An Analysis of the Significance, Cause, and Motives Behind Lehman’s Bankruptcy

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During the Financial Crisis of 2008 many factors contributed to the sustained state of economic chaos which ensued in the following months. While many financial institutions were saved by the government and other rescue operations, the collapse of Lehman Brothers remains an outlier in these instances; rather than follow the seemingly apparent protocol of “rescue” the government did quite the opposite in letting Lehman fail. This paper seeks to explain the reason for this decision and investigate the ramifications it had on the economic and political system. Much controversy surrounded the decision to let Lehman collapse and several explanations have developed to justify the actions of the government. Lehman Brothers and its collapse was at the center of a political debate during the Financial Crisis which was based on theories of conspiracy, lessons being taught, and public pressure that was tied to political motives on the part of the Fed. There is no doubt that the downfall of investment bank Lehman Brothers was a major contributing factor to the Financial Crisis. There is however doubt regarding exactly why this financial institution was allowed to collapse and what specifically the ramifications were for the financial system as a whole. In the middle of March, 2008, the Federal government working with J. P. Morgan Chase bailed out Bear Sterns, however only several months later in September of the same year, Lehman Brothers was left to file for bankruptcy after the Federal government declined to rescue them. This inconsistency on the part of the government and the Federal Reserve contributed to the uncertainty which the Financial Crisis fostered. Much debate has arisen over the inconsistency in the policies which were applied to Bear Sterns and Lehman in the onset of the financial crisis in 2008. Speculation surrounding these decisions includes conspiracy

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