Bernanke on Lehman Brothers in His Memoirs

October 7th, 2015
in Op Ed

by Dirk Ehnts, Econoblog101

The NYT has an article on Ben Bernanke, former chairman of the Fed, and his view on the collapse of Lehman Brothers.

Follow up:

I have to admit that I don't get it:

But crucially, Mr. Bernanke writes: "Hank's statements were to some extent beside the point, in that the Fed loans were the only government funds available. It would have been the Federal Reserve's decision - not Hank's or the Treasury's - whether to make a loan, had a loan of sufficient size to save the firm been judged feasible." [...]

He writes that it was simply impossible to save Lehman, pointing to the nearly $200 billion of losses that Lehman's creditors have since suffered. No one has come forward on the record, nor has any contemporaneous document been produced in the past seven years that said the government had found a way to save the company and specifically chose not to do so for political reasons, a point Mr. Bernanke alludes to in his book. "I do not want the notion that Lehman's failure could have been avoided, and that its failure was consequently a policy choice, to become the received wisdom, for the simple reason that it is not true," he writes. "We did everything we could think of to avoid it."

Well, Bernanke just said that the Fed could have made a loan, but then he goes on and writes

"that it was simply impossible to save Lehman, pointing to the nearly $200 billion of losses that Lehman's creditors have since suffered".

Huh? Since when can a central bank not suffer unlimited losses? Bernanke once said that the central bank just credited banks' accounts at the Fed when purchasing assets or making loans.

This does not make a lot of sense to me. It seems like an intent to change the way historians see him, but I don't buy into it. The demise of Lehman Brothers was a powerful symbol, but nothing crucial. The interbank market would have frozen anyway, since no one would have believed that the Fed would be willing to lend unlimited amounts of money to all the banks without any conditions.

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.

 navigate econintersect .com


Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2018 Econintersect LLC - all rights reserved