Lehman Jan 18

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Comment - Bernie Sanders

1. Little Support For Sanders's Claim About Financial Crisis

   Jan 16, 2016 | AP (in the Reading Eagle)

   "Secretary Clinton says that Glass-Steagall would not have prevented the financial crisis because shadow banks like AIG and Lehman Brothers, not big commercial banks, were the real culprits. On the issue, Secretary Clinton is wrong. Shadow banks did gamble recklessly, but where did that money come from?...

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

Comment - Bernie Sanders

1. Little Support For Sanders's Claim About Financial Crisis

   Jan 16, 2016 | AP (in the Reading Eagle)

   "Secretary Clinton says that Glass-Steagall would not have prevented the financial crisis because shadow banks like AIG and Lehman Brothers, not big commercial banks, were the real culprits. On the issue, Secretary Clinton is wrong. Shadow banks did gamble recklessly, but where did that money come from? It came from the federally insured bank deposits of big commercial banks - something that would have been banned under the Glass-Steagall Act."

   ...As for Sanders's specific examples, he mentions Lehman Brothers - an aggressive investment banking firm - and AIG, an insurance company. Their failures were critical to the financial crisis, but neither example necessarily backs up Sanders's version of history.

   The 500-page report of the Financial Crisis Inquiry Commission (FCIC) - the official government-funded investigation of the crisis - said that Lehman relied primarily on non-bank sources of funding such as money-market funds: "Solvency and liquidity were essential and related. If money market funds, hedge funds, and investment banks believed Lehman's assets were worth less than Lehman's valuations, they would withdraw funds, demand more collateral, and curtail lending. That could force Lehman to sell its assets at resale prices, wiping out capital and liquidity virtually overnight."

   As for AIG, which required a $180 billion federal bailout, the commission said its "enormous sales of credit default swaps were made without putting up initial collateral, setting aside capital reserves, or hedging its exposure - a profound failure in corporate governance, particularly its risk-management practices."...

   For full story: http://www.readingeagle.com/ap/article/little-support-for-sanderss-claim-about-financial-crisis
   

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