Swaps and the Bankruptcy Code

January 24, 2011Articles Bloomberg Law Reports

On Sept. 15, 2008, the Dow Jones Industrial Average suffered its largest one day market drop since Sept. 11, 2001, closing down 504 points. That morning, the 158-year-old investment bank, Lehman Brothers, filed the largest bankruptcy case in history. Mired among the multitude of adversary proceedings in Lehman's bankruptcy were several lawsuits dealing with derivatives. As the financial world crumbled on that September day, one thing emerged very clearly. Derivative financial instruments had played a significant factor in the destruction of the financial markets.