Whether it was right or wrong to let Lehman Brothers fail, can be discussed. But what is clear is that the way it was done owed less to the fundamentals of the business and more to political pressure. Ball shows that the Fed could have saved Lehman, but, under pressure from the Treasury Secretary Hank Paulson, it decided not to. Moreover, he does so in a lucid and exemplary fashion. Strongly recommended.
This book really is a must read if you like your economic and financial history, especially of the 2008/2010 Gloval Financial Crisis variety.
I could not figure out at the time (i.e. 2008) whether Lehman was allowed to fail or whether policy-makers had no choice. It seemed like the former at the time: after all, pretty much everything else was rescued in one form or another. And what policymakers said about the events as they were happening left things unclear.
But then came the memoirs of the actors themselves, and they mostly said that Lehman was unsaveable on account of its financial state.
This book questions that assumption, and quite strongly so. But some of the evidence presented could be read either way, to a degree. The problem is that it was for Lehman to declare bankruptcy, not the US government. And it is actually VERY CLEAR from the evidence now available - thanks to this book - that the government called time on Lehman before the Board of Lehman did.
I’m not saying this was an easy call for policy-makers to make. But the weight of evidence does seem to suggest that they could have done better.
Either way, any understanding of the Global Financial Crisis will not be complete until you have read this book. It is brilliant.
It seemed clear at the time that Lehman was not insolvent. Ball documents this thoroughly. And he explains why the Fed and Treasury forced it to fail, though they need not have done so. Historians will be in his debt. And we have had to live with the disastrous consequences of this misguided and misrepresented decision.