There’s no one reason why Lehman Brothers failed — but misrepresentations of the size of its liquidity pool in autumn 2008 might have been one of the biggest, says the anonymous finance lawyer blogging at Economics of Contempt. A stated $32.5bn pool as of September 12 2008 had shrunk to at most $2.5bn by September 15 — largely because assets defined as ‘liquid’ for purposes of inclusion in the pool in reality weren’t.
Which shows the importance of regulators improving liquidity requirements — if the Basel Commitee ever finishes the job, with the NYT noting torpor in the process of reform. Plus the IMF has pointed to continuing risk in the US financial system, reports the WSJ.