JPMorgan Chase chief: banks healthy 10 years after meltdown

WASHINGTON -- JPMorgan Chase CEO Jamie Dimon said Sunday the US banking system had returned to full health 10 years after the collapse of Lehman Brothers plunged the world into the worst financial crisis since the Great Depression.

Dimon, who traded barbs earlier in the week with Donald Trump, gave the US president "pretty good" marks for his handling of the US economy, noting that business and consumer confidence "skyrocketed" after his election.

"The banking system is very, very, very healthy. And regulators should actually take a little bit of a victory lap because Lehman would not happen today," he said on ABC's "This Week."

"There will be a recession one day, but it won't be the banking system. It'll probably be something else," he said.

Lehman Brothers, a venerable Wall Street investment bank, filed for bankruptcy September 15, 2008 amid a subprime mortgage crisis, setting off a broader market crash that imperiled the global financial system.

Dimon defended the federal bailouts of the big US banks at the height of the crisis.

But he said he understood why many believe it was unfair that the banks were protected while other Americans were left to suffer the consequences.

"And there's some truth to that. And they didn't see Old Testament justice. So I understand why there is a lot of anger out there," he said.

source: news.abs-cbn.com

FOCUS: 'Lehman Weekend': the biggest bankruptcy in American history

WASHINGTON - It was "Lehman Weekend." The moment in September 2008 when the 150-year-old investment bank Lehman Brothers collapsed, precipitating the worst global economic crisis since the 1930s.

After failing to find buyers for the troubled financial giant, that was weighed down by risky debt holdings made up of at subprime mortgages, US authorities declined to offer a bailout and allowed the institution to fail.

Monday, September 15, 2008, at 1:45 am, Lehman Brothers filed for bankruptcy, taking the world by surprise leaving well over $600 billion in debt, as well as 25,000 employees in shock.

It was the biggest bankruptcy in American history. On Wall Street, the Dow Jones plunged 500 points, the largest drop since the attacks of September 11, 2001. Stunned traders streaming out of the building carrying boxes of their belongings became a symbol of the crisis.

Some were caught by surprise. But others, like Lawrence McDonald, a former trader and co-author of a 2009 book on the collapse -- "A Colossal Failure of Common Sense: The Incredible Inside Story of the Collapse of Lehman Brothers" -- said management had long been alerted to the excessive risks they took to increase short term profits.

The top Lehman leadership, housed on the bank's 31st floor, "drove us 162 miles (261 kilometers) an hour...right into the biggest subprime iceberg ever seen," he told AFP in 2009.

"It was 24,992 people making money and eight guys losing it," he said, lamenting that the management "bet the ranch" on toxic assets.

From 2005 to 2007, at the height of the real estate bubble, when mortgages were given to many homebuyers who could not afford them, and then packaged into securities and sold off, Lehman Brothers bought several mortgage brokerages and posted record profits.

But in mid-2007, the losses began to build. The knockout punch came nine months later, March 16, 2008, with the near bankruptcy of another investment bank, Bear Stearns.

- Between a rock and a hard place -

Bear Stearns was on the verge of bankruptcy also because of its massive bets on subprime mortgage securities, and was bought for a pittance by JPMorgan, in a sale brokered by the Federal Reserve. The deal shakes markets, which are now betting on Lehman's demise.

The Fed and Treasury tried to find a buyer, negotiating in vain with a South Korean bank, then with Bank of America and Barclays.

But while the government just a week earlier took over mortgage giants Fannie Mae and Freddie Mac -- government-sponsored private enterprises that guarantee more than $5 trillion in home loans -- in the end officials choose to abandon Lehman.

A few days later, Uncle Sam would rescue insurance giant AIG for $180 billion, before providing another $700 billion dollars in a controversial recapitalization plan to prop up banks: the Troubled Asset Relief Program (TARP) to try to shore up the teetering financial system.

Authorities found themselves between a rock and a hard place and have been widely criticized for sacrificing Lehman Brothers but saving other banks, such as Goldman Sachs.

"The thing we get the most criticism for is letting Lehman go down," said Henry Paulson, who served as Treasury secretary under then President George W. Bush and was at the helm at the start of the crisis.

