Kodėl Lehman Brothers bankrutavo?
Įžvalgos / 2010-03-23
Žemiau pateikiama labai trumpa ištrauka iš tyrimo apie Lehman Brothers investicinio banko bankroto priežastis. Visą tyrimą, kuris yra sudėtas į 2292 puslapius, atliko Anton R. Valukas.
Be abejo, ši santrumpa neatskleidžia visos virtuvės, tačiau aišku viena, kad tam tikri žmonės jau kuris laikas prieš įvykstant bankrotui žinojo kokia yra situacija ir kokios galimos pasekmės. Tačiau jie visą laiką įtikinėjo liaudį, kad viskas yra gerai, o vargšai investuotojai patikėję tokiomis kalbomis prarado labai daug pinigų.
Žemiau pateikiama minėta tyrimo santrauka.
"On January 29, 2008, Lehman Brothers Holdings Inc. (“LBHI”) reported record revenues of nearly $60 billion and record earnings in excess of $4 billion for its fiscal year ending November 30, 2007. During January 2008, Lehman’s stock traded as high as $65.73 per share and averaged in the high to mid‐fifties, implying a market capitalization of over $30 billion. Less than eight months later, on September 12, 2008, Lehman’s stock closed under $4, a decline of nearly 95% from its January 2008 value.
On September 15, 2008, LBHI sought Chapter 11 protection, in the largest bankruptcy proceeding ever filed. There are many reasons Lehman failed, and the responsibility is shared. Lehman was more the consequence than the cause of a deteriorating economic climate.
Lehman’s financial plight, and the consequences to Lehman’s creditors and shareholders, was exacerbated by Lehman executives, whose conduct ranged from serious but non‐culpable errors of business judgment to actionable balance sheet manipulation; by the investment bank business model, which rewarded excessive risk taking and leverage; and by Government agencies, who by their own admission might better have anticipated or mitigated the outcome.
Lehman’s business model was not unique; all of the major investment banks that existed at the time followed some variation of a high‐risk, high‐leverage model that required the confidence of counterparties to sustain. Lehman maintained approximately $700 billion of assets, and corresponding liabilities, on capital of approximately $25 billion. But the assets were predominantly long‐term, while the liabilities were largely short‐term. Lehman funded itself through the short‐term repo markets and had to borrow tens or hundreds of billions of dollars in those markets each day from counterparties to be able to open for business. Confidence was critical. The moment that repo counterparties were to lose confidence in Lehman and decline to roll over its daily funding, Lehman would be unable to fund itself and continue to operate.
So too with the other investment banks, had they continued business as usual. It is no coincidence that no major investment bank still exists with that model. In 2006, Lehman made the deliberate decision to embark upon an aggressive growth strategy, to take on significantly greater risk, and to substantially increase leverage on its capital. In 2007, as the sub‐prime residential mortgage business progressed from problem to crisis, Lehman was slow to recognize the developing storm and its spillover effect upon commercial real estate and other business lines. Rather than pull back, Lehman made the conscious decision to “double down,” hoping to profit from a counter‐cyclical strategy. As it did so, Lehman significantly and repeatedly exceeded its own internal risk limits and controls.
With the implosion and near collapse of Bear Stearns in March 2008, it became clear that Lehman’s growth strategy had been flawed, so much so that its very survival was in jeopardy. The markets were shaken by Bear’s demise, and Lehman was widely considered to be the next bank that might fail. Confidence was eroding. Lehman pursued a number of strategies to avoid demise. But to buy itself more time, to maintain that critical confidence, Lehman painted a misleading picture of its financial condition.
Lehman required favorable ratings from the principal rating agencies to maintain investor and counterparty confidence; and while the rating agencies looked at many things in arriving at their conclusions, it was clear – and clear to Lehman – that its net leverage and liquidity numbers were of critical importance. Indeed, Lehman’s CEO Richard S. Fuld, Jr., told the Examiner that the rating agencies were particularly focused on net leverage; Lehman knew it had to report favorable net leverage numbers to maintain its ratings and confidence. So at the end of the second quarter of 2008, as Lehman was forced to announce a quarterly loss of $2.8 billion – resulting from a combination of write‐downs on assets, sales of assets at losses, decreasing revenues, and losses on hedges – it sought to cushion the bad news by trumpeting that it had significantly reduced its net leverage ratio to less than 12.5, that it had reduced the net assets on its balance sheet by $60 billion, and that it had a strong and robust liquidity pool.
Lehman did not disclose, however, that it had been using an accounting device (known within Lehman as “Repo 105”) to manage its balance sheet – by temporarily removing approximately $50 billion of assets from the balance sheet at the end of the first and second quarters of 2008. In an ordinary repo, Lehman raised cash by selling assets with a simultaneous obligation to repurchase them the next day or several days later; such transactions were accounted for as financings, and the assets remained on Lehman’s balance sheet. In a Repo 105 transaction, Lehman did exactly the same thing, but because the assets were 105% or more of the cash received, accounting rules permitted the transactions to be treated as sales rather than financings, so that the assets could be removed from the balance sheet. With Repo 105 transactions, Lehman’s reported net leverage was 12.1 at the end of the second quarter of 2008; but if Lehman had used ordinary repos, net leverage would have to have been reported at 13.9.
