==Financial crisis and bank bailout==
===High leverage===
On Saturday September 13<blockquote>"In 2004, 2008, Timothy F. Geithner, called the Securities and Exchange Commission relaxed a meeting on rule limiting the future amount of leverage that Lehmanand other investment banks could use. As this Lehman chart shows, which included that proved to be a temptation the possibility firm could not resist. At first, Lehman’s bets paid out. As Mr. Fuld’s testimony recounts, Lehman achieved “four consecutive years of an emergency liquidation of its assetsrecord-breaking financial results” between 2004 and 2007. These were lucrative years for Lehman’s executives and Mr. Fuld.<ref>[http://wwwLehman paid out over $16 billion in bonuses.nytimesMr.com/2008/09/13/business/13rescueFuld himself received over $30 million in cash bonuses.html “UHis total compensation during these four years exceeded $260 million.S But while Mr. Gives Banks Urgent Warning to Solve Crisis”]Fuld and other Lehman executives were getting rich, 09-12-2008they were steering Lehman Brothers and our economy towards a precipice. Retrieved 09-10 Leverage is a dangerous double-2009edged sword.</ref> Lehman reported that When it works — as it did from 2004 to 2007 — it had been in talks with Bank of America and Barclays for magnifies investment gains. But when asset values decline — as the company's possible sale. However, both Barclays subprime market did — leverage rapidly consumes a company’s capital and Bank of America ultimately declined to purchase the entire companyjeopardizes its survival.<ref>[http://www Mr.nytimesFuld’s actions during this crisis were questionable.com/In a January 2008/09/15/business/15lehmanpresentation, he and the Lehman board were warned that the company’s “liquidity can disappear quite fast.html "Lehman Heads Toward Brink as Barclays Ends Talks"]” Yet despite this warning, NY Times. 09-15-2008Mr. Retrieved 09-Fuld depleted Lehman’s capital reserves by over $10billion through year-2009end bonuses, stock buybacks, and dividend payments.</ref>
At its New York headquarters, shortly before 1 a.m. Lehman Brothers Holdings announced it would file for Chapter 11 bankruptcy protection citing bank debt of $613 billion, $155 billion in bond debt, and assets worth $639 billion.<ref>[http://www.ecommerceRisk-journaltaking has an important role in our economy.com/articles/12188_10_most_memorable_events_of_2008_according_to_the_ecommerce_journal “10 most memorable events of 2008”], Ecommerce Journal. 12-30-2008But federal regulators are supposed to ensure that these risks don’t become so large they can imperil our entire economy. Retrieved 09-10-2009They failed miserably. </ref> It further announced The regulators had a blind faith in the market and a belief that its subsidiaries would continue to operate as normalwhat was good for Mr. A group of Fuld and other executives on Wall Street firms agreed to provide capital and financial assistance was good for the bank's orderly liquidation and the Federal Reserve, in turn, agreed to America. We are now all paying a swap of lower-quality assets in exchange for loans and other assistance from the governmentterrible price."<ref/blockquote>[http://www.thestreet.com/story/10436608/lehman-brothers-what-you-need-to-know.html “Lehman Brothers: What You Need to Know”]Statement by Chairman Henry Waxman, Oversight and Government Reform Committee Chairman, October 6, TheStreet.com. 09-15-2008. Retrieved 09-10-2009. </ref>
The morning of Monday, September 15 witnessed scenes of Lehman employees removing files, items with the company logo, ===Housing bubble and other belongings from the world headquarters at 745 Seventh Avenue. The spectacle continued throughout the day and into the following day.mortgage crisis===
At its New York headquarters, shortly before 1 During the housing bubble home prices rose astaggering 96 nominal percent price increase over six years (72 percent in real dollars.m Prices peaked in May 2006 and started a slow decline. Lehman Brothers Holdings announced it would file for Chapter 11 bankruptcy protection citing bank debt Much of $613 billionthis boom was funded with mortgages, $155 billion in bond debtincluding subprime mortgages, and assets worth $639 billion.<ref>[http://www.ecommerce-journal.com/articles/12188_10_most_memorable_events_of_2008_according_to_the_ecommerce_journal “10 most memorable events of 2008”]questionable quality that were financialized, Ecommerce Journal. 