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10 Years After Lehman, the Solution Was ‘More Lehmans’

By Daniel Lacalle | 12 September 2018

HEDGEYE — The day Lehman went bankrupt I left the office in London for Waterloo Station and realized that something monumental had happened. The faces of the dozens of people waiting patiently for trains from the center to their homes were revealing. Most of them were, like me, City workers. Panic.

I remember when Freddie Mac and Fannie Mae — both government entities — were bailed out, because it happened shortly before the Lehman collapse. They were the largest originators of subprime mortgages.

Why were subprime mortgages originated by Freddie and Fannie given maximum rating and credit quality? Because they had the government stamp.

What had happened with Lehman? The CEO, Richard Fuld, had been saying for some time that its situation was impeccable, that solvency and liquidity ratios were strong and the viability of the bank was out of the question. He also repeated something we hear too often nowadays, that the shares were simply under the “attack of speculators”. Many of my readers will remember similar excuses in Popular, Monte dei Paschi, Abengoa, Tesla and so many others. This “speculator attack” excuse was used a lot of years later during the Eurozone crisis. […]

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