"Why did you allow Lehman to fail?" It is an understandable question, but one that nevertheless contains a false premise. The Federal Reserve did not "allow" Lehman Brothers to die, bankruptcy being the equivalent of death to a financial company. Instead, the Federal Reserve, the United States Treasury Department, the Securities and Exchange Commission (SEC), and others tried hard to save it—not for its own sake, of course, but for the sake of all the families and businesses who would be harmed by the devastating effects of a Lehman bankruptcy. We did not succeed, but the effort made was serious and determined. We came very close.Read Baxter's complete testimony on why the NY Fed could not and did not save Lehman Brothers from bankruptcy here.
Correcting misconceptions about markets, economics, asset prices, derivatives, equities, debt and finance
Wednesday, September 1, 2010
Why The NY Fed Allowed Lehman To Fail
Posted By Milton Recht
From the testimony of Thomas C. Baxter Jr., Executive Vice President and General Counsel of the Federal Reserve Bank of New York, on September 1, 2010, before the Financial Crisis Inquiry Commission, Washington, DC:
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ReplyDeleteAfter reading the latest news on the period, I'm still not convinced the principal actors in the drama with Lehman are being entirely frank about what happened behind the scenes of the real.
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