Abstract
Lehman collapse was the largest bank bankruptcy in the United States history. Complex causes combination lead to this tragedy. This paper is going to illustrate primary causes that result in its failure, and also discuss impacts on financial systems supervision and regulations.
TABLE OF CONTENTS
1. INTRODUCTION 1

2. LITERATURE REVIEW 4
3. RESEARCH METHODOLOGY 1

3.1 Data collection 2 3.2 Methodology x 3.3 Limitations 3
4. ANALYSIS AND DISCUSSION 4

4.1 5 4.1.1 4.1.2 4.1.3 4.1.4 4.1.5 4.2 4.3 6
5. CONCLUSION 1

6. REFERENCES 4

7. APPENDICES 1

8. ACKNOWLEDGEMENTS 1

1. INTRODUCTION
The credit crunch occurred in 2008 has been arguably recognised as an extreme phenomenon during the financial crisis, which generated to the longest recession in the U.S. history since ‘the Great Depression’ in1929. Over 600,000 jobs lost in during 2008, and unemployment rate went up to 6.1% which was the highest point in 5-year time (Isidore, 2008). According to the Turner Review (2009), faultiness of regulation and supervision underpinned financial problems’ increase. Therefore, to illustrate the causes of Lehman Bother’s crash in 2008, events occurred during crisis progress are listed in Appendix 1. Among those serious cases, bankruptcy of Lehman Brothers was concerned to be the most typical one to explore.
Lehman Brothers Holding Inc., founded in 1850, was once a prominent and highly reputational financial institution and used to provide diversified financial services all over the world with high quality (Lim, 2012; Smith and Sidel, 2010). However, it filed Chapter 11 Bankruptcy Protection on 15 September 2008, after failing to find any buyers to pull it out from tough financial difficulties (Sorkin, 2008). The bankruptcy of Lehman Brothers can account for the largest investment banking collapse since bankruptcy of Drexel Burnham Lambert 18 years ago (Sorkin, 2008). When Bear Sterns acquired by JP Morgan, people though the fearful phase of the crisis in financial markets may be over, but but the fallout leaves the United States vulnerable to recession. However, since Lehman collapsed, people believed that the bankruptcy is disastrous (Nocera and Andrews, 2008). The United States Treasury Secretary Harry Paulson Jr. had feared for months before its failure, and he thought that Lehman Brothers was hurtling toward bankruptcy beyond fast. With respect to Lehman’s size and weight to financial market, unanticipated financial market reaction took place when information about that Lehman was under stressful financial difficulties released.
The purpose of this research paper is to assess causes of shocked failure of Lehman Brothers and its subsequent effects on the United States financial system supervision and regulations. With the concerns of causes of failure of Lehman, various causes that contributed to the eventual consequences which lead to severe impacts on financial systems supervision and regulations. Therefore, in order to illustrate these issues critically, detailed analysis towards following research questions will be provided later in this paper:
I. What factors caused Lehman Brothers Inc. failure?
II. What impacts had on United States financial systems supervision and regulations progress?
In summary, the overall objective of this research is to investigate how the unexpected failure of Lehman Brothers affected business world in terms of regulations and supervision. And the scope of this research paper is mainly focusing on causes of Lehman collapse and its overall/general effects on the financial system supervision and regulation.
2. LITERATURE REVIEW
Unexpected failure of Lehman Brothers Holding Inc. has been widely regarded as the turning point of financial crisis of 2008. Despite that it has been more than four years past since Lehman Brothers’ bankruptcy announcement, however, scholars are still showing interests in depth research in Lehman case and the press are still concerned about its follow-up events. In another word, the impacts of its failure on financial systems and institutions are still on-going. Numerous analysis and research papers have been worked on figuring out fundamental causes of its failure, consequence to the financial system supervision and regulation, and also lessons learnt from the collapse in case of replaying similar tragedy. Failure of Lehman is not only simple banking crush, but also involved human failure (i.e. managerial issues and corporate governance failures).
It is somehow controversial that Lehman was allowed to go under administration procedure without government rescue. While other financial institutions that suffered financial difficulties received assistance either from the Federal Reserve or the US Treasury Department, corresponding with ‘Too Big To Fail’ policy. Numerous scholars believe that Lehman should have received government assistance according to TBTF policy in case it worsens economic situations (Sterling, 2009; Carney, 2009). Sterling pinpoints that the Federal Reserve refused to bailout Lehman Bros did have negative impacts on financial market confidence which resulted in further downturn of economy afterwards. On the contrary, Brewer and Jagtiani (2007) argue that when business entities are treated as TBTF (Too Big To Fail) entities, exclusive benefits can be received from local and central governments. Ennis and Malek’s research (2005) shows that TBTF policy affects financial institutions decision-making and company expansion sizes. However, Wheelock and Wilson’s (2000) research shows that investment banks which suffer capitalised issues are at higher risk to fail. Positive correlation has been detected between chances of failure and management efficiency (Wheelock and Wilson, 2000). Johnson and Mamun (2012) claim that importance to the financial market refers to that serious failure of this institution would lead to devastating outcomes such as credit market freezing, etc. In addition, Cochrance and Zingales consider that, based on Lehman case, financial institutions have to be allowed to collapse once take trading risk in operation.
It has been pointed out that both banks themselves and their supervisors are eligible not to overlook the importance of corporate governance (Mϋlbert, 2009). Erken, Hung and Matos (2012) also said that corporate governance affected performance of financial institutions during crisis period. Some scholars believe that failure of Lehman could have been predicted by its head board directors (Christopoulos, Mylonakis and Diktapanidis, 2011; Azadinamin, 2013; Osei-Owusu, 2013) According to Christopoulos, Mylonakis and Diktapanidis (2011), large volume of bad debts held by Lehman made its management into tough position so that they were unwilling and incapable to pull Lehman out of collapse course. Similarly, Osei-Owusu states that Lehman could have been saved if its executives were not over confident and predicted future financial market trend mistakenly. Cited from Lehman’s former chief talent officer, Greenfield (2010) said that failure of Lehman gave the entire financial world a lesson of corporate culture. Moreover, Panfilii and Popa (2012) point out that collapse of Lehman indicated corporate governance failure rather than financial market failure.