"Many people say well they were able to save Bear Stearns, they were able to save AIG, why couldn't they save Lehman? We answer it and most people don't believe us," he complained to National Public Radio.

Officials concluded that Lehman was so weak, and had so little collateral, that a bailout would be simply unworkable.

Timothy Geithner, who lead the New York Fed during that time and late became Treasury secretary under President Barack Obama, said officials had very few options.

"Lehman was terribly weak even relative to the other weaker institutions in this context. The world was terrifically fragile," he told NPR.

"It was very hard to find someone strong enough in that moment of peril that was going to be capable of taking on the vast bulk of that risk."

But others, including Laurence Ball, head of the economics department at Johns Hopkins University, said in a 2016 report on Lehman that the reasons given do not add up and it was more likely there was political pressure on the Fed to allow the bank to fail.

"Another factor is that both Paulson and Fed officials, although worried about the effects of a Lehman failure, did not fully anticipate the damage that it would cause," Ball argued.

source: news.abs-cbn.com

Lehman exits bankruptcy to repay debt and vanish

NEW YORK - The debtors of Lehman Brothers, whose stunning collapse in 2008 sparked global financial panic, emerged from a record bankruptcy Tuesday in a step toward the final chapter for the once-powerful Wall Street investment bank.

The liquidators running Lehman Brothers Holdings said it had exited Chapter 11 bankruptcy protection and would begin repaying creditors, whose claims total about $450 billion.

"We are proud to announce Lehman's exit from Chapter 11 and entrance into the final stage of this process -- distributions to creditors," said John Suckow, Lehman's president and chief operating officer and also managing director of Lehman's restructuring adviser Alvarez & Marsal.

"Our objective remains to provide the best results possible for creditors -- by continuing to strategically position assets to produce strong values, to pursue the resolution of disputed claims and other matters in litigation, and to manage expenses in line with the asset disposition process," he said in a statement.

Lehman said payments to creditors were to begin on April 17 with a $10 billion payout as it heads toward a "complete liquidation" of the remaining assets, valued at roughly $65 billion.

The country's largest ever bankruptcy three years ago triggered an unprecedented shock to the global financial system.

Before its collapse, Lehman Brothers, one of Wall Street's most prestigious firms, had $639 billion in assets, with business in more than 40 countries.

In November the creditors of the former fourth-largest US investment bank approved a liquidation plan; a bankruptcy judge gave the go-ahead in December.

Collectively, creditors claim about $450 billion. They are expected to receive less than a seventh of their initial claims.

Of the $65 billion in recovered assets, $30 billion is in cash and the remaining $35 billion is in illiquid assets that need to be monetized for distribution.

The final dismantling of Lehman could take up to five years, with payments to creditors made twice a year until complete.

In the United States, the recovered assets are expected to be paid first to priority creditors such as government tax services and the government-seized mortgage finance lenders Fannie Mae and Freddie Mac.

Lehman, the poster child of the global financial meltdown, declared bankruptcy on September 15, 2008, after its risky bets on the US housing market soured.

Just after Lehman's collapse, rival bank Barclays swept in and bought Lehman's headquarters building in New York and hired some of its employees in trading and investment.

Japanese financial giant Nomura acquired most of Lehman's activities in Asia, the Middle East and Europe.

The officials overseeing the bankruptcy have called it "the largest and most complex in history," involving 7,000 legal entities in 40 countries at a cost expected to reach $5.0 billion.

In the United States, 450 ex-Lehman employees are working on the liquidation, as well as 75 people from Alvarez & Marsal.

The bankruptcy unleashed more than 75 separate court procedures and creditors are battling over the payouts.

In mid-February, Lehman's creditors asked a federal court to force US Treasury Secretary Timothy Geithner to testify in a civil suit against JPMorgan Chase's role in the bankruptcy.

The creditors accuse JPMorgan of using inside information from the government and the New York Federal Reserve, then headed by Geithner, to squeeze cash out of Lehman to their bank's advantage in the final week before it collapsed.

JPMorgan Chase, which loaned $70 billion to Lehman, is now Lehman's single largest creditor and insists it should be repaid before any other creditor, according to the court documents.

In another case, Citigroup is seeking to recover $2.5 billion from Lehman.

source: interaksyon.com