More than five years after the collapse of Lehman Brothers, economists are still searching to understand why it failed as badly as it did. By this I don’t mean why it went bankrupt – everyone is well aware that its exposure to the mortgage market coupled with a high degree of leverage (31:1 by 2007) meant that only a small loss on its vulnerable positions would eliminate all of its equity. The much more relevant question is why the insolvency proceedings have failed as miserably as they have for the firm. Writing for the New York Fed, Michael Fleming and Asani Sarkar reckon that Lehman’s senior unsecured creditors have only been paid out around 28% of their claims to date. (This implies a loss of around $200 billion.) bastiat.mises.org/2014/04/why-lehman-is-still-a-mess/
Posted on: Tue, 08 Apr 2014 19:19:16 +0000
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