In addition, according to Kirkpatrick (2009), inappropriate incentive system encourages managers and directors to seek for high profit financial operations that are obviously operated along with extremely high level of risk, such as hedge funds. Moreover, Sieczka, Sornette and Holyst (2011) believe that immediate effect of Lehman bankruptcy worsens credit worthiness of almost whole financial institutions. Speaking of bank lending, research of Ivashina and Scharfstein (2009) shows that during the worst period of financial crisis, volume of lending shrank sharply and which obviously was affected by impacts of failure of Lehman Brothers. Additionally, also according to their study, failure of Lehman was regarded as the turning point of financial crisis; because of which bank short-term loans cannot be covered that worsen the crisis (Ivashina and Scharfstein, 2009). Haas and Horen point out that syndicated lending contracted sharply due to shock of Lehman’s failure. Cechetti (2009) believes that bank lending is related tightly to bank capital or wealth, as a result, banks are required to maintain loans volume within correlative multiple of capital. Cechetti (2009) also states that Federal Reserve was in tough position and traditional investment tools served by Federal Reserve were not completely capable to resolve problems presented in financial crisis. Therefore, as a result creative initiatives released based on the purpose of rebuilding level of financial market confidence and liquidity. Vyas (2011) believes that adequate write-downs have a positive impact on improving or maintaining high quality of corporate governance, and he also concludes that corporations and organisations under regulatory investigations pressures would become more co-operating on write-downs. Furthermore, Taylor (2009) points out that inadequate interventions caused by unpredictable framework would worsen financial crisis. The Dodd- Frank Act, enact into law after crisis in order to be correspondent with the Financial Regulatory Reform that released earlier. Chaffee (2010) points out that Dodd-Frank Act over-concentrated on domestic issues instead of global financial market that emerging rapidly. In addition, Chaffee (2010) also states that Dodd-Frank Act did not function as a comprehensive vision of the Financial Regulatory Reform as policy makers expected.
3. RESEARCH METHODOLOGY
3.1 Data collection
As Lehman Brothers Holding Inc. has already filed for Chapter 11 Bankruptcy Protection in 2008, its official website has been shut down and it is under administration procedure. Therefore, in this paper, no primary data and resources are possible to be obtained directly from inside Lehman, such as official website. Although certain amounts of links are given in its official website home page to forward users finding relevant resources, they are related within limited scope in this research paper. Therefore, secondary data collection and analysis are preferable in this paper in order to demonstrate implications of Lehman’s failure on both financial systems supervision and regulations, as well as assessment of causes of Lehman’s failure.
Data used to analyse and illustrate Lehman performance and issues are cited from its Annual Report or Quarter Report. Historical share prices acquired form Dow Jones Indices official website.
In order to identify whether secondary data evidences are useful and reliable, following questions needing to be addressed (Blumberg, Cooper and Schindler, 2008; pp. 317):
“
• Is the information provided in the secondary data sufficient to answer your research problem?
• Do the secondary data address the same population you want to investigate?
• Were the secondary data collected in the relevant time period? ”
3.2 Methodology
In order to ensure that supported evidences in this paper are reliable and ground, numerous methods should be applied to demonstrate reality in terms of ‘triangulation’ which is defined as ‘using multiple methods to capture a sense of reality’, according to Loveridge (1990). In other words, evidences collected from various sources are much more beneficial to ground controversial points than unitary sources. Data sources collected from journals, website, media and even broadcast is straightforward in the form of reports, video recorded, Several research papers focus on similar area applied relevant method to operate research (Latifi, 2012; Osei-Owusu, 2013). Research methodology applied in this paper will demonstrate these three questions during analysis assessments and evaluation. To be more specific, authors of literatures that cited in this paper are highly reputational and respectful. The majority of them are working as professors in university, and published numerous workings which highly appraised by scholars in certain areas.
3.3 Limitations
Using secondary data has less control of its quality compared with primary data. Therefore, data collection must be operated carefully in order to achieve high quality of research results. Furthermore, complexity of secondary data have to be noticed. Because of large volume of data base, some data are not what this research need to assess for. Thereby, prior to secondary data collection, data relevance has to be detected which would give better research result and save analysis time. However, although analysis time is possible to save by implementing prepared identification and classification, researchers have to spend more time on getting familiar secondary data acquired, compared with primary data analysis. Another limitation is that issues related in certain research area cannot be expressed in numbers that are obviously more visualized, compared with literal expression. Therefore, non-numerical evidences collection and analysis related to contents are vital to this research. If non-numerical evidences can be converted into quantitative diagrams or tables, it would be beneficial to applying statistical tests to illustrate problems (Remenyi, Williams, Money and Swartz, 2002), however, it is much difficult to be applied in this paper.
4. ANALYSIS AND DISCUSSION
As mentioned earlier, failure of Lehman Brothers Inc. has extremely significant influences on the United States financial systems, even the whole world ones. Reasons why such a dominant corporation went for bankruptcy protection unexpectedly during the financial crisis, like usually small corporations did, are worth depth studying. Serious failure of Lehman shocked financial stability of the whole world and have significant impacts on financial system supervision and regulation, no matter in the United States or the rest of the world, as mentioned earlier. Compared with financial crisis in 1929, causes of financial crisis in 2008 were differentiated from the previous one. Johnson and Mamun (2012) described this the recession as ‘this time is different’. This is because, for a certain period of time during 1930s, investors were over-optimistic about whole economic and investment environment future trends which resulted in the overheating of economy, along with increasing volumes of lending and borrowing (Arner, 2009). Pressures have been placed on lending market because of decreasing of credit supply crisis (Sieczka, Sornette and Holyst, 2011). Furthermore, what makes the financial crisis of 2008 more difficult to recover is that serious recession took place along with crisis (Sieczka, Sornette and Holyst, 2011). Lehman was not the only one who suffered huge losses. Then why Lehman collapsed unexpectedly? And what impacts its failure bring to global financial market?
In early 2007, Lehman Brothers achieved the best performance ever in its history, net profit and earning per share increased significantly in four consecutive years (Lehman Brothers, 2007), which relying on high leveraging housing market instead of substantial economy. Meanwhile, Lehman’s share price reached its peak point to almost 90 dollars per share (Appendix 3). Besides, Lehman became the largest brokerage in London Stock Exchange in terms of share trading volume. However, things changed among time. In March 2008, Lehman Brother announced its first quarter net profit, which decreased by 57%, and its share price dropped by nearly 20%, caused by credit market shrinking (Lehman Brother, 2008). Two weeks later, in order to subside concern of fund shortage, Lehman Brother issued 4 billion dollars convertible preferred shares (Lehman Brothers, 2008). Regarding of positive information, Lehman’s share price increased by 18%, which reflected that investors were confident in Lehman’s future that can avoid being merged as Bear Stearns did. In mid-2008, Lehman’s loss increased significantly to 3.3 billion, in order to balance leverage, Lehman decided to sell Neuberger Berman, its asset management department, to financing (Lehman Brothers, 2008). As a result of continuous loss, credit rating institutions downgraded Lehman’s rating lead to more difficult situation for Lehman to seek financing partners. After unsuccessful negotiation with Korea Development Bank, Lehman’s share price reduced sharply by 46% and decided to seek interested buyers to sell company as a whole (Appendix 3). However, unfortunately, without rescue and capital protection from the Federal Reserve which supposed to be corresponding with ‘too big to fail’ policy, many potential buyers, such as Barclay and Bank of America quit acquisition negotiation, then Lehman Brothers was hanging on balance.
