On the Anniversary of Lehman's Collapse, Muriel Siebert Warns of Danger Ahead

Two years after the collapse of Lehman Brothers, Muriel Siebert, often known as "Mickie," stopped by the offices of DailyFinance at Aol to discuss what she calls a shocking event.

Siebert is the founder and chairwoman of Muriel Siebert & Co. since 1969 and of Siebert Financial Corp. since the mid-1990s. She was also the first woman to become a member of the New York Stock Exchange and the creator of one of the nation's first discount brokerage firms.

Often referred to as "The First Woman of Finance," she was the Superintendent of Banks for the State of New York from 1977 to 1982, where she oversaw all the banks in the state. While there were bank failures across the country during her tenure, not one bank failed in New York while Siebert was in charge.

Bailouts: "A Necessary Evil"

Looking back, Siebert says she never expected a crisis of the magnitude of the Lehman Brothers collapse, nor did she anticipate the subsequent unraveling of the U.S. economy. But she had long been an advocate of greater bank regulation, and she warned for years that a crisis would come unless more strict controls were put in place. She often spoke out on behalf of the common investor, arguing for greater transparency and tougher margin requirements. After the fall of Enron and Long Term Capital, see continued to call for tougher regulations, testifying before Congress. Now, reflecting back, she observes, "Transparency has gotten worse instead of better."

Siebert, who calls the government bailouts a necessary evil, praises the government for taking steps to turn the economy around. But what about the decision to let Lehman Brothers fail after rushing to bailout Bear Stearns? "You don't bailout some and not others," says Siebert. She goes on: "We had something that was really right close to total collapse. One firm would have triggered another ones going broke because there's so much interplay between them when they trade on the money owed for trades."

Same Strokes for Similar Folks

When Lehman collapsed, Siebert started calling for more global regulation. "I became aware of this [global regulation] and very sensitive to it when the hedge funds could not borrow enough money here because we have margin requirements," she says. "They went to London where you can borrow whatever a bank will loan you! We have to have the same strokes for similar folks."

Since then, the government has taken steps to address financial reform, and more recently, regulators from around the world met in Basel, Switzerland, to develop global regulations which include more than doubling the capital requirements of the world's banks over the next eight years.

Potential Danger Still Lurks

But that is not enough. Siebert says we need to know which banks are trading in derivatives and whether they are borrowing on them. "It's totally unfair to expect the public, which has been a great supporter of the financial markets, to borrow money without seeing a true balance sheet," she points out.

Siebert is also calling for greater regulation around other areas that she warns could be dangerous and lead to more problems in the future. One such area is flash trading, which allows some investors to see incoming orders to buy or sell securities a few milliseconds earlier than general investors. Another: dark pools -- the private exchanges between firms and institutions that provide liquidity but are not displayed on order books. They allow traders to move large numbers of shares without identifying themselves, leaving individual investors blindsided.

If the last two years teach us anything, perhaps it's that we should heed such warnings.

Increase your money and finance knowledge from home

Economics 101

Intro to economics. But fun.

View Course »

Socially Responsible Investing

Invest in companies with a conscience.

View Course »

Add a Comment

*0 / 3000 Character Maximum


Filter by:

What you unemployed and your XP stuff won't work with Windows 7 premium?

September 16 2010 at 9:12 AM Report abuse rate up rate down Reply

Before you can count to ten another Windows OS will your reject your DVD drives and software that you paid thousands for.

September 16 2010 at 9:09 AM Report abuse +1 rate up rate down Reply

The holiday season looks like it will be just awful with millions of people out of work with no income to help the economy.

September 16 2010 at 9:05 AM Report abuse +1 rate up rate down Reply

The demand form job is the only demand increasing in the USA.

September 16 2010 at 8:43 AM Report abuse +1 rate up rate down Reply

Yet another ruined holiday shopping season becuse of greedy investors.

September 16 2010 at 8:41 AM Report abuse +1 rate up rate down Reply

Technology needs consumers that have income or it becomes a useless investment. The bulk of customers are losing their income forcing maaufacturers to close plants even at their favorite nation China.

September 16 2010 at 8:23 AM Report abuse +1 rate up rate down Reply

They found away to get rid of Handicapped and Older people an won't hire until they find enough nazi youth to replace them.

September 16 2010 at 8:14 AM Report abuse +1 rate up rate down Reply
Crafts for Pets

I, for one, am so glad that this issue is being publicly addressed so that people will be made shockingly aware of the situation. We are now on the road to recovery, be it so slow; yet, we are now aware & ready to do something about it in our own singular lives & on the institutional level.

September 16 2010 at 6:10 AM Report abuse rate up rate down Reply

Super Star of Finance, "late-to-wake-up" Siebert is a dynamic example of our modern day culture concentrating on how to work magic on the dollar's wicked ways, rather than comprehend that all damages done by Wall Street pirates to bring distrust to the global economy marketplace,,, and,,, those responsible should be dealt with harshly and immediately in order to keep the wonderful system wholesome and longlasting. As matters stand, one blinded and wishful, believing "all-is-well", unable to see that the multiplier-effect of debt we now must contend with, guarantees an unimaginable lengthy period of hardship they too, the uncaring unscrupulous culprits will be victimized by and hurt the most, because yes, the bigger they are the harder they fall. of a magnitude so great

September 16 2010 at 5:45 AM Report abuse +2 rate up rate down Reply
Linda Belinda

We are living in the last days. An unstable economy is one small compnent of the trials to come upon the earth. Many have chosen a path of plenty, denying themselves and their families nothing. Perhaps it is time to look into the Word of God for direction and advice. There you will find principles of simplicity and temperance. There you will also find God's call for the faithful return of the tithe. Food pantries and clothing centers are beginning to feel the strain and often unable to meet the needs of the poor. Seniors are trying to make prescriptions stretch until their Social Security check arrives. We are seeing more and more attempts at insulating homes against the cold of winter. "Bring ye all the tithe into the storehouse," says the Lord, "prove me, for I will open the windows of heaven and pour out a blessing that there will not be room eough to receive." Obedience to the Word of God is our only safeguard in these trouble times. Blue Kentucky Girl

September 16 2010 at 5:45 AM Report abuse rate up rate down Reply