A man exits the Lehman Brothers Holdings headquarters building in New York after its bankruptcy filing, on Sept. 15, 2008. (Photographer: Jeremy Bales/Bloomberg News)

10 Years After Lehman Brothers: 10 Stories You Must Read

Why ‘President Trump’ Is The Biggest Legacy Of The Financial Crisis

Donald Trump, then 2016 Republican presidential nominee, gestures while speaking during a campaign event a day before the election, in Scranton, Pennsylvania, on  Nov. 7, 2016. (Photographer: Michael Nagle/Bloomberg)
Donald Trump, then 2016 Republican presidential nominee, gestures while speaking during a campaign event a day before the election, in Scranton, Pennsylvania, on Nov. 7, 2016. (Photographer: Michael Nagle/Bloomberg)

The biggest effect of the financial crisis and its aftermath was a loss of faith in U.S. institutions. Initially, and not surprisingly, this loss of confidence was concentrated in the financial sector. But as time went on, the blame spread. Anger in politics is a lot like a forest fire—it can quickly burn out of control. Ignoring popular sentiment always has political consequences, and they’re often ones we can’t possibly imagine.

What Bernanke, Paulson, And Geithner Make Of The Crisis 10 Years Later

Former U.S. Fed chairman Ben Bernanke, Former U.S. Treasury Secretaries Timothy Geithner and Henry Paulson, with Andrew Ross Sorkin of The New York Times, at a Brookings event on Sept. 12, 2018. (Photograph: Brookings)
Former U.S. Fed chairman Ben Bernanke, Former U.S. Treasury Secretaries Timothy Geithner and Henry Paulson, with Andrew Ross Sorkin of The New York Times, at a Brookings event on Sept. 12, 2018. (Photograph: Brookings)

It fell to three policymakers to undertake a number of unprecedented measures to stave off a second Great Depression in the United States. 10 years later, Former Federal Reserve Chairman Ben Bernanke and former U.S. Treasury Secretaries Henry Paulson and Tim Geithner reveal why they did what they did.

The Man Credited With Ring-Fencing India From The Lehman Crisis

Yaga Venugopal Reddy, then governor of the RBI, speaks during the annual policy statement in Mumbai,  on Oct. 30, 2007. (Photographer: Prashanth Vishwanathan/Bloomberg News)
Yaga Venugopal Reddy, then governor of the RBI, speaks during the annual policy statement in Mumbai, on Oct. 30, 2007. (Photographer: Prashanth Vishwanathan/Bloomberg News)

YV Reddy, former governor of the Reserve Bank of India, had been credited with building buffers which helped India withstand the global financial crisis. His policies and thinking had caught the attention of the global economic community. Domestically and globally, Reddy has not been a big votary of an exclusive focus of central banks on price stability. “One lesson which has been learned from the earlier crises is that too much of concern about price stability and inflation is not good for your health,” Reddy told BloombergQuint.

A New RBI Governor And His Trial By Fire In 2008

Duvvuri Subbarao, then governor of the RBI, pauses during a speech in Mumbai, on June 19, 2012. (Photographer: Dhiraj Singh/Bloomberg)
Duvvuri Subbarao, then governor of the RBI, pauses during a speech in Mumbai, on June 19, 2012. (Photographer: Dhiraj Singh/Bloomberg)

It was on Sept. 5, 2008, that D Subbarao took over as the governor of the Reserve Bank of India. Within a fortnight, his meetings turned into fire-fighting sessions. The induction turned into a rite-of-passage of sorts for the new governor. “Our actions in the days and weeks following Lehman brothers were guided by three objectives,” Subbarao explained. “First, we must maintain ample rupee liquidity. Second, we must douse the system with foreign exchange liquidity. Third, we must, at any cost, keep financial market going,” he added.

All The Prime Minister’s Men

India’s then planning commission deputy chairman Montek Singh Ahluwalia and Prime Minister Manmohan Singh, at the G-20 summit in Pittsburgh, Pennsylvania, on Sept. 25, 2009. (Photographer: Andrew Harrer/Bloomberg)
India’s then planning commission deputy chairman Montek Singh Ahluwalia and Prime Minister Manmohan Singh, at the G-20 summit in Pittsburgh, Pennsylvania, on Sept. 25, 2009. (Photographer: Andrew Harrer/Bloomberg)

India’s Prime Minister at that time, Manmohan Singh, a former RBI governor himself, understood the gravity of the situation right from the start, says Montek Singh Ahluwalia the former deputy chairman of the erstwhile Planning Commission. He recalls that the Prime Minister called for a meeting soon after Lehman Brothers filed for bankruptcy, inviting the RBI Governor, the Finance Minister and Ahluwalia. That became the core group that Singh relied on to judge the appropriate domestic response to the global crisis.

