The failure resolution of Lehman Brothers

Michael Fleming and Asani Sarkar

Economic Policy Review, 2013, issue Dec, 175-206

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.

Keywords: Chapter 11; derivatives (search for similar items in EconPapers)
JEL-codes: G01 G23 G33 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.newyorkfed.org/medialibrary/media/research/epr/2014/1412flem.pdf Full text (application/pdf)

Related works:
Working Paper: The Failure Resolution of Lehman Brothers (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fednep:00016

Ordering information: This journal article can be ordered from

Access Statistics for this article

More articles in Economic Policy Review from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Gabriella Bucciarelli ().