Lehman Brothers Bankruptcy, What Lessons can be Drawn?
There is disagreement about whether large and complex financial institutions should be allowed to use US bankruptcy law to reorganise when they get into financial difficulty. We look at the events surrounding the Lehman Brothers bankruptcy filing for lessons as to whether bankruptcy law could be used to produce an orderly windup of the affairs of a failed financial firm. If so, then judicial resolution under the US Bankruptcy Code might be a better alternative to bailouts or to resolution under the Dodd–Frank Act’s orderly liquidation authority. We find that there is no clear evidence that bankruptcy law is insufficient to handle the resolution of large complex financial firms.
KeywordsBankruptcy Causation Contagion Dodd–Frank Insolvency Orderly resolution authority
JEL ClassificationsE44 G01 O11 K20 K22 G28 G38 G18 G21 G28 N12
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