Lehman’s Fall Cast a Long, Risky Banking Shadow
Unscrutinized leveraged lending swells in the dark.
Too-big-to fail worked. Too-small-to-matter is a problem.
Photographer: Nicholas Roberts/AFP/Getty Images
Bloomberg Opinion marks the 10th anniversary of Lehman’s bankruptcy with a collection of columns from around the world. Read more.
Ten years after the credit crisis sparked by the collapse of Lehman Brothers Holdings Inc., many argue that a combination of lessons learned and regulations have made the banks far safer from collapse than they have ever been.
However, a growing portion of the financial ecosystem, in both size and importance, has moved into the shadows where there is neither transparency nor regulation. Oddly, this is by design in part. One of the main goals of the regulations that emerged in the wake of the financial crisis — the Dodd-Frank financial overhaul law and others — was to prevent bank failures by barring the biggest ones from the riskiest types of trading and lending, relegating that business to a tier of financial firms thought to be too small to matter.