Lehman’s Toxic Assets No Secret on Wall Street, Paulson Says

Lehman Brothers’ disastrous balance sheet was not a secret to the insiders on Wall Street, reveals former United States Treasury Secretary Henry Paulson in his new memoir, “On the Brink.”

Yet this knowledge did not encourage anyone within UBS and other financial service firms from continuing to sell Lehman Brothers principal protected notes to thousands of main street investors around the world.

These investors believed their principal would be protected from losses, but when Lehman Brothers filed for bankruptcy in September 2008, it became apparent that the majority of their investment would be lost.  Investors with high-dollar losses have been encouraged so far by awards in arbitration through FINRA, the Financial Industry Regulatory Authority, where Vernon Litigation Group is representing investors from multiple states.

Vernon Litigation Group is representing numerous Lehman Brothers principal protected notes investors, the majority of whom have losses well in excess of $500,000, in cases against UBS.  Investors around the world – particularly from the U.K – who were affected by the collapse of Lehman Brothers have sought information about Lehman Brothers principal protected notes through Vernon Litigation Group.

In “On the Brink,” Paulson describes Lehman Brothers as being “loaded with toxic assets worth far less than the value at which they were carried, creating a capital hole.” Paulson declines to accuse any specific executives of violating the rules, however.

According to Paulson, investment heavyweights on Wall Street were concerned with excessive risk-taking in the markets and appalled by the erosion of underwriting standards.  However, this did not change their behavior in terms of selling structured notes such as the Lehman Principal Protected Notes.

Paulson’s memoir indicates that some banks did not want an industry-backed rescue. “They knew that to make the math work, they would have to make a loan secured by assets worth much less than their stated value,” he writes.

This was the case at Lehman Brothers. There, a particular set of bad investments had been carried at $52 billion but were later analyzed and estimated at closer to $27 to $30 billion.

Vernon Litigation Group is representing multiple Lehman structured product investors in FINRA arbitration. Vernon Litigation Group, a Naples, Florida-based law firm, represents investors nationwide who are victims of stock fraud and stock losses due to broker fraud and brokerage firm fraud and misconduct. Vernon Litigation Group securities attorneys are experienced in arbitration and litigation. The firm assists clients in attempting to recover losses caused by all manner of financial fraud and negligence. It focuses its practice on complex financial litigation and arbitration as well as business and commercial litigation.