Lehman Oct19

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Comment - Bernanke

1. In His New Memoir, Ben Bernanke Is Wrong About The Fall Of Lehman

   Oct 16, 2015 | Fortune

   By Peter J. Wallison
   
   
   ...Why did Bernanke and Paulson rescue Bear Stearns but not Lehman, which was about 50% larger than Bear Stearns? The first excuse Bernanke offered when chaos followed Lehman’s bankruptcy was that the Fed did not have the legal authority to make the loan. That was also his position when he testified before the Financial Crisis Inquiry...

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Client Attorney Privileged/Attorney Work Product/At Request of Counsel

Comment - Bernanke

1. In His New Memoir, Ben Bernanke Is Wrong About The Fall Of Lehman

   Oct 16, 2015 | Fortune

   By Peter J. Wallison

   ...Why did Bernanke and Paulson rescue Bear Stearns but not Lehman, which was about 50% larger than Bear Stearns?

   The first excuse Bernanke offered when chaos followed Lehman’s bankruptcy was that the Fed did not have the legal authority to make the loan. That was also his position when he testified before the Financial Crisis Inquiry Commission, of which I was a member. There he said, when I questioned him, that the Fed needed collateral to make such a loan and Lehman didn’t have enough. He was vague about what he knew of Lehman’s financial condition, and how he knew it. I was puzzled at the time about why he was not more informed about matters of such importance, especially when Bernanke was on record as having told the FCIC that he knew a catastrophe would ensue if Lehman was not rescued.

   Now, in his new book, Bernanke says that after Lehman’s bankruptcy he and Paulson should have been more candid about why they didn’t rescue the investment bank. They couldn’t tell the truth, he suggests, because they didn’t want to spook the market. “We had agreed in advance to be vague,” he says, “because we were intensely concerned that acknowledging our inability to save Lehman would hurt market confidence.” This, he says, allowed people to believe, erroneously, that the government had deliberately allowed Lehman to fail. Yet what has since come to life suggests that Bernanke and Paulson could have rescued Lehman, and possibly averted the catastrophe that followed Lehman’s failure, but failed to act for personal reasons.

   On September 29, 2014, a New York Times story by Peter Eavis and James B. Stewart reported that unnamed economists at the New York Fed had analyzed Lehman’s financial condition before that fateful weekend, and believed that, as the article stated, “Lehman might, in fact, be a candidate for rescue.” In other words, these economists had concluded that Lehman had sufficient collateral for a loan from the Fed, but they were never asked for their views. This suggests that neither Bernanke nor anyone else really wanted to knowwhether Lehman could be rescued...

   For full story: http://fortune.com/2015/10/16/ben-bernanke-memoir-lehman-brothers/

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