4.1 Causes of Lehman’s failure
Lehman Brothers Holding Inc., providing diversified financial services, used to be top-four investment bank in U.S. history. However, after its announcement of huge quarterly loss of $2.8 billion in 2008, financial markets have been shocked by this significant information disclosure, and investors and relevant authorities began to keep an eye on every single change of situations (Craig and Lauricella, 2008).
4.1.1 Business expansion over-concentrated
As was one of the best investment banks, Lehman used to operate successfully in traditional investment banking businesses, such as securities issuance underwriting and mergers & acquisitions consultant. Since 1990s, with rapid development of fixed income instrument and financial derivatives, Lehman expanded business scope speedily in those traditional business areas and achieved huge success. As reflection, Lehman was known as ‘Bond King’ during that successful period (Palmeri and Pressman, 2006). However, title of ‘Bond of King’ was dual appraise for Lehman performance. It not only was praise for Lehman’s success, but also indicated that its businesses were too centralised in fixed income sectors. In 2006, Lehman made a deliberate business decision to pursue a further expansion on business. The developing strategy then switched from a low-risk brokerage model to a high risk capital intensive banking model. This led to a mismatch between short-term and long-term debts. Therefore, Lehman had to borrow hundreds of billions of dollars in order to avoid business risk, whereas that was exactly the way to increase the credit risk! Compared with other comprehensive financial institutions in similar size, Lehman as investment bank, its business was less diversified which reflected by lacking of contingency plans that allow Lehman to convert assets into cash in hand speedily. Referring to previous cases, under similar complex difficult situation, Merrill Lynch (the CFO) converted assets into desperately needed cash by selling share of Bloomberg and Black Rock, which rescue itself from the edge of bankruptcy. Continuous success on crisis beaten made Lehman feel more confident on their investment way. Similar to other investment banks, Lehman was attracted into flourishing housing and credit market. This involvement supposed to be beneficial to Lehman’s development. Nevertheless, increasingly systematic risks had to be dealt with due to over-aggressive expansion. In practice, systematic risk has dual effects: when market is in positive trend, the whole market condition is moving upwards and market liquidity rise, so investors become increasingly optimistic and Lehman made enormous profit by high systematic risk; on the contrary, when market is breaking down, existence of high systematic risk result in extremely negative impacts on financial operations. Nevertheless, concentrating on traditional businesses was not direct causes of failure of Lehman; this is because as long as investment banks structured with reasonable debt and equity constitution.
4.1.2 Compliance on high leverage ratio
Comparing with comprehensive banks (such as Citibank, JP Morgan and Bank of America, etc.), Lehman’s size was much smaller. As mentioned earlier, they hold a very low level of owned capital and high leverage ratio. In order to expand business with sufficient capital and funds, they have to rely on both bond market and inter-bank lending market. Investment banks supposed to be capable to manage long-term funding efficiently by issuing new bonds. Additionally, investment banks also supposed to be capable to manage short-term (overnight, 7 days, a month, etc.) funding by collateralized repo in inter-bank lending market. Therefore, investment banks maintain operating cash level with low level of owned capital and large volume of lending and borrowing money, which is the basic principle of gearing. Main feature of leveraging is that either profit or loss moved multiply along with changes of leverage ratio. Prior to credit crunch, financial leveraging of many Wall Street investment banks increased to an extremely dangerous level. Lehman Brothers Inc., as Wall Street leading underwriter and book runner, retain the majority of difficult-to-sell bonds in its own balance sheet. Even though those types of bonds are highly rated (most in AAA and some of them even higher rating than American government bonds), with characteristics of ‘low risk level, low interest rates’ applied. Thus, those types of bonds are not attractive enough to existing and potential investors; Lehman could only hold those bonds in hands (BBC News). Table shows below stated the average leverage ratio of Lehman generated by the years. (Callan,2008)
(Data resources: Lehman Brothers’ leverage analysis, Erin, Callan, 2008)
It represents that along with Lehman’s business expansion, gross leverage ratio reached a very high level and stably remained the ranges between 23x-32x approximately. Accordingly, main areas contributed to a 34% increasing in gross leverage ratio since the year of 2003 were principally in matched book and rate businesses, heavily weighted towards short-term loans and housing mortgage. What remarkable here is that the CEO Richard Fuel was a risk-taking person which believes the recession the point that risks can be reduced if they kept those types of bonds in balance sheet. However, he neglected that reasonable value of those bonds cannot be measured with circulation market, so gains and losses cannot be measured by ‘mark to market’ (Valukas,2010). Therefore, methods of valuation can be varied differentiated among institutions. With the complexion of data analysis, banks are reliable on rating and valuation models that provided by third parties, such as ‘Standard & Poor’, instead of performing critical reviews on their own. Traders and management teams are motivated to overvalue Level 3 assets, since the higher value, the more products that can be sold to investors which bring them more profits. No one knows the exact value of those Level 3 assets, so information released by financial institutions has significant impacts on investors’ decision-making. In fact, if Lehman did not file for bankruptcy; market did not overcome negative impacts and liquidity was not improving, further loss would be made by continuing value decrease in Level 3 assets.(Callan, 2009)
In Appendix 2 and 3, increasing moving trend of Level 3 Financial instruments can be found out. Its total Level 3 Financial instruments fair value increased from 20,840 million (31 May 2007) to 37,911 million (31 May 2008), which was almost doubled. Huge losses accumulated in lower-rated mortgage-backed securities throughout 2008. In the second fiscal quarter, Lehman reported losses of $2.8 billion and was forced to sell off $6 billion in assets. In the first half of 2008 alone, Lehman stock lost 73% of its value as the credit market continued to tighten. In August 2008, Lehman reported that it intended to release 6% of its work force, 1,500 people, just ahead of its third-quarter-reporting deadline in September.(Valukas, 2010)
4.1.3 Accounting tricks – Repo 105
Under the huge pressure of excessive leverage in mid-2007, Lehman’s CEO Richard Fuld worked out an emergency schedule in order to gain the market confidence of their investors and counterparties, by utilizing ‘Repo 105’devices to reduce and spread the level of credit risk. (Valukas, 2010) Accordingly, in a general repo contract, a firm borrowed funds by selling a collateral asset and committed to repurchase it at a later date. Here in Lehman’s case, Richard Fuld took $105 security as collateral assets to borrow $100 funds, after that they only spent $100 to get$105 security back when they repurchased it basing on revaluation treatment. By which means, the difference between market value of the collateral and the amount borrowed ($5) was regarded as asset and revaluated its market value. (Valukas 2010, p. 762-763)
It did work. Lehman’s repo 105 transaction was identified by commentators that the real purpose was to remove securities inventory from the balance sheet. Meanwhile, after Lehman received cash of the transaction, using borrowed funds from Repo105 transactions to reduce short term debts. Lehman reduced its total assets and by that reduced its leverage ratios. Basing on the standards of Federal Accounting Standard No.140 (SFAS), higher than the 2% reduction in the rate of repurchase operations is defined as ‘sale’ instead of ‘financing’ transactions, which contributed to a naturally offset on those borrowing assets under the rules. In other words, it means that Lehman’s actual intention was to repay the debt and sell troubled assets in balance sheet quickly by using those amounts of short-term funds gaining from the market, in order to manipulate and high the incredible carrying amount of bad debt, showing a lower gearing ratio in their annual reports. This action was considered as ‘accounting tricks’ by other investment banks and partners (Merced and Sorkin, 2010) Accordingly, Lehman failed in attempt to seek strategic investors in the end, since Fuld held out for a relatively high price. The fair value of its corporation valuation was strongly doubted by other financial institutions, which possibly lead to its credit rating downgraded. Valukas indicated that Lehman did not fully disclose the real financial conditions faithfully by utilising the characteristics of Repo105 as off-balance sheet effects. Basing on Valukas’ report (2010), it could be indicated that to a certain extent, Lehman failed to comply with the Federal Accounting Standards which requires the character of materiality. However, Valukas also mentioned that it was less important on whether they disclose those off-balance sheet transactions or not, that was not the factor contributed to the failure. Instead, the action of Repo105 itself was already estimated to be out of the FAS permission, since attributes of Repo105 itself is misleading and failed to obey ‘free from material error’. “They are drawing a materially misleading picture of the firm’s financial condition in late 2007 and 2008”, quoted from Valukas (2010). Apart from that, he determined that the Repo programme had another crucial dimension, one necessitated lawyers in the UK affirmed that the amounts of evidence proved those transactions were actually taken placed out of the US. Lehman executives were also pointed with the “sole purpose was balance sheet manipulation” (Valukas 2010, p.870).
