lehman brothers Archives - Compliance Culture

Selected Frontline documentaries on financial crisis and compliance

Frontline is a documentary series that has been broadcast by PBS since 1983. The series covers a broad range of social, political, and historical topics. Among these documentary programs have been several episodes that have covered financial crises or compliance issues in the markets or at organizations. These topics range from the 2008 global financial crisis to an overview of corruption and unethical behaviour on Wall Street to fraudulent and misleading practices within specific companies that contributed to market instability and economic collapse.

To Catch A Trader and insider trading – This 2014 episode covers the history of SAC Capital Advisors, a group of hedge funds founded in 1992 by Steven A. Cohen which was very successful for many years but declined after numerous investigations by the US Securities and Exchange Commission for insider trading. Several former traders were indicted by the US Department of Justice and the firm itself pled guilty to insider trading charges, subsequently shrinking away after returning external investors’ money to them and divesting the rest of its capital. SAC Capital Advisors no longer exists as of 2016, but the divestment process is ongoing and continues to raise questions about conflicts of interest and ethical practices at the firm. As for Cohen himself, he runs what was once SAC Capital Advisors as a family office and remains active in the financial industry despite his failure to supervise at SAC.

Dot Con and financial markets fraud during the dotcom bubble – From 2002, this episode looks at the “dotcom bubble” of the late 1990s, when the financial markets were crazy for new internet companies and their IPOs were aggressively marketed to the investing public. At the time this was a totally new frontier and the growth of the bubble was fuelled by aggressive allocation practices in the IPO process. Did the eagerness to exploit this new market tip over into fraudulent or misleading handling of the IPOs? In the rush to take companies public, risks were certainly ignored or unknowingly assumed by investors. Transparency in the marketplace was really lacking, and no one wanted to miss on profits to slow down and question whether what was going on was appropriate or advisable. This is a formula which is bound to repeat over and over again in future financial market advances and collapses.

Inside the Meltdown and the causes of the 2008 global financial crisis – This 2009 documentary starts with the seeds of fear that were sown in late 2007 about the effect that the bursting housing bubble would have on Wall Street investment firms. Saddled with bad debt and hounded by rumors of instability, in 2008 financial organizations began to decline and collapse precipitously. First Bear Sterns, and then Fannie Mae and Freddie Mac, failed and needed rescue. Then finally in September 2008 came Lehman Brothers – and from the Treasury Secretary Henry Paulson, who was subject to immense political pressure and criticism from the handling of prior crises, there came no bailout. In the aftermath of this, the financial crisis unfolded and ensued. Questions still remain about how this happened so quickly and severely, who caused or could have avoided it, and whether the plans to fix it and avoid it happening again have been effective.

Money, Power and Wall Street and the effects of the 2008 global financial crisis – In a sense picking up where the previous documentary left off, this 2013 episode looks at the often problematic efforts to recover from the financial crisis. In the many efforts to repair the global economy and strengthen the system to withstand future crises that are similar or more several, the financial markets and the governments that regulate and supervise them have struggled against themselves and each other. With investors and taxpayers all over the world on the hook for the risk and the bill, bold decisions as well as failures to act have characterized the rescue and rebuilding process, and continue to raise doubts about the resilience for the future.

The Warning and failure to regulate the derivatives market – This 2009 documentary looks at the financial crisis not from the perspective of the firms that weakened the market or collapsed within it, but from one segment, the derivatives market. This market is mysterious and key regulators took a hands-off position in investigating or managing it. The fears were that regulating the market could lead to financial crisis; it’s possible that not regulating it was one of the key causes of the downturn, in the end. These complex dynamics which prevented changes in the risky derivatives market still exist in governments and the markets today. Failing to change or move on from these to close the regulatory gap suggests that future crises are inevitable.

These are only just some Frontline episodes from over the years of the program that have touched on historically important events and issues relating to financial crisis and corporate compliance. These compelling documentaries provide a rich and informative, yet accessible, view into the complex and wide range of these topics.

The bankruptcy of Lehman Brothers

For over 150 years, Lehman Brothers Holdings Inc. was one of the largest financial services organizations in the world. In the United States it had far-reaching business operations in investment banking, securities sales and trading, research and analysis, asset and wealth management, and private equity investments.

Despite this long history, in the early 2000s Lehman Brothers was deeply impaired by the firm’s involvement in the subprime mortgage market, the impending bursting bubble of which precipitated the 2008 global financial crisis. Losing clients, market value, and rating status rapidly, Lehman Brothers filed for bankruptcy on September 16, 2008. This date is often seen as the impetus of the subsequent financial crisis, when widespread, sustained market collapse commenced.

The Lehman Brothers businesses were almost immediately taken over by Barclays in North America and Nomura Holdings elsewhere in the world. However, the impact of the bankruptcy was seismic. It had a strong effect both in concrete terms of losses in the financial markets and stress to the economy as well as a symbolic effect in representing the “too big to fail” categorization that troubled the global financial system and the many large firms within in that suffered great losses during the ensuing crisis.

A Colossal Failure of Common Sense – Also a best-selling book by Lawrence G. McDonald with Patrick Robinson, this lecture goes into great detail of the events leading up to, during, and following the Lehman Brothers bankruptcy during the years 2007-2010. The study goes even further back as well, to unpack the changes in financial regulation and banking industry laws from the 1990s which allowed the business conditions under which products like the subprime mortages and resulting securities were created and sold.

The Last Days of Lehman Brothers: Moral Hazard – This film dramatizes the events of the weekend leading up to, and in hopes of preventing, the eventual bankruptcy of Lehman Brothers. The subtitle “moral hazard” refers to the situation in which precarious risk calculations are made by individuals who do not face the liability and/or loss if the decision was the wrong one. This sort of risk-taking was prevalent during the lead-up to the financial crisis and in the subprime mortgage securitization market. The bankruptcy of Lehman Brothers served as both a reminder that the risk could come home to roost after all, as well as a cautionary tale for financial firms and governments in the future to continue to try to mitigate this exposure.

Wall Street Crash of 2008 – This is the real-time video from CNBC on the evening of September 14, 2008 which reports the unfolding story that Lehman Brothers was going to collapse and file for Chapter 11 bankruptcy protection the next day (followed by a bankruptcy filing the day after that).

Did Lehman Brothers Cause the Financial Crisis & Stock Market Crash on Wall Street? – This interview between Maria Bartiromo and Yves Smith analyses the effects of the Lehman Brothers bankruptcy to ask whether the firm’s collapse contributed to the causes of the global financial crisis or simply signalled the beginning of a trend.

Five Years After Lehman Brothers – This discussion on The Agenda with Steve Paikin from 2013 looks into what has changed, or not, in the global economy and financial services sector since Lehman Brothers went bankrupt in 2008 and the markets and industry began their prolonged collapse.

The story of the rapid decline and fall of Lehman Brothers, and the collapse of the global economy and markets that followed, is one that will remain captivating to students of the 2008 financial crisis for years to come. Furthermore, the events of that weekend in September 2008, and their causes and effects, serve as an interesting and important measure against which compliance professionals and decision-makers in the business should judge their assumptions of risk and expectations for liability.