Why hadn’t the Federal Reserve rescued Lehman Brothers ten years ago?
With hindsight, we now know the decision not to rescue Lehman resulted in the calamity of 2008 financial meltdown and a prolonged recession which affected millions of lives in the US and around the world.
Even Ben Bernanke, then Chairman of the Fed, agreed in his latest research that the collapse of the financial system was the primary reason the recession has such lingering effect.
Then, again, why didn’t the Fed rescue Lehman Brothers? This week, the trio who was directly responsible for the decision to let Lehman fail — Bernanke, Tim Geithner (then New York Fed President), and Hank Paulson (then Treasury Secretary) — joined together at a panel held by Brookings Institution and spoke about the lessons they had learned from the crisis.
During the discussion, panel moderator Andrew Ross Sorkin asked the trio why Lehman was not rescued.
In response, Geithner insisted that the decision to let Lehman fall is because of three reasons:
- Lehman was weaker than Bearn…