Fair value has dual aspects. When market condition is in positive trends, huge amount of floating income has been shown in balance sheet which counted by fair value. In this period, capital managers and brokers are easily got over-optimistic, encourage incentives of shareholders distributions. All these actions seem to be harmful to financial institutions risk control. On the contrary, when market condition is in negative trend, value of relevant assets underestimated. According to accounting standards, financial institutions are required to increase or decrease equity based on assets attributes, which would definitely affect profit level and leverage ratio of financial institutions. In order to deal with crisis, financial institutions have to sell more trading financial assets. Thereby, trading price decreased – extract high provision of impairment, subtract shareholders’ equity – irrational sell off – continuous prices dropping – continuous increase provision of impairment and subtract shareholders’ interests; which turn into a vicious cycle until balance of capital adequacy ratio and leverage ratio broken, the financial institutions collapsed.
4.1.4 Supervisors’ negligence – corporate governance failure
Corporate governance issues inside Lehman Brothers could also be a reason of its failure. Professor O’Connell (2010) believes that the executive team of Lehman Brothers’ were too optimistic to detect the potential risks caused by excessive leverage, after several processes of business expansion, huge amount of profit gained mainly through subprime mortgage loans collateral debt obligations, Lehman believed that the way they insist in terms of positive market trend even until the time they found that accumulated bad debt caused severe liquidity risks, the supervisors still kept the faith that the adverse situation was temporary. Risk arising from dependency of long-term borrowing was automatically ignored by Lehman’s supervisors compared with the more attractive salary figures shown on their notebook. Liquidity problems lack of independent thinking at Lehman make Lehman decision markers over-focused on short term losses instead of acting with the required urgency. Eventually, the existence of bad debt cannot be removed forever in such ways, improper management decisions brought Lehman itself into an irreparable damage instead of rescue. Lack of adequate corporate governance was also regarded as the supervisors’ negligence.
With depth research of internal causes of Lehman’s failure, it is not difficult to discover that obviously, extra root factors strikes Lehman’s insufficient corporate governance is concerned on the remuneration incentive system and company structures internally. According to Equilar CEO Benefits & Perquisites Report (2008), it shows that from 1993 to 2007, Richard Fuld received 466 million dollar remuneration in total, including salaries, bonus, long term stock ownership incentive and other incomes, etc. In addition, various employee incentive plans had been launched. According to its incentive plans for the period ended 30 November 2007 (last annual report date before bankruptcy), 82.3 million ordinary shares were available to be issued and 0.4 million shares reserved to issue as bonus somehow (Lehman Brothers, 2007). Besides, Lehman also reserved the right that issue held ordinary shares and new shares in the future if planned to. Because of Lehman’s incentive systems, in order to achieve high profits, brokers and managers take high risk for stock options, even breach moral standards. Matching with high remuneration packages, high-risk assets distribution in Lehman business plans enlarged year by year, which eventually lead to collapse of whole business.
Additionally, the Board of Director consists of ten directors, nine of which have already retired and four were over the age of seventy-five; practically, the CEO named Richard Fuld had also played the role in chairman and risk control manager at the same time, which was the only one had professional acknowledgement of current financial market among those directors. He also had longest tenure of office in Wall Street and rescue Lehman go through several bankruptcy challenges. In addition, although the establishment of five committees, and the Audit Committee, the Finance and Risk Committee, relevant members were lack of experience of the Commission responsibility and the frequency of the annual meetings in finance and risk management committee was only twice a year in both 2006 and 2007. In the first place, management teams were unreasonable optimistic which affected by previous well-going performance. They estimated future market trend extremely wrongly. At the beginning of housing market crisis in early 2007, Lehman still decided to expand its businesses in that field without any awareness of potential coming serious crisis. Lehman was even regarded as outstanding paragon of challenge dealer in the early subprime crisis. During years of rapid development prior to credit crisis, Lehman Brothers head office put risk monitoring aside in order to achieve higher profit. Even worse, because of unreasonable remuneration incentive plans, managers paid more attention on short-term earnings instead of long-term ones. For instance, excessive remuneration packages for Chair Executive Officer and other headquarter management team members had been approved by the Board of Directors.
In order to accomplish high profits targets, Lehman put its business in hazard high financial leverage level. For instance, financial leverage of Lehman was 24.3 in second quarter of 2008, which was at extremely high level. The most obvious risk of high leverage is that multiple losses. A corporation that borrow too much money might have to deal with bankruptcy of default during a business downturn, while a less-levered corporation might survive. An investor who buys a stock on 50% margin will lose 40% of his money if the stock declines 20%.
(Data resources: Lehman Brothers’ leverage analysis, Erin, Callan, 2008)
Basing on the table above, it is straightforward to see the weight of level 3 assets among total at Lehman Brothers. Though Lehman was not the highest one, again, Lehman held a far shortage of funds in hands compared with other comprehensive investment counterparties. Basing on the corporate size, it still indicated that Lehman barely focused on a long-run development strategy.
