Lehman Day 2018 is just around the corner! A friend of a friend sent me this hat, and I’m actually super excited to have it! To celebrate (mourn?), I’ve pulled together a few links:

As McArdle notes in “Lehman changes everything”, economists largely thought they had cycles figured out in 2006. It had been over 20 years since a major recession. Bankers had thought they had figured out how to price risk. Lifetime renters had become homeowners, and they often felt they had figured out a quick route to success. It seemed all too easy to make money just by purchasing–and then selling that very same piece of property. In hindsight, it is easy to see that these were generally poorly grounded beliefs.

The fact that so few were punished for their actions reflects on our innate belief that when good things happen to us it is due to our merit, while when bad things happen it is due to bad luck. If you think about the gains–high incomes that stockpiled wealth along with paper gains–in the buildup of the housing bubble, those mortgage issuers, bundlers, insurers, and really anyone who benefitted felt they were generally doing the right thing. Unfortunately, many of the promises that were made in the buildup were unable to be fulfilled. We broke our trust with one another, and our economy and political system is still dealing with that today. Ideally, those with higher earnings would have saved enough of their incomes to have weathered any economic storm. In most cases that did not–or could not–happen. A lot of the new found wealth was tied up in homes which fell in value. It is a fascinating episode in U.S. (global) economic history that deserves a close and frequent look. It’s so easy to forget the stunning events leading up to September 15, 2008. It is really our responsiblity to learn lessons from what happened.

A Timeline

  • 3/18/08 Bear Stearns purchase by JP Morgan - facilitated by Fed (Sunday)
  • 9/7/08 Fannie Mae and Freddie Mac nationalized (Sunday)
  • 9/15/08 Lehman Brothers bankruptcy (Monday)
    • BoA and Merrill merge
  • 9/16/08 AIG crisis begins (Tuesday)
  • 9/21/08 Goldman Sachs and Morgan Stanley become bank holding companies (Sunday)
  • 9/25/08 Washington Mutual (WaMu) declared insolvent and purchased by JP Morgan (Thursday)
  • 10/3/08 Troubled Asset Relief Program (TARP) passed by Congress (Friday)
    • Wells Fargo also purchases Wachovia