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Lehman was allowed to go bankrupt, which in the UK forced the immediate cessation of operations (in the U.S., the firm can still operate even if its bankrupt). That was the equivalent of shifting to park on a car moving 80 miles an hour, especially as they froze their prime brokerage.

The blow up probably could have been less severe if they smoothed the landing.

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That's interesting. What is the expected method to emerge from bankruptcy, or at least protect investors and creditors, if a business must cease operations?

My intuition (and the presumption in the U.S.) is that a market position allows a business to dispose of inventory in normal commercial channels more profitably than auctioning it at wholesale in a Chapter 7-style liquidation. Hence first-day motions in U.S. bankruptcy courts.

(Disclaimer: I worked on the Lehman Brothers bankruptcy but did not represent any U.S. or U.K. subsidiaries.)

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