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Open Access (free)
Oonagh McDonald

for the FRBNY announce that since the Barclays deal had failed, Lehman had to file for bankruptcy by midnight. Miller argued: ‘You don't realize what you're saying. It's going to have a disabling effect on the markets and destroy confidence in the credit markets. If Lehman goes down, it will be Armageddon.’ 5 He was right. Later in the course of the bankruptcy proceedings, he stated that he believed that the regulators could have stepped in, not necessarily to save Lehman, but to head off the meltdown that followed: ‘They totally missed it.’ He added: ‘When

in Lehman Brothers
Open Access (free)
Oonagh McDonald

prices of securities are continuously adjusted to reflect all publicly available information. Many argued that the dominance of the theory created the context in which the financial crisis occurred. The theory influenced market participants, central bankers and regulators alike. Central bankers believed that market prices could be trusted and that bubbles either did not exist or could not be identified before they occurred, or even that they were beneficial for growth. Regulators seemed to accept the need for ‘light touch’ regulation, in which the

in Lehman Brothers
Open Access (free)
January to September 2008
Oonagh McDonald

banks didn't want bank-type supervision from the Federal Reserve. They wanted to be regulated by the SEC, which had been their functional regulator for 70 years. 20 This does put the position as stated by Erik Sirri, Director of Market Regulation, Securities and Exchange Commission, in a somewhat different light, but does not undermine the basic point that proper regulation of the investment banks did not exist. In his testimony, Sirri pointed out that no regulator in the Federal

in Lehman Brothers
Open Access (free)
A Crisis of Value
Author: Oonagh McDonald

This book explains the fundamental causes of the bank's failure, including the inadequacy of the regulatory and supervisory framework. For some, it was the repeal of the Glass-Steagall Act that was the overriding cause, not just of the collapse of Lehman Brothers, but of the financial crisis as a whole. The book argues that the cause is partly to be found both in weak and ineffective regulation and also in a programme of regulation and supervision that was simply not fit for the purpose. Lehman Brothers' long history began with three brothers, immigrants from Germany, who sold selling groceries and dry goods to local cotton farmers. Dick Fuld, the chairman and CEO, and his senior management, ignored the increased risks, choosing to rely on over-valuations of the firm's assets. The book examines the regulation of the Big Five investment banks in the context of the changes which took place in the structure of banking after the repeal of the Glass-Steagall Act. It describes the introduction of the European Union's Consolidated Supervision Directive in 2004. The book examines the whole issue of valuing Lehman's assets and details the regulations covering appraisals and valuations of real estate, applicable at the time and to consider Lehman's approach in the light of these regulations. It argues that that the valuation of Lehman's real estate assets was problematic to say the least, as the regulators did not require the investment banks to adopt a recognized methodology of valuation, and that Lehman's own methods were flawed.

Oonagh McDonald

nation's payments system or deposits insured by the FDIC. BHCs are regulated by the Federal Reserve, whereas most banks and almost all the large ones are regulated by the Office of the Comptroller of the Currency. State chartered banks are regulated by their home state regulators and the FDIC at the federal level. The GLBA expressly authorizes the broker-dealer subsidiaries of an FHC to underwrite and deal in all types of securities, including corporate debt and equity securities, without limit as to the amount of revenue the

in Lehman Brothers
Oonagh McDonald

Guidelines Further guidelines were issued in December 2006, with the focus this time on concentrations in commercial real estate lending and on sound risk management practices in particular. 10 The regulators had observed the increased concentration and that this added ‘a dimension of risk that compounds the risk inherent in individual loans, making the institutions more vulnerable to cyclical CRE markets’. 11 There should be a risk management framework to identify, monitor and control CRE concentration risks. The responsibilities

in Lehman Brothers
Open Access (free)
Oonagh McDonald

obligations to federal and state governments, as well as regulators at each level of government. This mosaic of rules and regulations, and the various authorities and mechanisms by which they are implemented and enforced, make for an environment of frequent change and evolution. 1 That is certainly an understatement. The patchwork leads to confusion. It is entirely unclear which set of rules takes precedence over the others, where they conflict or appear to conflict. To an outsider that is a

in Lehman Brothers
Open Access (free)
Oonagh McDonald

meeting at 7.15 am New York time, Diamond had discovered problems with its regulators, the Financial Services Authority (FSA). Less than an hour later, Diamond and Varley informed Geithner, Christopher Cox and Paulson that they had just discovered that the FSA would not support the deal. Barclays, Paulson pointed out, had assured them that they were keeping in touch with their regulators. Subsequently, Geithner and Cox conferred with Callum McCarthy, then the FSA chairman, who provided a cautious statement of the FSA's position. The FSA had neither approved nor

in Lehman Brothers
Open Access (free)
Oonagh McDonald

with CDSs and regulators allowed financial institutions to set aside less capital if they had bought such protection. That alone was a major reason for the increased demand for credit default swaps. In a market in which CDSs are often sold and resold amongst parties, there are risks. Buyers may not be as financially sound as they should be to cover the obligation when there is a credit event, especially without collateral. To take account of this, the New York Federal Bank advised counterparties to inform their trading partners when the contract

in Lehman Brothers
Jonathan Michie

largely on those grounds that the RPC judgement went against the OFT.15 Conclusions This chapter has identified three peculiarities of the economics of professional football. This triad of peculiarities suggests the need for multiple forms of regulation. Incentive conflicts between clubs, and between clubs and their league (where leading clubs can credibly threaten to leave to form a rival league) undermine the capacity of leagues, particularly the Premier League, to be selfregulating and suggest the need for an independent regulator. Incentives for 142 Jonathan

in Market relations and the competitive process