Effects of Lehman Collapse and Recession Felt by Families Here in Wales and Worldwide; Three Years Ago, One of the World's Largest and Most Important Financial Institutions Was Allowed to Collapse. Aled Blake Looks Back at the Fall of the Lehman Brothers and Asks What the Legacy of the Bank's Implosion Was

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THE collapse of the Lehman Brothers was evidence, if any was needed, that the events in the world's money markets affect hard working families in Wales.

It was followed by recession and a deepening economic crisis from which the world has struggled to emerge.

The repercussions of the events that followed the credit crunch in the months before Lehman's bankruptcy continue to be felt to this day.

The world economy has barely recovered from the recession that followed the financial crisis, with a growing uncertainty for the future thanks the troubles faced by the eurozone.

Lehman Brothers - with a history dating back to 1850 - filed for bankruptcy on September 15, 2008 after it was hit by billions of dollars worth of sub-prime mortgage losses.

There was already a global financial crisis when Lehman decided it could no longer continue.

A momentous decision was taken by then US Treasury Secretary, Hank Paulson to allow Lehman to fall.

There was no appetite to throw more money at a problem that Washington felt was a problem created by Wall Street. The resultant chaos in the markets, a meltdown no less, changed that view.

It became apparent that governments would need to prop up the markets in order to avoid further catastrophe and the po-tential for a global recession on a scale not seen since the 1930s.

In the weeks following the Lehman collapse, then Chancellor Alastair Darling took decisive action in an effort to stop a similar crisis hitting the UK's banking sector.

Bradford & Bingley was nationalised and that was followed by the part nationalisation of Royal Bank of Scotland (RBS) and Lloyds TSB - which had just merged with the debt-striken Halifax Bank of Scotland (HBOS).

It was part of a pounds 500bn rescue package by the government.

The worrying thing for the future, according to many economists and city analysts, is that the debt problems associated with Lehman have not gone away.

While sticking plasters have been put over the wounds by governments and central banks around the world, many economists argue that the wounds remain untreated.

What the markets, and therefore the rest of us, must hope is that the lessons have really been learned and there is a concerted effort by the world's governments to ensure decisive action is taken to stave off future crises.

Adam Davies, director at Newport-based financial planning specialists Seer Green, said: "There is no doubt the collapse of Lehman Brothers taught the entire financial services sector some very painful lessons which had a resounding impact on the whole of society. …