Bros. Grim

Monday, September 15, 2008

Lehman Brothers is likely to file for Chapter 11 bankruptcy today. New York Times columnist Paul Krugman looks at what this means for our economy as a whole, while Crain's NY Business editor Greg David sizes up the impact here in New York.


Greg David and Paul Krugman

Comments [36]


eva -- i will check out mark leonard's book, thanks for the tip. (ps my own personal asia experience led to my comment. americans tend to alternatively dismiss and fear China. meanwhile the attraction as an investment climate of the usa is our extreme strength as a political and economic power. compared to financial crisis in other nations this is nothing, as you probably know. in fact the world's sensitivity to our current problems reminds me how powerful the usa economy still really is. usa is important to china as a market, and then as a reliably safe investment target/bank. china is important to the usa for much lesser reasons than that.

Sep. 16 2008 10:05 PM
Praful Nikam from New York

Someone who has been wooing me (for the past 6 months) from a "respected" Wall Street firm to manage my money asked me the other day as to How am I doing?. My reply was that i am keeping my head above the water. Not necessarily because I am smart , but because I use my commonsense !

When a unit of currency becomes a digit on the computer, all bets are off ! One can create so many complex financial models, evangelize it in "friendly" media and that game can go on for so long, it carries very real risk of implosion because anyone who can point to structural faults and anyone who can ask hard questions are never given a chance. In fact, they don't exist in the set-up. You cannot join a country club and discuss why people without means are not admitted in country clubs!

Sep. 15 2008 08:16 PM
Praful Nikam from New York

Does anyone believe that the roots of current financial system crisis lies in America's wars ? To pay for those wars without waking up the masses, authorities lent money liberally hoping that once these wars are won, they will somehow fix the problem arising from overlending ? Unfortunately they ran out of time, deeper in hole and no end in sight.

Does anyone believe in this ?

Sep. 15 2008 08:01 PM
Christopher from Manhattan

I was relieved to hear that "the Feds" a/k/a "we, the taxpayers!!", are not bailing them out! I suggest that the dozends of highly-paid executives who make over a million bucks a year and have significant investments all over the place pony-up a million dollars a piece out of their own bursting coffers and bail themselves out!

Sep. 15 2008 07:04 PM

But to YOUR larger point, yes, they are interested in a solid investment. But to THEIR larger point, having investments here is a prime example of soft power.
Soft power comes in all forms. Some forms are comfy. Some aint.

Sep. 15 2008 06:12 PM

But to your larger point, yes, they were interested in a solid investment. But to their larger point, having investments here is a prime example of soft power.
Soft power comes in all forms. Some forms are comfy. Some aint.

Sep. 15 2008 06:12 PM

Being half Asian and having traveled in China, and speaking Mandarin not as well as I would like, I would suggest that this is a "China." It is a government that tramples over its people, but it does not make it less "real."
I recommend the Mark Leonard book; it is brief and to the point.
I also recommend that you check which "non-entity" spurred the timing of the FNMA takeover. On Jim Lehrer, on "All Things Considered" and in the Times, they are crediting the investments that the Chinese government has made in FNMA for the timing of the takeover. They are not crediting the people of China. Note the difference. It is substantial.

Sep. 15 2008 06:09 PM
superf88 from NY


good point. don't buy it though. cash is king esp in china. did not read the book to which you refer but it assumes that there is a "china" that is jockeying for world position. i think there is no china. there is a country filled w chinese people who want to be rich. and there is a govt filled w millionaires who want to keep power. to keep that power and there millions they need good investments -- and the us is always a safe bet. even now. in fact, come back in 500 years and i'll bet there will be plenty more chinese investments then than now. (along w LOTS more millions of chinese...)

Sep. 15 2008 05:40 PM
Thurman from Philadelphia, PA

People with MBAs from fancy schools
take in sham morgages, based on
loans extended to people who did
not have to proove income or assets
in order to gain said mortgages,
bundle that garbage into "bonds",
and peddle the "bonds" onto gullible

The Ponzi scheme crumbles, and the financial news bureaus of the mainstream media finally tell the world what an 8th grade dropout could have figured out all by his lonesome.

