Lehman is back

IF ONLY 42 really was the answer to life, the universe and everything. That's how many months Lehman Brothers languished in Chapter 11 protection. The Wall Street firm's failure in September 2008 triggered a global financial meltdown.

Sadly, the emergence of its ghost from bankruptcy three-and-a-half years later scarcely offers even symbolic hope that the crisis is truly over.

Lehman's was neither a typical bankruptcy of the kind seen, say, at American Airlines nor a quickie reboot like the ones the government funded at Chrysler and General Motors.

Instead, the firm offloaded its major businesses just days after going under - the asset management unit to its partners, the US brokerage to Barclays, and the European and Asian operations to Nomura.

Since then, Lehman has been a humongous exercise in asset liquidation for debt holders to fight over. Creditors submitted more than $300bn in claims and will probably recover around $65bn over time. The process has been a steady source of bounty for lawyers and other advisers, who between them charged the defunct bank's estate $1.5bn in fees.

In the meantime, the worst of the crisis, in the United States at least, has become history. But the effects are lingering. Other failures from September 2008 are still struggling. Taxpayers have so far committed $180bn to keep Fannie Mae and Freddie Mac afloat, with no sign of any meaningful reform.

American International Group has at least paid back some of the aid it received, but managed only a 2.3% return on equity last year.

A mix of unresolved new regulations, a slow US recovery and Europe's sovereign debt crisis make profit hard to come by for banks and other insurers, too. It's also unclear whether the financial system is now any better placed to cope with another Lehman-like collapse, despite the hopes attached to reforms in the United States and elsewhere.

Perhaps most tellingly, Western governments and taxpayers' funds are now far more enmeshed in keeping financial markets functioning than for decades - and are likely to stay that way for some time. Lehman's emergence from bankruptcy is a landmark of sorts. But for the future of the financial system, it's irrelevant.

 - Reuters

* Antony Currie is a Reuters Breakingviews columnist. The opinions expressed are his own.

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