ANN ARBOR—Banking experts at the University of Michigan’s Ross School of Business are available to discuss the bankruptcy protection filing by Lehman Brothers Holdings Inc. and the purchase of Merrill Lynch & Co. by Bank of America Corp.

They include:

Amiyatosh Purnanandam, assistant professor of finance, is an authority on bank failures, risk-management practices by banks, corporate finance and investments, credit risk pricing and the mortgage crisis.

“Lehman failed because of extremely high leverage and its investments in risky mortgage-backed securities,” he said. “Even a small drop in the asset value can wipe out the entire equity capital of a leveraged financial institution that operates with as high a debt-equity ratio as 30:1. The problem is especially severe for stand-alone investment banks like Lehman that lack a solid demand deposit base typically enjoyed by traditional commercial banks.

“Fed is finally sending the right signal to the market by not participating in further bailouts. Though financial markets may experience some pain in the short term, this is a prudent move for long-term stability.”

Purnanandam can be reached at (734) 764-6886 or amiyatos@umich.edu.

Sreedhar Bharath, assistant professor of finance, is an expert on banks and financial institutions, relationship banking, credit risk, bankruptcy, corporate finance, mergers and acquisitions, accounting quality, and factors that drive public companies to go private.

“The largest bankruptcy in the United States to date, we wait with bated breath on what the ripple effects for the rest of the financial system players and the economy itself could be,” he said. “Unlike the Bear Stearns bailout, the Fed did not intervene this time and let Lehman fail. Does this mean they think the problem is not serious enough for their intervention or they simply couldn’t afford it a second time?”

Bharath can be reached at (734) 763-0485 or sbharath@umich.edu.

PurnanandamBharath