Niall Ferguson writes in the FT on the collapse of Lehman Brothers against the backdrop of reviewing a new book on the topic.
The real tragedy is that the failure of Lehman has left Wall Street’s survivors both bigger in relative terms and more secure politically. As long as the big banks feel confident that they can count on the government to bail them out – for who would now risk “another Lehman”? – they can more or less ignore calls for lower leverage and saner compensation.
If only we had learnt from Lehman that no bank should be “too big to fail”, we might still have a real capitalist system, instead of the state-guaranteed monstrosity that is the real legacy of last year’s crisis. If only.
He looks at a number possible scenarios which might have occurred and comes to the conclusion above.
In my view the article is worth a look.
There are issues here of financial supervision, as well as of governance. How and why did the Lehman board allow this disasterous mess to occur, the question might well be asked of other boards as well.