Bernanke says law forbade Lehman rescue...
US Federal Reserve Chairman Ben Bernanke declared on Thursday that it would have been unlawful for the US government to rescue Lehman Brothers, arguing the Wall Street bank's finances were too weak to justify an emergency injection of public money in the run-up to its 2008 bankruptcy.business Updated: Sep 03, 2010 21:43 IST
US Federal Reserve Chairman Ben Bernanke declared on Thursday that it would have been unlawful for the US government to rescue Lehman Brothers, arguing the Wall Street bank's finances were too weak to justify an emergency injection of public money in the run-up to its 2008 bankruptcy.
In three hours of testimony to the Financial Crisis Inquiry Commission, Bernanke contradicted claims by Lehman's former boss, Dick Fuld, that the US government refused to bail out the Wall Street giant.
"The only way we could have saved Lehman would have been by breaking the law and I'm not sure I'm willing to accept those consequences for the Federal Reserve and for our system of laws," Bernanke said.
He said he realised over Lehman's final days that a collapse of the firm was going to be "catastrophic" but insisted it was a myth that authorities could have averted bankruptcy, arguing that at the time, prior to bailout legislation, the Fed was not allowed to lend taxpayers' money without a reasonable expectation of repayment.
...while former Lehman boss blames Fed for collapse
Former Lehman boss Dick Fuld on Thursday told the US Financial Crisis Inquiry Commission in Washington that the firm's 2008 bankruptcy was down to false rumours about a solvency crisis, uncontrollable market forces and a refusal by the US government to come to the rescue.
"I made mistakes," said Fuld, conceding that Lehman had too many illiquid assets, such as commercial property, on its books, and insufficient capital. But he said these issues were addressed before bankruptcy as the bank raised $3.8 billion in equity capital and "de-risked" by shedding 50 per cent of its less saleable investments.
Fuld shifted blame on to the US government, insisting the Fed refused to allow Lehman access to its "discount window" that provided cheap capital to Wall Street.
First Published: Sep 03, 2010 21:41 IST