4.2 Impacts on financial system supervision and regulations:
In general, policymakers will tend to bail out institutions which are considered to be “systemic” important which means that institutions whose potential failure could threaten the stability of the entire financial system. Similarly, a hedge fund company named Long-Term Capital Management (LTCM) made significant loss in Russian financial crisis but got bail out by other financial institutions under the Federal Reserve supervision. To a certain degree, besides this time crisis differentiate from previous, government was trying to convey warning signal through Lehman Brothers bankruptcy to all other financial institutions to observe their potential severe risk in their business.
4.2.1 Too Big To Fail
Principles of financial institutions that become ‘too big to fail’ based on firm’s size and level of importance to financial systems. Investors used to believe that not a single bank would be allowed to fail until Lehman collapsed. They are firmly convinced that government would assist and repay the debts that collapsing banks had in order to avoid severe impacts on stability of economy and financial systems. Meanwhile, large financial institutions received mislead messages that they would receive assistance from governments when they were failing.
The United States Department of the Treasury released the financial industry bailout plan in early 2009 for the purpose of rescuing large financial institutions which are suffering difficult financial situations. However, not as usual, they emphasize that approaches have been taken depended on each own situation. Decision of whether rescuing are based on the market influence of financial entities that trapped in difficult financial situations. The department of the Treasury considers to provide target investments and assets cover(资产担保) to financial institutions might disrupt financial market and worsen national economy. Efficiency of government bailout would be increased by the new financial industry bailout plan. In additions, new plan would also satisfy investors’ requirement of corporation information transparency.
4.2.2 Financial Reform
Due to severe consequences caused by financial crisis of 2008, United States government introduced relevant policies and regulations in order to rescue economy and prevent economic conditions deterioration. Because of which, the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted in 2010 voted by United States House of Representatives. It corresponds with Financial Regulatory Reform and expected to a comprehensive vision (Black, 2010). The central idea of Dodd-Frank Act is to monitor systemic risk under adapted regulation frameworks. This is the first time in the United States history that a general framework solely has devised for systemic risk regulation. In post-crisis period, risk control takes more and more important position in financial institutions general management performance measurement. In fact, failure of one powerful financial entity would lead to chain reaction in entire financial industry, which could result in multiple failures of other institutions and economic instability.
The United States Department of the Treasury describe globalisation phenomenon in Financial Regulatory Reform as “as we have witnessed during this crisis, financial stress can spread easily and quickly across national boundaries. Yet, regulation is still set largely in a national context. Without consistent supervision and regulation, financial institutions will tend to move their activities to jurisdictions with looser standards, creating a race to the bottom and intensifying systemic risk for the entire global financial system.” (Department of the Treasury, 2009, pp.8) In order to retain competitive in international financial market, the United States should tend to perfect relevant regulations. The Dodd-Frank Wall Street Reform and Consumer Protection Act also mentioned regulatory reform in banking industry (White House, 2009). Financial regulatory reform was recognized as the most strict reform act since the great depression and also was a footstone in financial supervision regulations (Investors’ Working Group, 2009). This reform decided to build a brand new financial stability supervision committee that will work with Federal Reserve to supervise ‘too big to fail’ financial entities. Through approaches, such as increase capital base and restrict its leveraging. The new reform act also requires the government to operate audit accountability and assurance on Federal Reserve future lending plans. Therefore, as a result of which, Volker Rule enacted. The Office of Thrift Supervision (OTS) has been abandoned which seems to be a minor but vital change in financial system (Rappaport, 2012). In 2010, Volcker Rule, proposed by former Federal Reserve Chairman Paul Volcker, has been approved by President Obama which is mainly about forbidding financial institutions operating Proprietary (Rappaport, 2012). To be more detailed, Volcker Rule split proprietary trading from merchant banking which is aiming to reduce volume of risky investments in case worsening financial crisis. Moreover, Volcker Rule also mentioned regulations about activities of hedge fund and private equity restriction.
The Dodd-Frank Act force large banks peeling majority of their departments of hedge funds and private equity in order to build new systems to split banks in similar size as Lehman who suffer bankruptcy challenges, in case of which failure of large banks result in serious consequences in entire financial market.
Countries among the world, particularly western countries, focus more on supervision on financial initiatives in post crisis period. Even though the Federal Reserve released huge volume of monetary base and rapid expansion in balance sheet, due to worse condition of balance sheet performance, banks’ lending willing was not that strong and increasing standard level of credit market, currency liquidity speed rise up obviously. Monetary base can be changed through open market transactions (i.e. buying and selling of government bond).
4.2.3 Improvements on financial systems supervision
With rapid innovation of financial initiatives, shadow banking systems developed beyond imagination. According to the Turner Review (2009, pp,23), it describe shadow banking as “…the increasing complexity of securitised credit, increasing scale of banking and investment banking activities, and increases in total system leverage, were accompanied by changes in the pattern of maturity transformation which created huge and inadequately appreciated risks”. The central part of shadow banks in United States is that housing mortgage loans securitisation. Changings of housing mortgage loans financing not only reduce financing costs, but also become new sources of systemic risk by derivatives globalisation and credit expansion. What is also changed by financial crisis is that government authority takes investment banks under supervision after bailing them out from financial crisis. For instance, Goldman Sachs Group Inc. used to be a corporation without government supervision prior to crisis, however, after receiving assistance from central government, its business has to put under related authorities monitoring. In fact, after serious crisis of 2008, business operated by investment banks has been strategically adjusted with changing of market conditions. Most importantly, business concentrations moved from valet trading to proprietary trading; besides, business focus also moved from stock market trading to derivatives trading. Nevertheless, these two strategic changes in investment banks business contents brings huge benefits but also becoming more risky. With rapid development of shadow banking, high leverage ratio boom financial market meanwhile also brings fragility of entire financial systems, which push financial crisis into worsen position. However, after suffering severe financial crisis outcomes, blank of shadow banking supervision has been filling in steps by steps. Under adapted supervision regulations, information disclosure and adequate capital would be put on the top of the list. At the present time, United States has required hedge fund, private equity and risk capital fund corporations that achieved certain trading volume disclose partial information to their investors as well as competitors.
4.3 Recommendation
Since financial crisis, western countries, especially United States, tend to mitigate effects of wealth shrink by expanding their balance sheets and providing incentives so that deleverage speed can be controlled, as well as urge assets and liabilities of private sectors transferring to public sectors. In such situation, sovereign debt and deficit finance become universality issues that bothered developed countries. According to surveys, deficit level of western countries all increased by 15%-20%, compared with that prior to crisis (Ventura and Aridas, 2011). Bankruptcy of Lehman Brothers Inc. resolved United States financial sector over capacity issues, which provide necessary bases to recover from severe financial crisis of 2008. Similarly, bankruptcy of Bear Stearns made hedge fund industry recover from over capacity, meanwhile Dow Jones index rose significantly to 13000 points (Appendix 4). Moreover, over capacity problems in housing mortgage loans sector were overcame by taking over of Fannie Mae and Freddie Mac and bankruptcy of New Century Financial. Speaking of bankruptcy of Lehman, it resolve over capacity issues in fixed income industry.
