Barclays’ takeover of much of
Lehman Brothers’ US operations in 2008 was flawed but fair, a judge in New York
Lehman had sued Barclays for $11
billion in damages, claiming the bank was given special treatment.
However, while the judge said the
sale process was “imperfect”, it was still “adequate” under
Barclays bought Lehman’s US
operations in a hastily-arranged sale at the peak of the credit crisis in
Lehman agreed to sell its US
investment banking and broking arm for $1.85 billion five days after it filed
for Chapter 11 bankruptcy protection.
That, and the fact Lehman was the
highest profile bank to be allowed to fail, was one of the most significant
events of the global crisis.
Lehman’s bankruptcy estate had
hoped to extract an $11 billion “windfall” payment from Barclays.
However, US Bankruptcy Judge James
Peck said in his opinion statement that while the deal had not been without
flaws, it was sound overall.
“The sale process may have
been imperfect, but it was still adequate under the exceptional circumstances
of Lehman Week,” he said.
The deal was seen by many as vital
for keeping the international banking system alive.
Judge Peck there was an
“undeniably correct” perception at the time that the sale
“mitigated systemic risk,” and helped avert “an even greater economic
He said there was no better
alternative to the sale, which avoided “a potentially disastrous piecemeal
liquidation” and saved thousands of jobs in the financial services industry.
A spokesman for Barclays said the
UK bank was pleased that the court had found that Barclays had acted in good
Lehman, which has sued other banks
including Bank of America and JP Morgan Chase to recover assets for creditors,
gave no immediate comment.