Just over a year ago, Treasury Secretary Paulson was smarting from criticism over the government–backed Bear Stearns marriage to J. P. Morgan to which he had reluctantly acceded.  This was followed by the Fannie Mae and Freddie Mac bailouts.  Ideologically incensed, he was by this point on a mission to teach Wall Street a moral hazard lesson.  As Lehman Brothers crumbled and its suitors left the table, through the secretary’s lens, bankruptcy of the firm became an imperative.  Paulson's abandonment of the oldest major investment bank (with nods from Bernanke and Geithner) had devastating consequences.  This fallout was not foreseen by our country's policymakers, but was viewed as a near certainty to many who work in or understand financial markets. 

Soon after Lehman filed for bankruptcy, Paulson predictably awoke to a cataclysm.  He scrubbed the words moral hazard from his vocabulary and reinvented his rationale for the Lehman bankruptcy as an inability to act due to legal impediments.  Behind this transparent veneer of dodging blame, there was, however, an important shift in Paulson’s and the government’s collective view.  A visceral desire to see to it that reckless Wall Street villains paid for their sins --- rather than taxpayers --- was overtaken by the practical need to act boldly to prevent unimaginable ruin. 

Following the Lehman bankruptcy filing, I and my colleagues were relieved that Barclays, after the eleventh hour, acquired Lehman's North American operations.  We were road kill, resuscitated because of a deft angle crafted by skilled lawyers.  At the same time, our franchise now operated in an apocalyptic financial landscape.  The Lehman bankruptcy hovered over the world like a mushroom cloud.  Still, it could have been worse.  Reeling from the shock and awe of the bankruptcy’s collateral damage, our leaders, albeit clumsily, had seized the post-Lehman moment.  AIG was bailed out a day after Lehman filed and the government acted to prevent an economic nuclear winter from truly smothering our country and the world. 

Marking the one-year anniversary of the Lehman-sparked crisis, President Obama warned financial leaders that the excesses and reckless accumulation of risk in the recent past would no longer be tolerated.   These were encouraging words, surely resounding on Main Street, but cynically discounted on Wall Street.   To date, the new rulebook consists of little more than this Obama preface.  Secretary of the Treasury, Geithner, and more recently, Senator Dodd, have talked of an uber-regulator to replace the rusted structure that currently passes for oversight. We await a true blueprint.  New rules on compensation are under congressional discussion and are in the news, but already appear to be shaping up with gaping holes that invite disregard.  As time passes, the opportunity for reform is slipping through our nation's fingers.  

The notorious Lehman anniversary has come and gone as little more than a footnote to the financial crisis.  As noted, I spent some days satisfying the media’s insatiable appetite for anything Lehman.  I found the attention, in many cases disappointing.  I hoped the coverage I received would be substantive.  With a few notable exceptions, I found the quotes excised from lengthy interviews were mostly a few tabloid words.  Serious discussions of the many factors that created the conditions for the Lehman-triggered financial crisis were excised.  Is it any wonder that the politicians feel less urgency for reform than they did a year ago?   And so, yes, the anniversary has passed with great hoopla, but with tragically few truly scrutinizing the lessons of the Lehman bankruptcy.   Instead, it was a time for many to reminisce about Dick Fuld's rage and the helicopter in which Joe Gregory, Lehman’s former president, commuted to work.

We, indeed, remain at risk.

 The Murder of Lehman at Amazon

Joseph Tibman, author of “The Murder of Lehman Brothers, An Insider’s Look at the Global Meltdown” and a former senior banker at Lehman for twenty years