According to Bernanke (2010), the new vision of financial supervision act is focusing on improving supervisors’ abilities of risk control, strengthening supervisions on financial institutions that matter systemic importance and increasing anti-risk ability of financial market. So that new financial supervision systems have to be built, although government and financial institutions still have much further works to be done. Besides, supervisors have to renew their knowledge to financial innovation which requires co-operations from both private sectors and public sectors.
Deleveraging began with deleveraging of financial products. During peak period of financial innovation, United States financial industry was enthusiastic about financial derivatives innovation, producing huge volume of derivative structured financial products based on securitized assets, such as CDO and CDS. Because of financial accelerator mechanism, correlation between credit market and macroeconomic fluctuations indicates nonlinear. In addition, under financial accelerator mechanism, tightening credit market significantly affected economic output which will aggravate macroeconomic fluctuations and seriously weaken the tendency of recession. Sovereign debt crisis pushes deleveraging into further steps. Owing to various national debts cross held by banks, the risk of multi-national banking is the main path that spread sovereign risk into other banking systems. As a result, global banking industry could suffer capital loss which would resist financial credit, worsen flocculation of macro economy as well as recession in global economy. Warren E. Buffett once said that financial derivative tools are the timer bomb in financial market, in the press interview of New York Times (Sorkin, 2011). Additionally, George Soros (2010) said that supervisors have to pay serious attention on the risk of financial derivatives, in case financial crisis of 2008 happened again.
4.4 Limitations
As mentioned in the previous section, various limitations have been found during research data collection and analysis process. In the first place, I have been looking through numerous literatures and pick up relevant materials to be evaluated. However, going through wider and further depth extent of materials and collecting relevant data are not allowed due to limited time restriction. Additionally, since Lehman Brothers Inc. has already filed for bankruptcy and undertaken administration process, direct communications with its employees and core management team members are not easily possible to be conducted. In other words, first-hand data and information cannot be accessed directly from Lehman Brother Inc. sources links. Therefore, secondary data collection and analysis are preferable in this research paper.
5. CONCLUSION
The last CEO of Lehman Richard Fuld said that "We are on the right track to put these last two quarters behind us", on September 10th of 2008 (Ellis, 2008). However, Lehman filed for Chapter 11 Bankruptcy Protection which beyond Mr. Fuld’s anticipation. Being the largest financial institution collapse in the United States history, the failure of Lehman Brothers rang the warning bell towards global financial market. And it was also regarded as a turning point of the financial crisis (Ivashina and Scharfstein, 2010).
This paper is mainly focusing on why Lehman Brothers collapsed unexpectedly and its impacts on financial systems supervision and regulations. Based on discussions and evaluations in previous sections, failures of Lehman not only caused by financial factors, but also affected by political elements. Without doubting, unexpected failure of Lehman do have significant and long-lasting influence on entire United States financial history, even on entire world financial history. In general, based on the findings of this research, Lehman Brothers’ failure not only reveals the insufficiency of corporate governance internally and accounting tricks, but also reveals loopholes in financial system supervision and regulations. Corporate governance played an important role in risk management and financial decision-making in firm performance. Improvements and updates in government legislations and regulations could be marked as positive sign in recovery period. As Mervyn King, the governor of the Bank of England, said that ‘Global banking institutions are global in life, but national in death’ (Schifferes, 2009). Economy globalisation bonded global economy tightly beyond any expectation. Therefore, once crisis took place, each country is not able to respond serious consequences on its own stand point. By the collapse of Lehman, not only governments but also scholars are necessarily to improve understandings and acknowledgements of what changes has been brought by economic globalisation, thereby, in order to perfect national financial systems and promote sustained economic prosperity and development.
Since subprime credit crisis occurred in United States, Federal Reserve has to spread losses into all domestic industry sectors, even transferred into global sectors. As U.S. dollar is regarded as international base currency, majority countries hold United States government bonds. Therefore, inflation in global economy that caused by crisis is seemingly to be taxation upon international countries in order to relieve its financial burden.
6. REFERENCE
Arner, D.W., 2009. The Global Credit Crisis of 2008: Causes and Consequences. International Lawyer, 43(1), pp. 91-136.
Arnold , G., 2012. Corporate Financial Management. 5th edition. Harlow: Pearson Educational Limited.
Azadinamin, A., 2012. The Bankruptcy of Lehman Brothers: Causes of Failure & Recommendations Going Forward. Social Science Research Network [online], 06 March. Available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2016892 [Accessed date: 19 March 2013]
Bernanke, B.S., 2010. Lessons from the Failure of Lehman Brothers [online]. Available at: http://www.c.federalreserve.gov/newsevents/testimony/bernanke20100420a.htm [Accessed date: 15 November 2012]
Bernanke, B.S., 2005. The Global Saving Glut and the U.S. Current Account Deficit. [online] Available at: http://www.federalreserve.gov/boarddocs/speeches/2005/200503102/ [Accessed date: 13 March 2013]
Black, B.,2010. How to Improve Retail Investor Protection After the Dodd-Frank Wall Street Reform and Consumer Protection Act. [online] Available at: http://works.bepress.com/barbara_black/2/ [Accessed date: 04 March 2013]
Blumberg, B., Cooper, D.R. and Schindler, P.S., 2008. Business Research Methods. 2nd European edition. Maidenhead, Berkshire: McGraw-Hill Education.
