“So I’m the schmuck?”
—Lehman Brothers Chief Executive Dick Fuld, confronted with the news that his firm would be forced into bankruptcy in September 2008.1
The Lehman Brothers bankruptcy in 2008 triggered a global crisis because the banking system had grown too interconnected. The crisis revealed that many European banks were holding on to bad U.S. debts and showed that their fate was dependent on political judgments, in both Washington and Brussels.
When Lehman Brothers sought bankruptcy protection on September 16, 2008, it was the fourth largest investment bank on Wall Street. The U.S. administration of President George W. Bush had deliberately allowed it to fail. There was no precedent for any such ...