Lehman Brothers "wind-down" loan

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The Lehman Brothers “wind-down” loan

The Federal Reserve loaned Lehman $138 billion through JPMorgan Chase hours after it declared bankruptcy (and the Fed declined to bail out the firm) in order to un-wind transactions it had with other banks without severely disrupting markets. The Fed has refused comment on the loan, which was repaid in full.


Wall Street Bailout Accounting
(back to main table)
LEHMAN BROTHERS “WIND-DOWN” LOAN
Balance Sheet
Disbursed*: $138B [1]
Current outstanding: $0 [2]
Public Funds
Maximum at-risk: $138B[3]
Current at-risk: $0 [4]

* See the methodology and glossary for definitions of "disbursed," etc.

Funding agency and aid type

The funding agency was the Federal Reserve Bank of New York.

Loan. [5]

Who benefits

Wall Street banks in deals with Lehman Brothers. [6]

Background

Prins: “In September 2008, the Fed gave JPMorgan Chase $148 billion in help the near-bankrupt Lehman Brothers.” [7]

Marketwatch (via Prins): “At the request of [Lehman] and the Federal Reserve Bank of New York, and in order to avoid a disruption of the financial markets ... [J.P. Morgan] advanced [the money] to or for the benefit of Lehman in order to clear, and facilitate the settlement of, certain securities transactions with customers or clients of Lehman,” the filing said. The first advance was repaid Monday night, and Tuesday’s advance was made at the request of both Lehman and the New York Fed.” [8]


Notes

The Federal Reserve used JPMorgan Chase as a conduit to loan Lehman Brothers $138 billion; an $87 billion overnight loan on Sept. 15, 2008 and a second $51 billion loan on Sept. 16. The loan came hours after the bank declared bankruptcy after the Federal Reserve had claimed that Lehman lacked the collateral for the Fed to legally lend it money. The loan was made to Lehman’s broker-dealer subsidiary in order to “facilitate an orderly write-down” of trades with other financial firms, according to Lehamn’s bankruptcy filings. The Federal Reserve has refused to comment on the deal. The loan was fully repaid. [9] [10]


Articles and resources

Related SourceWatch articles

References

  1. Andrew Ross Sorkin, “How the Fed Reached Out to Lehman,”[ http://www.nytimes.com/2008/12/16/business/16sorkin.html] New York Times Dec. 15, 2008.
  2. FAndrew Ross Sorkin, “How the Fed Reached Out to Lehman,”[ http://www.nytimes.com/2008/12/16/business/16sorkin.html] New York Times Dec. 15, 2008.
  3. FAndrew Ross Sorkin, “How the Fed Reached Out to Lehman,”[ http://www.nytimes.com/2008/12/16/business/16sorkin.html] New York Times Dec. 15, 2008.
  4. Andrew Ross Sorkin, “How the Fed Reached Out to Lehman,”[ http://www.nytimes.com/2008/12/16/business/16sorkin.html] New York Times Dec. 15, 2008.
  5. Andrew Ross Sorkin, “How the Fed Reached Out to Lehman,” New York Times, Dec. 15, 2008, http://www.nytimes.com/2008/12/16/business/16sorkin.html, accessed Mar. 12, 2010.
  6. Andrew Ross Sorkin, “How the Fed Reached Out to Lehman,” New York Times, Dec. 15, 2008, http://www.nytimes.com/2008/12/16/business/16sorkin.html, accessed Mar. 12, 2010.
  7. Prins’ Mother Jones analysis. Dec. 21, 2009. http://motherjones.com/politics/2009/12/behind-real-size-bailout [Note: This is listed as $138B in the ITAP supplement. The $148B figure is likely an error.]
  8. Sam Mamudi, “J.P. Morgan Advanced $138 Billion to Lehman,” MarketWatch, September 16, 2008, http://www.marketwatch.com/story/jp-morgan-advanced-138-billion-to-bankrupt-lehman
  9. Andrew Ross Sorkin, “How the Fed Reached Out to Lehman,” New York Times, Dec. 15, 2008, http://www.nytimes.com/2008/12/16/business/16sorkin.html, accessed Mar. 12, 2010.
  10. Additional information at Tiffany Kary and Chris Scinta, “JPMorgan Gave Lehman $138 Billion After Bankruptcy,” Bloomberg, Sept. 16, 2008, http://www.bloomberg.com/apps/news?pid=20601087&sid=aX7mhYCHmVf8&refer=home, accessed Mar. 12, 2010.

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