12-30aggregated into complicated financial instruments like collateralized debt obligations (CDOs) and sold as high-2008. Retrieved 09-10-2009rated securities. </ref> It further announced that its subsidiaries would continue to operate as normal. A group The risk of Wall Street firms agreed to provide capital and financial assistance for the bank's orderly liquidation and these securities were supposedly balanced by the Federal Reserve, in turn, agreed to a swap purchase of lower-quality assets in exchange for loans and other assistance Credit Default Swaps (CDS) from the government.<ref>companies like [[http://wwwAIG]].thestreet.com/story/10436608/lehman-brothers-what-you-need-to-know.html “Lehman Brothers: What You Need to Know”] However, many companies took unbalanced positions in these securities and derivatives, TheStreet.com. 09-15-2008. Retrieved 09-10-2009believing that housing prices could not fall. </ref>
The morning of MondayIn addition to engaging in risky derivativee trading including CDSs, September 15 witnessed scenes of Lehman employees removing files, items with Brothers experienced unprecedented losses in the company logo, mortgage crisis. Lehman held on to large positions in subprime and other belongings from lower-rated mortgage tranches while securitizing the world headquarters at 745 Seventh Avenueunderlying mortgages leading to huge losses accrued in lower-rated mortgage-backed securities throughout 2008. The spectacle continued throughout In the day second fiscal quarter, Lehman reported losses of $2.8 billion and into was forced to sell off $6 billion in assets.<ref name="fourteen">[http://www.nytimes.com/2008/08/29/business/29wall.html?em "Struggling Lehman Plans to Lay Off 1,500"], NY Times. 08-28-2008. Retrieved 09-10-2009. </ref> In the first half of 2008 alone, Lehman stock lost 73% of its value as the following daycredit market continued to tighten.<ref name="fourteen" /> In August 2008, Lehman reported that it intended to release 6% of its work force, 1,500 people, just ahead of its third-quarter-reporting deadline in September.<ref name="fourteen" />
By September 2008, when Lehman Brothers declared bankruptcy, housing prices had already dropped 22 percent from the peak. Prices fell another 12 percent in the six months after Lehman collapsed. <ref>[[Imagehttp:LehmanFuld//economix.jpg|Richard Fuld of Lehman]blogs.nytimes.com/2009/09/08/what-weve-learned-ugly-truths-about-housing/#more-29781 “What We’ve Learned: Ugly Truths About Housing”], NY Times. 09-08-2009. Retrieved 09-10-2009. </ref>
During hearings on the ===Lehman bankruptcy filing by Lehman Brothers and bailout of AIG before the House Committee on Oversight and Government Reform, former Lehman Brothers CEO Richard Fuld said a host of factors including a crisis of confidence and naked short selling attacks followed by false rumors contributed to both the collapse of Bear Stearns and Lehman Brothers. House committee Chairman Henry Waxman said the committee received thousands of pages of internal documents from Lehman and these documents portray a company in which there was “no accountability for failure".<ref NAME="eighteen" /> Documents obtained by the Oversight and Government Reform Committee undermine Mr. Fuld’s contention that Lehman was overwhelmed by forces outside its control. One internal Lehman analysis reveals that Lehman “saw warning signs” but “did not move early/fast enough” and lacked “discipline about capital allocation.” <ref>[http://www.speaker.gov/blog/?p=1537 “Oversight Hearing on Causes and Effects of the Lehman Brothers Bankruptcy”], The Gavel. 10-06-2008. Retrieved 09-10-2009. </ref> =
===Contribution to On Saturday September 13, 2008, Timothy F. Geithner, called a meeting on the future of Lehman, which included the Crisis===possibility of an emergency liquidation of its assets.<blockquoteref>"In 2004[http://www.nytimes.com/2008/09/13/business/13rescue.html “U.S. Gives Banks Urgent Warning to Solve Crisis”], 09-12-2008. Retrieved 09-10-2009.</ref> Lehman reported that it had been in talks with Bank of America and Barclays for the Securities company's possible sale. However, both Barclays and Exchange Commission relaxed a rule limiting Bank of America ultimately declined to purchase the amount of leverage that Lehman and other investment banks could useentire company.<ref>[http://www.nytimes.com/2008/09/15/business/15lehman. As this html "Lehman chart showsHeads Toward Brink as Barclays Ends Talks"], that proved to be a temptation the firm could not resistNY Times. 09-15-2008. Retrieved 09-10-2009.</ref>
