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'Happy Lehman Day!': Two Years Ago, Lehman Brothers Declared Bankruptcy

Richard Fuld, Jr., former Chairman and CEO of Lehman Brothers, testifies during a Financial Crisis Inquiry Commission hearing on Sept. 1, 2010.
Richard Fuld, Jr., former Chairman and CEO of Lehman Brothers, testifies during a Financial Crisis Inquiry Commission hearing on Sept. 1, 2010.

This morning, columnist and economist Paul Krugman posted this on his blog, The Conscience of a Liberal: "Happy Lehman Day!"

I'm puzzled: shouldn't the papers this morning be full of retrospectives about The Event That Ended The Economy As We Knew It?

Indeed, on Sept. 15, 2008, Lehman Brothers (that's "LEE-man Brothers," in case you haven't gotten the pronunciation down yet), founded in 1850, declared bankruptcy. In fairness, several major media outlets, including this one, did mark the occasion.

On Morning EditionNPR's Linda Wertheimer spoke with Financial Times editor Peter Chapman, author of The Last of the Imperious Rich, a history Lehman Brothers. He reminded us what happened two years ago:

Lehman Brothers had some enormous investments in sub-prime mortgages -- mortgages being given to people who, in the end, couldn't pay them.  Therefore, it had huge amounts of debt, and what happened then was the money that Lehman owed to other banks was called in.

The financial services firm's subsequent failure, he said, was like "pulling the plug out of the sink."

Of course, that moment had huge political ramifications. According to USA Today's David Jackson, "you could argue that Barack Obama iced the presidential election two years ago today."

It's easy to forget that polls in early September of 2008 showed a close race between Obama and John McCain, who had received a boost from his surprise selection of Sarah Palin as running mate. But the economic train wreck badly injured McCain, whose specialty was foreign affairs.

Obama, meanwhile, argued that the financial crisis proved the need for sweeping change from the George W. Bush years. He won the election easily, though the fallout from what began two years today is now dogging his presidency, with problems ranging from a 9.6 percent unemployment rate to the prospect of big Democratic losses in the Nov. 2 elections.

In recent weeks, many of the principals involved in the collapse have testified on Capitol Hill.

Earlier this month, Federal Reserve Chairman Ben Bernanke "said legal and practical considerations prevented taking action, even though 'I never at any time wavered in my view that we should do absolutely everything possible to prevent the failure of Lehman,'" The Wall Street Journal reported.

"This is my own fault, in a sense," said, Mr. Bernanke, who made that acknowledgement publicly for the first time. "I regret not being more straightforward there because clearly it has supported the mistaken impression that in fact we could have done something. We could not have done anything."

So, what has changed? Anything?

In her newest book, The Weekend That Changed Wall Street: An Eyewitness Account, CNBC's Maria Bartiromo focuses on the Lehman Brothers collapse. In an interview with TheStreet.com, she said "the landscape looks different."

Fewer banks, no more traditional investment banks, no bank holding companies, boutiques, etc. Asset sales like proprietary desks continue. Another change has been the impact all of this has had on the economy, as businesses are reluctant to add heads to the payroll because of uncertainty over FinReg and higher expenses all around (health care and taxes). Also, scrutiny on compensation, pay for performance.

Earlier this month, she spoke with WNYC's Brian Lehrer about the book and the economy today:

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