The Bankwatch

Tracking the consumer evolution of financial services

The Lehman Bothers bankrupcty examiner report

For the record – 2,200 pages in all its glory.

Lehman Brothers Holdings Inc. Chapter 11 Proceedings Examiner’s Report

Jenner & Block is providing links to the Report of the Examiner in the Chapter 11 proceedings of Lehman Brothers Holdings Inc. The Examiner’s report is divided into nine volumes, which are reproduced below in individual Adobe Acrobat PDF files.

Included in this from the introduction that sums up banking, not just investment banking.  Investment banking just happens to be an extreme version of this.

Lehman’s financial plight, and the consequences to Lehman’s creditors and shareholders, was exacerbated by Lehman executives, whose conduct ranged from serious but non‐culpable errors of business judgment to actionable balance sheet manipulation; by the investment bank business model, which rewarded excessive risk taking and leverage; and by Government agencies, who by their own admission might better have anticipated or mitigated the outcome.

Lehman’s business model was not unique; all of the major investment banks that existed at the time followed some variation of a high‐risk, high‐leverage model that required the confidence of counterparties to sustain. Lehman maintained approximately $700 billion of assets, and corresponding liabilities, on capital of approximately $25 billion.   But the assets were predominantly long‐term, while the liabilities were largely short‐term.  Lehman funded itself through the short‐term repo markets and had to borrow tens or hundreds of billions of dollars in those markets each day from counterparties to be able to open for business.  Confidence was critical. The moment that repo counterparties were to lose confidence in Lehman and decline to roll over its daily funding, Lehman would be unable to fund itself and continue to operate

Written by Colin Henderson

March 14, 2010 at 16:06

Posted in Uncategorized

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