At firstits New York headquarters, Lehman’s bets paid outshortly before 1 a. As Mrm. Fuld’s testimony recountsLehman Brothers Holdings announced it would file for Chapter 11 bankruptcy protection citing bank debt of $613 billion, $155 billion in bond debt, Lehman achieved “four consecutive years and assets worth $639 billion.<ref>[http://www.ecommerce-journal.com/articles/12188_10_most_memorable_events_of_2008_according_to_the_ecommerce_journal “10 most memorable events of record2008”], Ecommerce Journal. 12-breaking 30-2008. Retrieved 09-10-2009. </ref> It further announced that its subsidiaries would continue to operate as normal. A group of Wall Street firms agreed to provide capital and financial results” between 2004 assistance for the bank's orderly liquidation and the Federal Reserve, in turn, agreed to a swap of lower-quality assets in exchange for loans and 2007other assistance from the government.<ref>[http://www.thestreet.com/story/10436608/lehman-brothers-what-you-need-to-know.html “Lehman Brothers: What You Need to Know”], TheStreet.com. 09-15-2008. Retrieved 09-10-2009.</ref>
These were lucrative years for Lehman’s executives The morning of Monday, September 15 witnessed scenes of Lehman employees removing files, items with the company logo, and Mrother belongings from the world headquarters at 745 Seventh Avenue. Fuld. Lehman paid out over $16 billion in bonuses. Mr. Fuld himself received over $30 million in cash bonuses. His total compensation during these four years exceeded $260 millionThe spectacle continued throughout the day and into the following day.
But while Mr[[Image:LehmanFuld. jpg|Richard Fuld and other of Lehman executives were getting rich, they were steering Lehman Brothers and our economy towards a precipice.]]
Leverage is a dangerous double-edged sword. When it works — as it did from 2004 to 2007 — it magnifies investment gains. But when asset values decline — as ===Hearings on the subprime market did — leverage rapidly consumes a company’s capital and jeopardizes its survival.bankruptcy===
During hearings on the bankruptcy filing by Lehman Brothers and bailout of AIG before the House Committee on Oversight and Government Reform, former Lehman Brothers CEO Richard Fuld said a host of factors including a crisis of confidence and naked short selling attacks followed by false rumors contributed to both the collapse of Bear Stearns and Lehman Brothers. House committee Chairman Henry Waxman said the committee received thousands of pages of internal documents from Lehman and these documents portray a company in which there was “no accountability for failure".<ref NAME="eighteen" /> Documents obtained by the Oversight and Government Reform Committee undermine Mr. Fuld’s actions during this crisis were questionablecontention that Lehman was overwhelmed by forces outside its control. In a January 2008 presentation, he and the One internal Lehman board were warned analysis reveals that the company’s “liquidity can disappear quite Lehman “saw warning signs” but “did not move early/fastenough” and lacked “discipline about capital allocation.” Yet despite this warning<ref>[http://www.speaker.gov/blog/?p=1537 “Oversight Hearing on Causes and Effects of the Lehman Brothers Bankruptcy”], MrThe Gavel. 10-06-2008. Fuld depleted Lehman’s capital reserves by over $ Retrieved 09-10 billion through year-end bonuses, stock buybacks, and dividend payments2009.</ref>
In one document, a senior executive tells Mr. Fuld that if ===Contribution to the company can secure $5 billion in financing from Korea, “I like the idea of aggressively going into the market and spending 2 of the 5 in buying back lots of stock (and hurting Einhorn bad!!).” This action might have inflicted short-term losses on a short seller Lehman despised, but it would have burned through even more capital. Mr. Fuld’s response: “I agree with all of it.”Crisis===
What’s fundamentally unfair about the collapse The bankruptcy of Lehman is its impact on Brothers, without a rescue from the government, created fear that the economy and taxpayersgovernment would allow the financial sector to collapse. Mr. Fuld will do fine. He can walk away from Lehman a wealthy man who earned over $500 million. But taxpayers are left with a $700 billion bill to rescue Wall Street and an economy in crisis The stock market fell dramatically the next day.
