Feds Let Lehman Fail—Then Loaned It $138B Anyway

After refusing to bail out Lehman Brothers, the Federal Reserve funneled $87 billion to a subsidiary through JPMorgan Chase on Sept. 15, then another $51 billion the next day. The feds say they aimed to “facilitate an orderly wind-down” of Lehman’s broker-dealer operations, Andrew Ross Sorkin writes in the New York Times, but their changing explanations, and other issues, continue to muddy the waters.

Official documents say the loan was a “carefully thought-out decision” to minimize the ripple effects of Lehman’s collapse. But Treasury Secretary Henry Paulson said the government couldn’t legally lend to Lehman; the collateral simply wasn’t there. There’s no telling if the loan averted a greater financial calamity, Sorkin writes, “but until officials explain what happened, it will remain a mystery.” (More financial crisis stories.)