Reforms made in response to the bankruptcy of Lehman Brothers in 2008 won’t prevent a repeat, experts told MarketWatch.com. As the 10th anniversary of the Sept. 15, 2008, bankruptcy of investment bank Lehman Brothers approaches, MarketWatch looked at whether the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 and other reforms will prevent another financial crisis if there’s a failure of a non-bank financial institution like Lehman. MarketWatch looked at two areas of reform resulting from Lehman’s bankruptcy and the effect the failure had on the financial crisis: the new Dodd-Frank orderly resolution authority that replaced bankruptcy for “too big to fail” banks, and the elimination by accounting standard setters of the loophole that enabled the use of Repo 105, an accounting technique Lehman used that also allowed balance sheet “window dressing.” Anton Valukas, the Lehman bankruptcy examiner, wrote in 2010 that determining whether the bankruptcy filing made the financial crisis worse was beyond the scope of his investigation. However, what happened next suggests the Lehman bankruptcy filing had a significant impact on the depth of the crisis. Read more.
In related news, almost all of the mandatory provisions of the law had been finalized by the Securities and Exchange Commission by the end of 2015, five years after the passage of the Dodd–Frank Wall Street Reform and Consumer Protection Act in 2010. The executive compensation-related provisions of the Dodd-Frank Act were “designed to address shareholder rights and executive compensation practices,” according to the text of the law, MarketWatch.com reported. But 10 years after the failure of Lehman Brothers, and eight years after the passage of the reform law, five of 12 mandatory executive compensation rules remain to be approved by the Securities and Exchange Commission. Read more.