The media deserve to be held in greater contempt than they already are.

Sep. 15 2008 02:35 PM
ralf from patchogue, ny

ivan boesky, michael milken, enron, worldcom-- the list goes on and on and Bush says, "a few bad apples." this is standard operating procedure. pensions wiped out, jobs lost and americans stuck with the bill. zero accountability, unchecked corporate power and greed, are the root of the majority of U.S. problems. laws need to be changed

Sep. 15 2008 02:05 PM
Sarah from Brooklyn, NY

I am a graduate student, and I have been living off of federal and bankers' funds for the past 6 years.
How is this news going to ultimately affect me and my fellow student population who are already swimming in debt?
What can I do to protect myself - or should I even be concerned, considering I have another 3 or 4 years before I can acquire a well-paying job?

Sep. 15 2008 11:55 AM
c. e. from AZ

what do the problems at AIG mean for people with AIG/Valic retirement accounts?

Sep. 15 2008 11:19 AM
Phil Henshaw from NY

You might ask, what a system physicist's answer would be for the simple difference between physically sustainable economies and ones that are not.

The most general one is that investors in sustainable economies stop compounding their unearned income (spend wealth rather than manage it to endlessly multiply) when the physical economy (where it's work that builds wealth) stops multiplying... [period, definitive answer, next question..]

Learning to read the world of physical developmental processes (complex natural systems) gives you access to nature's main way of operating that our planning has been overlooking.

Sep. 15 2008 11:09 AM
Nicole Efros from Manhattan

Lehman Brothers paid out $8.7 billion in compensation in 2006 and $9.5 billion in compensation in 2007 (an average of $335,441) in 2006, roughly 60% of this compensation in the form of bonuses. Why is that in bull markets this take is safely stowed in condos in Aspen and Park Avenue penthouses but whenever there is a crisis on Wall Street, it is the taxpayer who, one way or another, has to bail them out?

Sep. 15 2008 10:37 AM
Joe Corrao from Brooklyn

its all a Ponzi Scheme

Sep. 15 2008 10:31 AM

#6, what is the possibility that China has lent us so much money because they knew we, as a people addicted to credit, would fail?
Mark Leonard, in "What Does China Think?" makes the argument that china is uninterested in using hard power to assert its primacy. They're fascinated by George Soros and financial manipulation.
BTW, in the midst of the Palin pick, who noticed the $300 billion Chinese oil deal with Iraq? Wasn't that supposed to be "our" oil?

Sep. 15 2008 10:29 AM
Jesse from New York

The wall street journal reports:

Lehman Brothers, facing a refusal by the federal government to bail it out, announced this morning that it intends to file for Chapter 11 bankruptcy in the Southern District of New York for its holding company only, while its investment bank and asset management operation will continue doing business as usual.

Can you ask what that means?

Sep. 15 2008 10:27 AM
Ralph from Bowery

"Wall Street got drunk. We got the hangover."
-G.W. Bush

Seems to be the best our president can/will do. Thanks... for nothin'!

Nothing free about the Free Market. Now we all get to pay for it. Thanks again.

Sep. 15 2008 10:26 AM
m fisher

i am shocked to see that there is gambling going on here.
the thing i don't buy is that any of these people (including the press) thought any of these unsecured loans (call them investments if you want)were other than bogus paper that they would have passed on to someone else before the music stopped and they needed a safe chair. it seems that the citizen who stayed within his means is about to be screwed in many different ways. if government is not there to protect us from this type of deception
what the hell are they there for?

Sep. 15 2008 10:25 AM

so -- on this day -- mr. david's only criticism is reserved for the state congressmen for counting on tax dollars that now won't be collected?

what we need now is real media that scrutinizes, forecasts, analyses, w intelligence and open mindedness and without bias.

Sep. 15 2008 10:24 AM
Eric from B'klyn

I'm curious how the billions being spent in Iraq/Afghanistan, approx 10 billion, effects the big picture?