Brewer III, E. and Jagtiani, J., 2007. How Much Would Banks Be Willing to Pay to Become ‘Too-Big-To-Fail’ and to Capture Other Benefits?. Research Working Papers [online], No. RWP 07-05, The Federal Reserve Bank of Kansas City Economic Research Department. Available at: http://www.kansascityfed.org/publicat/reswkpap/PDF/RWP07-05.pdf [Accessed date: 23 Feb 2013]
Carney, J., 2009. The New Yorker's Economics Dude: Lehman Matters. Business Insider [online], 16 March. Available at: http://www.businessinsider.com/the-new-yorkers-economics-dude-lehman-matters-2009-3 [Accessed date: 15 January 2013]
Cecchetti, S.G., 2009. Crisis and Responses: The Federal Reserve in the Early Stages of the Financial Crisis. Journal of Economic Perspectives [online]. 23(1), pp. 51-75. Available at: http://www.jstor.org/stable/pdfplus/27648294.pdf?acceptTC=true [Accessed date: 26 Jan 2013]
Chaffee, E.C., 2010. The Dodd-Frank Wall Street Reform and Consumer Protection Act: A Failed Vision for Increasing Consumer Protection and Heightening Corporate Responsibility in International Financial Transactions. American University Law Review [online], Vol. 60, pp. 1431-1458. Available at: http://heinonline.org/HOL/Page?handle=hein.journals/aulr60&div=37&g_sent=1&collection=journals [Accessed date: 04 March 2013]
Christopoulos, A.G., Mylonakis, J. and Diktapanidis, P., 2011. Could Lehman Brothers’ Collapse Be Anticipated? An Examination Using CAMELS Rating System. International Business Research [online], Vol.4 (2), pp. 11-19. Available at: http://ccsenet.org/journal/index.php/ibr/article/download/10009/7111 [Accessed date: 10 March 2013]
Cochrane, J.H. and Zingales, L., 2009. Lehman and the Financial Crisis [online]. The Wall Street Journal, 15 September. Available at: http://online.wsj.com/article/SB10001424052970203440104574403144004792338.html [Accessed date: 31 November 2012]
Craig, S. and Lauricella, T., 2008. Big Loss at Lehman Intensifies Crisis Jitters. The Wall Street Journal [online]. 10 June. Available at: http://online.wsj.com/article/SB121300896698257001.html [Accessed date: 09 February 2013]
Dash, E., 2008. U.S. Gives Banks Urgent Warning to Solve Crisis. The New York Times [online], 12 September. Available at: http://www.nytimes.com/2008/09/13/business/13rescue.html [Accessed date: 14 November 2012]
D’Hulster, K., 2009. Crisis Response: Public Policy for the Private Sector: The Leverage Ratio [online]. Available at: http://www.worldbank.org/financialcrisis/pdf/levrage-ratio-web.pdf [Accessed date: 10 January 2013]
Ellis, D., 2008. Lehman Suffers Nearly $4 Billion Loss. CNN Money [online], 10 September. Available at: http://money.cnn.com/2008/09/10/news/companies/lehman/ [Accessed date: 17 March 2013]
Ennis, H.M., Malek, H.S., 2005. Bank Risk of Failure and the Too-Big-To-Fail Policy. Federal Reserve Bank of Richmond Economic Quarterly, Vol. 91/2 (Spring), 21-44. [online] Available at: http://richmondfed.org/publications/research/economic_quarterly/2005/spring/pdf/ennismalek.pdf [Accessed date: 23 Feb 2013]
Equilar, 2008. CEO Benefits and Perquisites Report 2008. [online] Available at: http://www.equilar.com/knowledge-network/research-reports/2008-research-reports.php [Accessed date: 15 December 2012]
Erkens, D.H., Hung, M. and Matos, P., 2012. Corporate Governance in the 2007-2008 Financial Crisis: Evidence from Financial Institutions Worldwide. Journal of Corporate Finance, 18(2), pp. 289-411.
Fein, M.L., 2013. The Shadow Banking Charade. Social Science Research Network [online], (15 February). Available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2218812 [Accessed date: 15 March 2013]
Financial Services Authority, 2009. The Turner Review: A Regulatory Response to the Global Banking Crisis. [online] Available at: http://www.fsa.gov.uk/pubs/other/turner_review.pdf [Accessed date: 07 March 2013]
Galbraith, J.K., 2009. The Great Crash of 1929. 3rd edition. London: Penguin Books Ltd.
Gotshal, W., 2010. Financial Regulatory Reform An Overview of The Dodd-Frank Wall Street Reform and Consumer Protection Act.
Greenfield, H., 2010. The Decline of the Best: An Insider’s Lessons from Lehman Brothers. Leader to Leader [online], Vol. 2010(55), pp. 30-36. Available at: http://onlinelibrary.wiley.com/doi/10.1002/ltl.399/abstract [Accessed date: 19 December 2012]
Hendricks, D., 2009. Defining Systemic Risk. Financial Reform Project, Briefing Paper No.1, The PEW Economic Policy Department. [online] Available at: http://debtsim.pewtrusts.org/uploadedFiles/wwwpewtrustsorg/Reports/Financial_Reform/Pew-Hendricks-Defining-Systemic-Risk.pdf [Accessed date: 09 March 2013]
JOHN KENNETH GALBRAITH, THE GREAT CRASH OF 1929 (19S4); MILTON FRIEDMAN & ANNA JACOBSON SCHWARTZ, A MONETARY HISTORY OF THE UNITED STATES (1971); KINDLEBERGER
Isidore, C., 2008. Jobless Rate Soars to 6.1%. CNN Money [online], 5 September. Available at: http://money.cnn.com/2008/09/05/news/economy/jobs_august/ [Accessed date: 11 November 2012]
Ivashina, V. and Scharfstein, D., 2010. Bank Lending During the Financial Crisis of 2008. Journal of Financial Economics, 97, pp. 319-338.
Investors’ Working Group, 2009. U.S. Financial Regulatory Reform: The Investors’ Perspective [online]. An Independent Taskforce Sponsored by CFA Institute Centre for Financial Market Integrity and Council of Institutional Investors. Available at: http://www.cfainstitute.org/ethics/Documents/us_investors_working_group_report.pdf [Accessed date: 18 November]
Johnson, M.A. and Mamun, A., 2012. The Failure of Lehman Brothers and Its Impact on Other Financial Institutions. Applied Financial Economics, 22(5), pp. 375-385.
Kirkpatrick, G., 2009. The Corporate Governance Lessons from the Financial Crisis. Financial Market, Vol. 2009/1.
Latifi, P., 2012. Lehman Brothers’ Rise and Fall: From Hero to Dust [online]. Available at: http://www.lcbr-online.com/index_files/proceedingssym12/12sym13.pdf [Accessed date: 17 November 2012]

Lehman Brothers Holding Inc., 2007. Lehman Brothers Holding Inc. Annual Report 2007 [online]. Available at: http://quote.morningstar.com/stock-filing/Annual-Report/2007/11/30/t.aspx?t=PINX:LEHMQ&ft=10-K&d=3fe7e40f072c2953 [Accessed date: 10 March 2013]
Lehman Brothers Holding Inc., 2008. Lehman Brothers Holding Inc. Quarterly Report for the Quarter Ended May 31, 2008. [online] Available at: http://www.rns-pdf.londonstockexchange.com/rns/8436Z_1-2008-7-24.pdf [Accessed date: 09 March 2013]
Lehman Brothers’ leverage analysis, Erin, Callan, 2008. Lehman Brothers Holding Inc. Quarterly Report for the Quarter Ended May 31, 2008. Available at: PDF [Accessed date: 09 March 2013]
Lim, W.C., 2012. Organisational Strategic Human Resource Management – The Case of Lehman Brothers. Journal of Management Research, 4(2), pp.1-8.
Loveridger, R., 1990. Triangulation – or how to survive your choice of business school PhD course. Graduate management Research, 5(3), pp. 18-25.
Merced, M.J. and Sorkin, A.R., 2010. Report Details How Lehman Hid Its Woes. The New York Times [online]. 11 March. Available at: http://www.nytimes.com/2010/03/12/business/12lehman.html?pagewanted=all&_r=0 [Accessed date: 25 February 2013]
Mϋlbert, P.O., 2009. Corporate Governance of Banks. European Business Organization Law Review, 10(3), pp. 411-436.
