On December 12, 2019, Fed in Print will introduce its new platform for discovering content. Please direct your questions to Anna Oates

Home About Latest Browse RSS Advanced Search

Federal Reserve Bank of New York
Economic Policy Review
The failure resolution of Lehman Brothers
Michael J. Fleming
Asani Sarkar
Abstract

This study examines the resolution of Lehman Brothers Holdings Inc. in the U.S. Bankruptcy Court in order to clarify the sources of complexity in its resolution and to inform the debate on appropriate resolution mechanisms for financial institutions. The authors focus on the settlement of Lehman’s creditor and counterparty claims, especially those relating to over-the-counter (OTC) derivatives, where much of the complexity of Lehman’s bankruptcy resolution was rooted. They find that creditors’ recovery rate was 28 percent, below historical averages for firms comparable to Lehman. Losses were exacerbated by poor bankruptcy planning and mitigated by timely funding from the Federal Reserve. The settlement of OTC derivatives was a long and complex process, occurring on different tracks for different groups of derivatives creditors. Consequently, the resolution process was less predictable than expected, and it was difficult to obtain an informed view of the process.


Download Full text
Cite this item
Michael J. Fleming & Asani Sarkar, "The failure resolution of Lehman Brothers" , Federal Reserve Bank of New York, Economic Policy Review, issue Dec, pages 175-206, 2013.
More from this series
JEL Classification:
Subject headings:
Keywords: Chapter 11; derivatives
For corrections, contact Amy Farber ()
Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

Privacy Legal