US: Four Years After Lehman Brothers Meltdown, Banks Fight Reform

The collapse of Lehman Brothers four years ago today was the Pearl Harbor moment of a financial crisis that, over the next few months, threatened to bring down the entire U.S. financial system.

Blame for the collapse is still being debated. People bought homes they couldn't afford, peddled by lenders who knew -- or should have known -- that the loans were destined to fail. Wall Street sucked up these loans and sold them off in bundles to investors, sometimes while making bets against those same products.

Everyone should have known better. At the top of this list were the government regulators who are supposed to protect the economy from Wall Street excesses, but who instead sat and watched as a bubble built of rotten subprime loans kept expanding.

After regulators forced the shotgun wedding of the investment bank Bear Stearns to JPMorgan Chase in March 2008, the Federal Reserve Bank of New York and the Securities and Exchange Commission sent teams of observers to Lehman Brothers to gather information and monitor the company's condition. Like Bear Stearns, Lehman Brothers had invested heavily in mortgage bonds.

Instead of sharing their findings, however, as they had agreed to do, the regulators did what regulators too often do: behave like naughty 2-year-olds hoarding a new toy. Had they shared information, they would have discovered that Lehman's statements about the robustness of its liquidity were false, according to an independent examiner appointed by the bankruptcy court to determine what had gone wrong at Lehman.

But they didn't see it coming. And when it finally became clear in the week before Lehman fell apart that disaster was imminent, regulators claimed that they didn't have the tools to prevent its collapse. Lehman's lawyers warned that an unplanned bankruptcy would lead to "armageddon." Regulators let it fall, only to watch in horror as the entire U.S. financial system began to unravel, and lending of all sorts came to a halt.

Speaking on trade, commerce and economic values the Holy Prophet (pbuh) was asked which occupation is the best. He answered: Working with one's hands or buying and selling, provided it is free from trickery and fraud. [Wisdom of the Holy Prophet]

The Prophet of Islam (pbuh) forbade taking advantage of a distressed seller, and forbade fraudulent transactions, and the sale of fruit on the branch which has not yet ripened. [Wisdom of the Holy Prophet]


The Ahmadiyya Post, US. 16 Sept 2012