The & # 39; Lehman Weekend & # 39; or the largest bank bankruptcy in American history

The & # 39; Lehman Weekend & # 39; or the largest bank bankruptcy in American history
AFP / File

Sad reminder, it becomes the Lehman Weekend & # 39; called: the second weekend of September 2008, when the New York bank Lehman Brothers collapsed, causing the planet to hit the worst economic crisis since the 1930s.

Without finding buyers for the remote banking giant, led by mortgages with risk (subprime), the American authorities will drop the institution for more than a century.

Monday, September 15, 2008, 1:45 am, Lehman Brothers went bankrupt and took the world by surprise after a weekend of ultimate negotiations at the top. The bank leaves a slate of 691 billion dollars and 25,000 employees on the floor.

It is the biggest bankruptcy in American history. On Wall Street, the Dow Jones dives 500 points, the biggest drop since the attacks of the Twin Towers in 2001. Cardboard boxes under the arms, slower days leave the bank's headquarters the same day, under the objectives of paparazzi.

"We have not seen anything that is coming!", Said a group employee in London.

But for others, like Lawrence McDonald, a former trader, co-author of a book that was published in 2009 on the collapse of the bank ("A colossal failure of common sense" – "a monumental failure of common sense"), Lehman bosses have long been aware of the excessive risks they have taken to increase their profits in the short term.

The management "drove us to 250 km / h, right on the largest subprime of the iceberg", he said to AFP.

She & # 39; had the house, the furniture and the washing up & # 39; risky on these toxic real estate credits, while from 2005 on the 31st floor of the bank – about the direction – someone was warned for a collapse of the real estate market said this former realtor.

From 2005 to 2007, in the heart of the real estate bubble, where real estate loans are made and securitized to insolvent buyers, Lehman Brothers, who bought several real estate financiers, recorded record profits.

But in mid-2007, the bank began to collect losses, the knockout that was carried out nine months later, March 16, 2008, by the almost bankrupt company of another investment bank, Bear Stearns.

Between the hammer and the anvil

On the brink of bankruptcy for subprime betting, Bear Stearns is bought for a pittance by JPMorgan Chase under the auspices of the Central Bank (Fed), which undermines the confidence of the markets, which now bet on the fall of Lehman.

The authorities are trying to find a buyer who negotiates in vain with a bank in South Korea and then with Bank of America and Barclays.

And while the US government nationalized the mortgage giants Fannie Mae and Freddie Mac just a week ago, guaranteeing more than $ 5 trillion in loans, he chose to drop Lehman.

A few days later, however, Uncle Sam will also save the AIG insurer ($ 180 billion) before giving another 700 billion dollars to banks in a controversial recapitalization plan (TARP).

Taken between the hammer and the anvil, authorities have been widely criticized for both sacrificing Lehman Brothers and saving other banks, such as Goldman Sachs.

"We have been criticized for letting Lehman go bankrupt," said Henry Paulson, George W. Bush's finance minister, who was at the helm at the start of the crisis. "They could save Bear Stearns, they saved AIG, why they did not save Lehman, it was explained and no one believes us," he complains.

"Lehman was very weak, even compared to other institutions." It was very difficult to find someone who was strong enough, at this moment of all dangers, to take this risk, "explained Timothy Geithner, then the boss of the New York Fed, during a recent show on public radio NPR .

But for some, such as Laurence Ball, who has just published a book about Lehman's fall (& # 39; The Fed and Lehman Brothers, setting the record for a financial disaster & # 39;), the investment bank has paid the price. enormous political pressure "when public opinion rejected the rescue operations of the Wall Street giants at the expense of the taxpayer.

02/09/2018 11:42:52 –
Washington (AFP) –
© 2018 AFP

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