This is interesting:
Creditors to the estate of Lehman Brothers will finally recoup all the money owed to them when the defunct US investment bank collapsed six years ago after administrators said they were ready to pay a dividend that will finally make them hole.
Hedge funds, asset managers and other major banks will be among the unsecured creditors receiving a dividend from PricewaterhouseCoopers, the administrator of Lehman Brothers, that will mean they will take their repayment to 100p for every £1 they were owed.
PwC estimates that creditors could actually receive interest on their money and has discovered a surplus of about £5bn that could be used to pay further dividends.
Tony Lomas, lead administrator at PwC, said the repayment of creditors six years on from Lehman’s 2008 bankruptcy was a “remarkable feat”.
“The fact that we have been able to pay ordinary unsecured in full, including the return of their trust assets and client money, with a significant surplus remaining, highlights the importance of having a healthy level of capital within a firm’s balance sheet,” said Mr Lomas.
Lehman’s (in London at least, dunno about the US) was bust, certainly, but because it was illiquid, not because it was insolvent. Which brings us to two points.
One, given this, was it wise to let it go under? And second, it does rather disprove some of the wilder claims about the bust. At heart the problem was maturity transformation, borrowing short and lending long. Fractional reserve banking in other words.
Not, as some seem to think, wild behaviour, greed or bonuses. Which leads to the question of what we should do about it, if anything. Myself I think the bank levy, there to pay for the implicit guarantee that FRB shops get, is the right thing to be doing. Because the value of FRB itself is sufficient that we’ll just have to put up with the failures and distortions that happen.
Agreed, many differ. But it is still true that if Lehman’s was a matter of liquidity, not solvency, then the debate about what to do has rather changed.