As the Senate prepares to vote on the financial regulation bill, Ben Bernanke, Fed chairman, Mary Schapiro, SEC chairman and Timothy Geithner, Treasury Secretary, appeared before the House Financial Services Committee to dissect what went wrong with Lehman.
Lots went wrong, of course, but the regulators (Mr Geithner was head of the NY Fed, at the time of the Lehman bankruptcy) shed little fresh light on their response (or lack there of) to Lehman’s ‘bad behaviour’. The Fed said it had no authority to regulate. The SEC, according to Ms Schapiro, didn’t have the ‘staff’, ‘resources’ or ‘mindset’ to be a prudential regulator. Lehman repeatedly failed stress tests, even those that did not exclude real estate, and the market was left blissfully unaware of the impending catastrophe.