This chapter examines the issue of valuing Mayer Lehman's assets, explaining the reasons for the market's lack of confidence in Lehman's valuations. The kind of regulations governing valuation in force between 1994 and 2007 are set out. The valuations were Lehman's own, and were presented as being marked to market. The chapter highlights the key points arising from the Examiner's analysis of Lehman's approach to valuation. The purpose is to detail the regulations covering appraisals and valuations of real estate, and consider Lehman's approaches to valuation for its commercial-principal transactions group's portfolio (PTG), in the light of these regulations. The analysis was that the senior management decided to go for profits, rather than restricting the risks laid down by their risk management team. Lehman's corporate charter and Delaware company law protected directors from personal liability based on their business decisions, since neither breached the duty of loyalty or good faith.

in Lehman Brothers
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Professional standards for the valuation of commercial and residential real estate existed at that time of Mayer Lehman Brothers' bankruptcy. However, bankruptcy Examiner Valukas demonstrates that Lehman showed little interest in conforming to them or hiring those who knew how to apply them. This chapter sets out the difficulties of valuing both complex financial instruments and real estate, and especially commercial real estate and development land. It describes the methodologies used to value commercial real estate and complex financial instruments. The chapter draws on the procedures as set out by the Royal Institution of Chartered Surveyors in London, and the Appraisal Foundation, which sets the Uniform Standards of Professional Appraisal Practice (USPAP), the standards required by the Financial Institutions Reform, Recovery and Enforcement Act 1989. It also examines some major derivatives in force when Lehman's collapsed, including collateralized debt obligations (CDOs) and collateralized loan obligations (CLOs).

in Lehman Brothers