What India Didn’t Learn From The Global Financial Crisis

Then Indian Prime Minister Manmohan Singh  welcomed by U.S. President George W. Bush, for the Summit on Financial Market and the World Economy, at Washington D.C., on November 14, 2008. (Photograph: PIB)
Then Indian Prime Minister Manmohan Singh welcomed by U.S. President George W. Bush, for the Summit on Financial Market and the World Economy, at Washington D.C., on November 14, 2008. (Photograph: PIB)

India is far more open than is believed to be. Every time the world sneezes, India catches a cold. It happened in 2008, 2013, and it is happening now. Monetary and fiscal policies are still based on the belief that India is a closed economy. The RBI has rarely linked its policy decision to global interest rates. The market and policymakers remain complacent that India’s capital controls provide a buffer against external financial shocks, writes Jahangir Aziz, chief emerging markets economist at JPMorgan.

Lehman Brothers Former Chief Economist On Lessons From 2008

Paul Sheard, former global chief economist of Lehman Brothers, and former vice chairman at S&P Global. (Photographer: Patrick T. Fallon/Bloomberg)
Paul Sheard, former global chief economist of Lehman Brothers, and former vice chairman at S&P Global. (Photographer: Patrick T. Fallon/Bloomberg)

Given that the possibility of a crisis is a design feature of the modern financial system rather than a ‘bug’ or something that careful design can banish forever, have at the ready a well-crafted lender-of-last-resort function and be prepared to deploy it quickly and forcefully, writes Paul Sheard, the Global Chief Economist of Lehman Brothers, at the time of its bankruptcy.

A Deluded Banker’s Tale of Lehman’s Last Days

A woman carries a box as she leaves the headquarters of Lehman Brothers in New York, ahead of its bankruptcy filing, on Sept. 14, 2008. (Photographer: Tom Starkweather/Bloomberg News)
A woman carries a box as she leaves the headquarters of Lehman Brothers in New York, ahead of its bankruptcy filing, on Sept. 14, 2008. (Photographer: Tom Starkweather/Bloomberg News)

On a Sunday night 10 years ago, I was sitting alone in my midtown Manhattan apartment on 46th Street, preparing to dial into a conference call to discuss the impending demise of my employer: Lehman Brothers, writes Shuli Ren.

Mohamed El-Erian’s Nine Lessons From The Global Financial Crisis

Mohamed El-Erian, chief economic advisor for Allianz, speaks during a Bloomberg Summit in New York,  on Oct. 25, 2016. (Photographer: Michael Nagle/Bloomberg)
Mohamed El-Erian, chief economic advisor for Allianz, speaks during a Bloomberg Summit in New York, on Oct. 25, 2016. (Photographer: Michael Nagle/Bloomberg)

Renewed efforts by both the public and private sectors are needed to deal with longstanding challenges that received inadequate attention in the aftermath of the crisis, and to understand and address some of the major unintended consequences of 10 years of crisis management and prevention. Fortunately, we know a lot more about both. The biggest challenge is to get the political process to address their importance when there is no actual or looming crisis in the advanced world to focus minds, writes Mohamed El Erian.

Why Lehman’s Third Act Won’t Play In Emerging Markets

A man walks in front of an electronic board showing the closing figure of the Hang Seng Index in Hong Kong, on Sept. 16, 2008. (Photographer: Jerome Favre/Bloomberg News)
A man walks in front of an electronic board showing the closing figure of the Hang Seng Index in Hong Kong, on Sept. 16, 2008. (Photographer: Jerome Favre/Bloomberg News)

It was supposed to be a play in three acts. Wall Street banks and the U.S. economy took the first blow from the Lehman crisis. Next, the epicenter of trouble moved to Europe, causing a run on sovereign debt. The overhang of global borrowing was then going to culminate in a big emerging-market fiasco, caused perhaps by a disorderly unwinding of China’s post-Lehman credit bubble. That denouement never materialized for an underappreciated reason: The forces that hastened Lehman’s demise have steadied emerging markets ever since, writes Andy Mukherjee.