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4 Years After Bankruptcy, How Is Lehman Faring?


It was four years ago this week that the big Wall Street investment bank Lehman Brothers declared bankruptcy. Its collapse sent shockwaves around the world and brought on the worst of the financial crisis. But the story didn't end there. Lehman Brothers is still in business - sort of.

Planet Money's Adam Davidson went to its offices in New York, and is here to tell us about it.

Good morning.


MONTAGNE: Now, you visited Lehman Brothers. It's not just alive, but it's brick-and-mortar.

DAVIDSON: I have to say, it was such a surreal experience to get off at the 40th floor of the Time-Life Building, just down the block from the NPR bureau here, and there - as if it hadn't nearly destroyed the world - was the Lehman Brothers logo, and there are, you know, young people in sort of dress pants and dress shirts walking around, sitting at computer screens. It might be a little lower-key now, but it definitely gives the impression of being sort of a functioning bank.

MONTAGNE: So it looks like a regular bank, but, in fact, Adam, is it?

DAVIDSON: It's not exactly a regular bank, I think it's safe to say. So, on September 15th, 2008, Lehman Brothers declared bankruptcy, and it has been in bankruptcy court until this spring. For the last several months, Lehman Brothers - at least this division of Lehman Brothers - is legally a regular company. It is an operating company no longer under the supervision of a bankruptcy court. That being said, it is a very odd company in that the existing Lehman Brothers has one purpose, which is to sell off all of its assets and pay them to the creditors.

MONTAGNE: Sort of like a going-out-of-business sale.

DAVIDSON: Yeah. It, really, in a lot of ways, it's an awful like one of those liquidations. You're walking down the street and there's, you know, all furniture must go. All men's suits must go. We're going out of business. It's just that when you're a huge investment bank, when Lehman Brothers declared bankruptcy, it had something like $600 billion in nominal assets. And the ones that were easy to sell off, like its office building, well, it sold that the very next day of the bankruptcy.

But the more complicated things - remember, we're talking about huge numbers of toxic assets, these very odd derivatives and weird financial products tied to the value of real estate around the U.S. and trades all over the world - those things just take a very, very long time to figure out what they're worth.

MONTAGNE: So it's not like the Lehman Brothers' headquarters, which went in hours, practically. When it comes to selling, it is very complicated. It's already taken four years. How much longer?

DAVIDSON: They don't know. They're not even willing to hazard a guess. Their current plans just say 2016-plus, because they know for sure they're going to be open at least through 2016. They told me it could be five years, it could be 10 years. They haven't even reached all their creditors yet. There's thousands of creditors, and it just takes so long. Lawyers are involved. Courts are involved. So they haven't even talked to all the people they owe money to to figure out: How are we going to settle with you? It's the most complex bankruptcy, probably, in human history.

MONTAGNE: Everyone was terrified four years ago that Lehman's collapse would bring down the entire global financial system. Average people who had never heard of Lehman before knew about Lehman. And it became such a symbol, and, in some sense, still haunts the financial system. Talk to us about that.

DAVIDSON: I think the global financial crisis, in a way, comes down to the question that these people running Lehman have been trying to answer, which is: How much is a massive investment bank worth? Who does it owe money to, and who do those people owe money to?

When you hear about too big to fail, that's what they're talking about. These are such huge companies. They're so complicated. They're so hard to figure out that we worry that maybe they owe so much money to other huge companies that they'll bring those down, and those will bring others down and those will bring others down.

Now, the true uncertainty is: Have we solved this problem? The U.S. government, the Dodd-Frank regulations, they say, yes, we've solved it. We've given new powers to the regulators. Lehman won't happen again. I have to tell you, I've talked to an awful lot of economists, finance professionals - I don't find that level of confidence. People really seem to think, no, it could happen again.

MONTAGNE: Adam, thanks very much.

DAVIDSON: Thank you, Renee.

MONTAGNE: Adam Davidson, with our Planet Money team. His piece on four years after Lehman Brothers will appear in this Sunday's New York Times magazine. Transcript provided by NPR, Copyright NPR.

Renee Montagne, one of the best-known names in public radio, is a special correspondent and host for NPR News.
Adam Davidson is a contributor to Planet Money, a co-production of NPR and This American Life. He also writes the weekly "It's the Economy" column for the New York Times Magazine.