Sep. 15 2008 10:22 AM

Paul Krugman is not a bankruptcy expert. It depends on where the company files etc.. And they have time before determining liquidation etc..

Sep. 15 2008 10:22 AM
Jeff Putterman from Queens

The major irony here is that Greenspan wrote his doctoral thesis on the ways the printing of money caused the 1929 depression. Then he got the job and started up the presses again.

The crux of this is simple. The solution is not. Free markets allow excess and fraud to run rampant. And wall street will sell anything that anyone is stupid enough to buy. To me, this is the underbelly of capitalism.

Sep. 15 2008 10:21 AM

What will happen to Manhattan Real Estate? There is still a ton of new construction underway. I was wondering who could afford all of these apartments at very high prices? I was always told "wall streeters with bonuses"

Will we be like Miami with all of the unfinished construction?

Sep. 15 2008 10:21 AM
shc from Manhattan

How does this look to affect NJ's state economy, or does it?

Sep. 15 2008 10:19 AM
Taher from Croton on Hudson

So the question is, should the government nationalize Wall Street?

Sep. 15 2008 10:18 AM
Phil Henshaw from NY

The main question is NOT why how bankers ‘fixed’ the banking system is failing too. The main question is where the pressure it’s failing to contain is coming from. It’s much simpler and deeper than others are acknowledging.

I can answer that simply and clearly from a basic physics of physical processes and the way we’ve designed our to multiply. It’s been irresponsible of you to not address the physical economy issues for the many years this crisis was clearly approaching. Please get someone you trust to hear me and other physical system economists out.

Sep. 15 2008 10:17 AM
Tony from San Jose, CA

Finally, a little bit of common sense and the sop of propping up reckless enterprises. I am glad that these companies are failing, as they should.

Sep. 15 2008 10:16 AM
Hugh from Brooklyn

Crains has been consistently conservative -- in the Greenspan lapdog camp -- for years. So what is the point in asking anyone from Crains for anything by way of intelligent comment?

Sep. 15 2008 10:16 AM
David from Queens

When Pension Funds, 401Ks, Other large retirement assets become coopted into daily trading, the net effect is destabilizing the market as they chase riskier investments to gain returns and pour money into bad ideas and force the rest of the market to do likewise.

Imagine if Social Security was also privatized at this point. It would far worse.

Sep. 15 2008 10:14 AM

2000 was the year the game of russian roulette began getting played. if not for foreign investors like china being unfamiliar w our market this would have happened years ago.

Sep. 15 2008 10:13 AM
Hugh from Brooklyn

Alan Greenspan has been lying through his teeth for years.

Meanwhile, Paul Krugman, Elizabeth Warren, Nouriel Roubini, and others have been sounding the alarm for at least year and on some more specific points for many years.

Time to note that the alarm-ringers were right.

Sep. 15 2008 10:13 AM
Anthony Clune from Brooklyn

Is this really as surprising as everyone is squawking about?

These corrupt institutions invented more and more creative ways to rob people of their money. They should not only lose their jobs but go to prison.

We are seeing the beauty of the free market in action.

Sep. 15 2008 10:10 AM

your local news reporter just said that "ny will miss lehman bros. which rents 2.4 millions sq ft of office space."

wasn't chapt 11 invented the same day as the federal bailout? should we assume that lehman is dead?

Sep. 15 2008 10:07 AM
whoindatgarden from Brooklyn

It doesn't surprise me a bit.
What is interesting that all this Financial turmoil has it's roots in crooked folks getting away with it and on the Republican watch.
They say Incestuous relationships lead to genetic disorders. The financial Institutions all have people in Management who have been all over the block and thus have managed for too long to keep the Old boys network going.

Sep. 15 2008 10:06 AM

Bankers who neither borrow at 5 and lend at 7 -- or craft weak companies into strong ones -- would seem by definition to be playing a zero sum game. Is this true? Have criminals infiltrated our financial system and gutted the economy? Or is this just the new Starbucks variety addling my poise?

Sep. 15 2008 09:28 AM

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