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Lehman Brothers bankruptcy, what lessons can be drawn?

Author

Listed:
  • Thomas J. Fitzpatrick IV
  • James B. Thomson

Abstract

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.

Suggested Citation

  • Thomas J. Fitzpatrick IV & James B. Thomson, 2012. "Lehman Brothers bankruptcy, what lessons can be drawn?," The New Palgrave Dictionary of Economics, Palgrave Macmillan.
  • Handle: RePEc:pal:dofeco:v:6:year:2012:doi:3882
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    More about this item

    Keywords

    bankruptcy; causation; contagion; Dodd; insolvency; orderly resolution authority;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-

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