I will donate $1000 to the DNC now if someone explains how G-S caused Lehman to fail.

[karynnj]

66. The repeal of GS led to too big to fail banks being in jeopardy of failing

The way various things contributed to the 2008 crash is very convoluted. You are using a bit of sleight of hand here by making the issue "Lehman Brothers failing". Lehman failing was a function of over leveraging that was allowed by the SEC chair, Chris Cox changing the leverage rate from 1:12 to 1:44 and the fact that derivatives and credit swaps were not regulated. Consider why this was done. It was early 2004 and the economy was beginning to sag. This action was in effect a stimulus to the economy essentially creating "new" money in the market - while the high leveraging put the companies at higher risk.

That coupled with the fact that what they speculated in more than anything else were mortgage backed securities sliced and diced into derivatives, that the credit agencies scored as very safe - even though the mortgages backing them became progressively more risky. All the financial companies were competing to give high rates - so they all increased their leverage rate and bought the derivatives and insured their risk with credit swaps. The problem was when his house of cards started to fail, the derivatives and credit swaps were seen to be far less safe than expected.

So, where was the effect of the repeal of GS? It was that many of the major banks did take advantage of the appeal and they expanded into securities. It was not Lehman failing, but the fear that several major banks - allowed by the repeal of GS to enter that risky speculation - were in jeopardy that caused the fear that the US and world financial systems could fail that necessitated the bail out.