precipitate” here:

    “Precipitating” the Credit Crisis
    http://www.ritholtz.com/blog/2010/01/precipitating-the-credit-crisis/

  3. AHodge says:

    right, even the P word a litle strong

    the Myth of Lehman of course is the perfect vehicle for
    1) forecast losers who did not see it coming even dimly. and need an explanation
    2) bailout beggers who like the narrative of everybody bailed “no more lehmans” “dont dare take away that govt guarantee for everybody big”

    i note wall st did not get on this bandwagon for at least 2 months.
    at the start it was only the europeans, big holders of LEH paper, that claimed it would be a disaster.

  4. AHodge says:

    Make that Bailout Extorters
    their threat may be a fiction and a bluff…
    but everybody buys it, specifically Chairman Bozo..ke
    in his recent testimony crying over how he wished he could have done more

  5. hammerandtong2001 says:

    Outstanding post there by AHodge.

    I would add that the collapse of BSC — 6 MONTHS BEFORE LEH’s BK — signaled pretty clearly that there was deep trouble afoot in the credit markets. And if JPM hadn’t been holding $10 Bil of bad Bear paper, making the “merger” necessary, then Bear probably would have BK’d then.

    In March of 2008 when Bear collapsed — the S&P 500 Index was trading around 1300, and during that summer, it traded up to well over 1400. After the crash, the index bottomed in the 6000′s — vaporizing value and wealth.

    But there was really plenty of time to exit longs.

    .

  6. AHodge says:

    thanks
    you are right about BEAR, and the fed still holds 30 bio of their paper.
    they were broke too..

    stage 1 of this tragedy was actually the seizing up of banking on aug 9 2007. Because many of them were broke (CITI Merrill) etc etc , The banks did not trust to lend to anyone even overnight. They did not know which were broke.

  7. obsvr-1 says:

    when your have the LEH card in your hand, you have to know when to hold ‘em and know when to Fuld ‘em ….

    LEH is gone and world moves on. Two years and no prosecutions, the long arm of the law seems to be mired in the political morass.

    Unfortunate after effect of the crisis is that many (if not most) of the fraudsters are still banksters, execs and serving on the board of public companies — and get to keep their treasures from the looting.
    http://dealbook.blogs.nytimes.com/2010/09/14/companies-may-fail-but-directors-are-in-demand/

  8. [...] Barry celebrates the 2nd Anniversary of Hurricane Lehman with some greatest hits.  (TBP) [...]

  9. reedsch says:

    The fraud of the ratings agencies is effect…they greased the skids but did not create the skids nor push them.
    Low interest rates are effect…who is willing to lend money at such rates?
    The disconnect between the people writing the mortgages and the actual money being lent was apparent for years. Again, effect…who is going to lend money out with such lax supervision?

    Cause: vast amounts of money looking for a place to go, like water in a reservoir creating leaks due to the excess pressure. Income distribution patterns in our economy created eddies in the flow of currency where too much liquidity has pooled. It must find its way back into the system somehow, it doesn’t seem to be coming in via wages or traditional capital spending as it once did.
    Basically, trickle-down didn’t work.
    IMHO