Nocera, J. and Andrews, E.L., 2008. Struggling to Keep Up as the Crisis Raced On. The New York Times [online], 22 October. Available at: http://www.nytimes.com/2008/10/23/business/economy/23paulson.html?pagewanted=all&_r=0 [Accessed date: 07 December 2012]
O’Connell, R., 2010. Why Did Lehman Brothers Fail?. Business School, University of Exeter.
Organisation for Economic Co-operation and Development, 2004. OECD Principles of Corporate Governance [online]. pp.11. Available at: http://www.oecd.org/daf/ca/corporategovernanceprinciples/31557724.pdf [Accessed date: 01 December 2013]
Osei-Owusu, M., 2013. What Collapsed Lehman Brothers, Could it Have Been Saved?. Social Science Research Network [online], 09 February. Available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2213717 [Accessed date: 21 March 2013]
Palmeri, C. and Pressman, A., 2006. Long Live the New King of Bond. Bloomberg Business Week Magazine [online], 15 January. Available at: http://www.businessweek.com/stories/2006-01-15/long-live-the-new-king-of-bonds [Accessed date: 09 March 2013]
Panfilii, A. and Popa, I., 2012. Failure of Corporate Governance – Intention or Negligence [online]. Reteaua Sociala. Available at: http://www.actionamresponsabil.ro/failure-of-corporate-governance-intention-or-negligence/17037 [Accessed date: 30 November 2013]
Rappaport, L., 2012. Goldman: Seeks Volcker Rule Change [online]. The Wall Street Journal, 15 February. Available at: http://online.wsj.com/article/SB10001424052970204062704577223671412393922.html [Accessed date: 17 December 2012]
Remenyi, D.,Williams, B., Money, A. and Swartz, E., 2002. Doing Research in Business and Management: An Introduction to Process and Method. 1st edition. London: Tech Trans Limited.
Schifferes, S., 2009. Can Banking Regulation Go Global?. BBC News [online], 18 March. Available at: http://news.bbc.co.uk/1/hi/business/7950758.stm [Accessed date: 12 March 2013]
Sieczka, P., Sornette, D. and Holyst, J.A., 2011. The Lehman Brothers Effect and Bankruptcy Cascades. The Physical European Journal, 82(3-4), pp. 257-269.
Smith, R and Sidel, R, 2010. Banks Keep Failing, No End in Sight. The Wall Street Journal [online], (27 September). Available at: http://online.wsj.com/article/SB10001424052748704760704575516272337762044.html [Accessed date: 14 November 2012]
Sorkin, A.R., 2008. Lehman Files for bankruptcy; Merrill Is Sold. The New York Times [online], 14 September. Available at: http://www.nytimes.com/2008/09/15/business/15lehman.html?pagewanted=all&_r=0 [Accessed date: 14 November 2012]
Sorkin, A.R., 2011. Derivatives, as Accused by Buffett. The New York Times [online], 14 March. Available at: http://dealbook.nytimes.com/2011/03/14/derivatives-as-accused-by-buffett/ [Accessed date: 08 March 2013]
Soros, G., 2010. America Must Face Up to the Dangers of Derivatives. Financial Times [online], 22 April. Available at: http://www.ft.com/cms/s/0/707ef202-4e3d-11df-b48d-00144feab49a.html#axzz2Pul9Tf85 [Accessed date: 08 March 2013]
Standard & Poor, 2013. S&P Dow Jones U.S. Total Stock Market Index (DWCF). [online] Available at: http://www.djindexes.com [Accessed date: 05 April 2013]
Sterling, W.P., 2009. Looking Back at Lehman: An Empirical Analysis of the Size and Timing of the Stock and Effectiveness of Countermeasures. Trilogy Global Advisors. [online] Available at: http://e-lib.lib.musashi.ac.jp/2006/archive/data/r5702-04/for_print.pdf [Accessed date: 28 January 2013]
Taylor, J.B. and S, 2009. The Financial Crisis and the Policy Responses: An Empirical Analysis of What Went Wrong. National Bureau of Economic Research. Working Paper 1463 [online]. Available at: http://www.nber.org/papers/w14631.pdf [Accessed date: 15 January 2013]
Udell, G.F., 2009. Wall Street, Main Street, and a Credit Crunch: Thoughts on the Current Financial Crisis. Business Horizons, 52, pp. 117-125.
United States. Department of the Treasury, 2010. Financial Regulatory Reform: A New Foundation: Rebuilding Financial Supervision and Regulation. [online] Available at: http://www.treasury.gov/initiatives/Documents/FinalReport_web.pdf [Accessed date: 04 April 2013]
United States. The White House. 2009. President Obama to Announce Comprehensive Plan for Regulatory Reform[online]. Washington: Office of the Press Secretary. Available at: http://www.whitehouse.gov/the-press-office/president-obama-announce-comprehensive-plan-regulatory-reform [Accessed date: 19 November 2012]
Valukas, A.R., 2010. Lehman Brothers Holding Inc. Chapter 11 Proceedings Examiner Report. [online] Available at: http://jenner.com/lehman/ [Accessed date: 29 December 2012]
Ventura, L. and Aridas, T., 2010. Public Debt as Percent of GDP 2006-2013. Global Finance [online]. Available at: http://www.gfmag.com/tools/global-database/economic-data/10394-public-debt-by-country.html#axzz2Q2D2otDW [Accessed date: 09 December 2012]
Vyas, D., 2011. The Timeliness of Accounting Write-downs by U.S. Financial Institutions During the Financial Crisis of 2007-2008. Journal of Accounting Research, 49(3), pp. 823-860. [online] Available at: http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=6aa4feb7-e273-47bf-8385-1ed0ef833e09%40sessionmgr13&vid=2&hid=20 [Accessed date: 27 February 2013]
Wall, L.D., 2010. Too Big to Fail after FDICIA. Federal Reserve Bank of Atlanta Economic Review, 95, pp. 1-16.
Wheelock, D.C. and Wilson, P.W., 2000. Why Do Banks Disappear? The Determinants of US Banks Failures and Acquisitions. The Review of Economics and Statistics, 82, pp. 127-138. [online] Available at: http://www.jstor.org/stable/pdfplus/2646678.pdf?acceptTC=true [Accessed date: 24 February 2013]
Wilson, L. and Wu, Y., 2010. Common (Stock) Sense about Risk-shifting and Bank Bailout. Financial Markets and Portfolio Management, 24, pp.3-29.
Yahoo Finance, 2012. Lehman Bros HLD (LEHMQ) Historical Share Prices [online]. Yahoo. Available at: http://finance.yahoo.com/q/hp?s=LEHMQ&a=04&b=11&c=1994&d=03&e=10&f=2013&g=m [Accessed 16 January 2013]
7. APPENDICES
Appendix 1.