Sep 17, 2008
3 comments
Lehman’s Collapse is Good for American Business
Every once in a while I feel compelled to put my economics degree to use. This is one of those times.
There’s a tremendous amount of pain around the collapse of Lehman Brothers. I don’t want to belittle or take attention away from that pain. I have been in two market collapses myself (Latin American stock markets in 1994 and the internet business in 2001) and it is not fun.
But there is a silver lining in the collapse of Lehman. Lehman’s bankruptcy, along with Bank of America’s purchase of Merrill Lynch and Bear Sterns disappearance are the end a particular type of business: the large scale broker-dealer investment bank. These banks made huge amounts of money in secondary markets for stocks, bonds and financial products derived from other underlying assets. The money in these markets is primarily traded among participants in those markets. It does not directly go to the companies, governments or people whose name might be on those assets. Read the rest of this post »
