Feds Let Lehman Fail—Then Loaned It $138B Anyway

Paulson & Co. say cash was to 'facilitate orderly wind-down' of trades, but questions persist
By Clay Dillow,  Newser Staff
Posted Dec 16, 2008 9:20 AM CST
Feds Let Lehman Fail—Then Loaned It $138B Anyway
In this Sept. 15, 2008, file photo, Lehman Brothers world headquarters is shown in New York.   (AP Photo)

After refusing to bail out Lehman Brothers, the Federal Reserve funneled $87 billion to a subsidiary through JPMorgan Chase on Sept. 15, then another $51 billion the next day. The feds say they aimed to “facilitate an orderly wind-down” of Lehman’s broker-dealer operations, Andrew Ross Sorkin writes in the New York Times, but their changing explanations, and other issues, continue to muddy the waters.

Official documents say the loan was a “carefully thought-out decision” to minimize the ripple effects of Lehman’s collapse. But Treasury Secretary Henry Paulson said the government couldn’t legally lend to Lehman; the collateral simply wasn’t there. There’s no telling if the loan averted a greater financial calamity, Sorkin writes, “but until officials explain what happened, it will remain a mystery.” (More financial crisis stories.)

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