Contemporaneous Lehman e‐mails describe the “function called repo 105 whereby you can repo a position for a week and it is regarded as a true sale to get rid of net balance sheet.” Lehman used Repo 105 for no articulated business purpose except “to reduce balance sheet at the quarter‐end.” Rather than sell assets at a loss, “ Repo 105 increase would help avoid this without negatively impacting our leverage ratios.” Lehman’s Global Financial Controller confirmed that “the only purpose or motive for [Repo 105] transactions was reduction in the balance sheet” and that “there was no substance to the transactions.”
Lehman did not disclose its use – or the significant magnitude of its use – of Repo 105 to the Government, to the rating agencies, to its investors, or to its own Board of Directors. Lehman’s auditors, Ernst & Young, were aware of but did not question Lehman’s use and nondisclosure of the Repo 105 accounting transactions. In mid‐March 2008, after the Bear Stearns near collapse, teams of Government monitors from the Securities and Exchange Commission (“SEC”) and the Federal Reserve Bank of New York (“FRBNY”) were dispatched to and took up residence at Lehman, to monitor Lehman’s financial condition with particular focus on liquidity.
Lehman publicly asserted throughout 2008 that it had a liquidity pool sufficient to weather any foreseeable economic downturn. But Lehman did not publicly disclose that by June 2008 significant components of its reported liquidity pool had become difficult to monetize. As late as September 10, 2008, Lehman publicly announced that its liquidity pool was approximately $40 billion; but a substantial portion of that total was in fact encumbered or otherwise illiquid. From June on, Lehman continued to include in its reported liquidity substantial amounts of cash and securities it had placed as “comfort” deposits with various clearing banks; Lehman had a technical right to recall those deposits, but its ability to continue its usual clearing business with those banks had it done so was far from clear. By August, substantial amounts of “comfort” deposits had become actual pledges. By September 12, two days after it publicly reported a $41 billion liquidity pool, the pool actually contained less than $2 billion of readily monetizable assets.
Months earlier, on June 9, 2008, Lehman pre‐announced its second quarter results and reported a loss of $2.8 billion, its first ever loss since going public in 1994.
Despite that announcement, Lehman was able to raise $6 billion of new capital in a public offering on June 12, 2008. But Lehman knew that new capital was not enough. Treasury Secretary Henry M. Paulson, Jr., privately told Fuld that if Lehman was forced to report further losses in the third quarter without having a buyer or a definitive survival plan in place, Lehman’s existence would be in jeopardy.
On September 10, 2008, Lehman announced that it was projecting a $3.9 billion loss for the third quarter of 2008. Although Lehman had explored options over the summer, it had no buyer in place; its only announced survival plan was to spin off troubled assets into a separate entity. Secretary Paulson’s prediction turned out to be right – it was not enough.
By the close of trading on September 12, 2008, Lehman’s stock price had declined to $3.65 per share, a 94% drop from the $62.19 January 2, 2008 price. Over the weekend of September 12‐14, an intensive series of meetings was conducted by and among Treasury Secretary Paulson, FRBNY President Timothy F. Geithner, SEC Chairman Christopher Cox, and the chief executives of leading financial institutions. Secretary Paulson began the meetings by stating the Government was there to do all it could – but that it could not fund a solution. The Government’s analysis was that it did not have the legal authority to make a direct capital investment in Lehman, and Lehman’s assets were insufficient to support a loan large enough to avoid Lehman’s collapse.
It appeared by early September 14 that a deal had been reached with Barclays which would save Lehman from collapse. But later that day, the deal fell apart when the parties learned that the Financial Services Authority (“FSA”), the United Kingdom’s bank regulator, refused to waive U.K. shareholder‐approval requirements.
Lehman no longer had sufficient liquidity to fund its daily operations. On the evening of September 14, SEC Chairman Cox phoned the Lehman Board and conveyed the Government’s strong suggestion that Lehman act before the markets opened in Asia. On September 15, 2008, at 1:45 a.m., LBHI filed for Chapter 11 bankruptcy protection.
Sorting out whether and the extent to which the financial upheaval that followed was the direct result of the Lehman bankruptcy filing is beyond the scope of the Examiner’s investigation. But those events help put into context the significance of the Lehman filing. The Dow Jones index plunged 504 points on September 15.51 On September 16, AIG was on the verge of collapse; the Government intervened with a financial bailout package that ultimately cost about $182 billion. On September 16, 2008, the Primary Fund, a $62 billion money market fund, announced that – because of the loss it suffered on its exposure to Lehman – it had “broken the buck,” i.e., its share price had fallen to less than $1 per share. On October 3, 2008, Congress passed a $700 billion Troubled Asset Relief Program (“TARP”) rescue package.
In his recent reconfirmation hearings, Federal Reserve Chairman Ben Bernanke, speaking of the overall economic crisis, candidly conceded that “there were mistakes made all around” and “we should have done more.” Lehman should have done more, done better. Some of these failings were simply errors of judgment which do not give rise to colorable causes of action; some go beyond and are indeed colorable."