Risk-taking has an important role in our economy. But federal regulators are supposed to ensure that these risks don’t become so large they can imperil our entire economy. They failed miserably. The regulators had a blind faith in the market and a belief that what was good for Mr. Fuld and other executives on Wall Street was good for America. We are now all paying a terrible price."</blockquote>
- Statement by Chairman Henry Waxman, Oversight and Government Reform Committee Chairman, October 6, 2008
<blockquote>“First, our financial system has become dangerous on a gigantic scale. We knew that the banks were playing games — e.g., with their so-called off-balance sheet activities — but we previously had no idea that these huge corporations were so badly run or so close to potential collapse.
- Joseph Stiglitz, Nobel prize-winning economist and professor at Columbia University<ref>[http://www.independent.co.uk/news/business/analysis-and-features/crash-of-a-titan-the-inside-story-of-the-fall-of-lehman-brothers-1782714.html “Crash of a titan: The inside story of the fall of Lehman Brothers”], The Independent. 09-07-2009. Retrieved 09-10-2009. </ref>
Housing prices peaked in May 2006. After experiencing a staggering 96 nominal percent price increase during the six years before then (72 percent in real dollars), prices started a slow decline. By September 2008, when Lehman Brother declared bankruptcy, prices had already dropped 22 percent from the peak. Prices fell another 12 percent in the six months after Lehman collapsed. <ref>[http://economix.blogs.nytimes.com/2009/09/08/what-weve-learned-ugly-truths-about-housing/#more-29781 “What We’ve Learned: Ugly Truths About Housing”], NY Times. 09-08-2009. Retrieved 09-10-2009. </ref> In addition to engaging in risky derivates trading, Lehman experienced unprecedented losses in the mortgage crisis. Lehman held on to large positions in subprime and other lower-rated mortgage tranches while securitizing the underlying mortgages leading to huge losses accrued in lower-rated mortgage-backed securities throughout 2008. In the second fiscal quarter, Lehman reported losses of $2.8 billion and was forced to sell off $6 billion in assets.<ref name="fourteen">[http://www.nytimes.com/2008/08/29/business/29wall.html?em "Struggling Lehman Plans to Lay Off 1,500"], NY Times. 08-28-2008. Retrieved 09-10-2009. </ref> In the first half of 2008 alone, Lehman stock lost 73% of its value as the credit market continued to tighten.<ref name="fourteen" /> In August 2008, Lehman reported that it intended to release 6% of its work force, 1,500 people, just ahead of its third-quarter-reporting deadline in September.<ref name="fourteen" />Bailout refusal===
By September 2008, the federal government had used hundreds of billions in taxpayer funds to try to blunt the impact of outsize financial blunders on Wall Street and at Fannie Mae, Freddie Mac and the American International Group (AIG). Lehman had pleaded with regulators for months to rescue it by purchasing hundreds of billions of dollars in distressed assets, but regulators refused. <ref>[http://www.nytimes.com/2008/09/21/business/21exec.html?_r=1 “Death and Near-Death Experiences on Wall St.”], NY Times. 08-28-2008. Retrieved 09-10-2009. </ref>
Lehman Brothers Investment Management Director, George H. Walker, President Bush’s cousin was responsible for overseeing Neuberger Berman. Here’s what he wrote to the executive committee: “Sorry team. I’m not sure what’s in the water at 605 Third Avenue today. .. I’m embarrassed and I apologize.” <ref NAME="eighteen" />
As Mr. Fuld was pleading with Secretary Paulson for a federal rescue, a request submitted to the compensation committee of the board on September 11, four days before Lehman filed for bankruptcy. It recommends that the board give three departing executives over $20 million in “special payments.” <ref>[http://www.speaker.gov/blog/?p=1537 “Oversight Hearing on Causes and Effects of the Lehman Brothers Bankruptcy”], The Gavel. 10-06-2008. Retrieved 09-10-2009. </ref>
==Coal investments==