Next week marks the two-year anniversary of the failure of Lehman Brothers, one of the major triggers of the financial crisis. Andrew Ross Sorkin questions whether the government really could have saved the firm and just chose not to. The answer isn't likely black-and-white. There were a number of factors that contributed to the firm's failure.
There Was No Buyer
The first, and probably most major, problem was the lack of a buyer. Think about the situations of other troubled institutions like Bear Sterns, Merrill Lynch, Washington Mutual, and Wachovia. None of those declared bankruptcy, because they all found buyers. Lehman didn't. Bank of America was interested until it realized it could get Merrill Lynch instead. Barclays wanted Lehman, but British regulators balked.
This is an important point, because all along U.S. regulators believed a deal could get done. They never really wanted to simply save a firm -- acquisition was the acceptable alternative to failure. Finalizing one with Barclays looked particularly promising. But then, as former Treasury Secretary Hank Paulson recounts in his book, "The British screwed us." Had British regulators allowed the acquisition to proceed, then there would be nothing to debate today.