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Lehman Brothers fall

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How did Lehman Brothers fall & the adverse effect on economy

How did Lehman Brothers fall & the adverse effect on economy

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  • - Alt-A loans (made to borrowers without full documentation).
  • - Alt-A loans (made to borrowers without full documentation).
  • NET change in Cash : 278 for 3 months ending , (-773) for 6 months ending
  • Transcript

    • 1. The Weekend That Changed Wall Street
      Presented By – RohanPopli
      Rohit Seth
      RohitYadav
      Sameer Kalra
    • 2.
    • 3. Fact File
      • In 2003 and 2004 Lehman acquired five mortgage lenders, including subprime lender BNC Mortgage and Aurora Loan Services, which specialized in Alt-A loans.
      • 4. In 2007, Lehman underwrote more mortgage-backed securities than any other firm, accumulating an $85-billion portfolio, or four times its shareholders' equity which was $ 21 billion.
      • 5. Lehman's high degree of leverage - the ratio of total assets to shareholders equity was 31.
      • 6. On September 10, The firm reported a loss of $3.9 billion, including a write-down of $5.6 billion, and also announced a sweeping strategic restructuring of its businesses.
      • 7. September 15, Lehman declared bankruptcy leading more than $46 billion of its market value wiped out.
      • 8. It had a bank debt of $613 billion, $155 billion in bond debt, and assets worth $639 billion.
      • 9. Lehman's collapse greatly intensified the 2008 crisis and contributed to the erosion of close to $10 trillion in market capitalization from global equity markets in October 2008.
    • The Whole Cycle
      House Bubble
    • 10. Conditions on Takeovers
    • 11. Income Side Fall
    • 12. Cash Flow Side Fall
    • 13. Lehman Takeovers
      North America
      Asia Division
    • 14. Collapse and Commercial Paper Market
    • 15. Lehman Brothers and Commercial Paper Market Freeze
      - U.S. policy makers meet
      • Real Estate plummeting in value
      • 16. Bailout ruled out
      • 17. Barclays and Bank of America takeover abandon.
    • Lehman Brothers and Commercial Paper Market Freeze
      -Lehman files bankruptcy .
      • Client start to pull the money market fund.
      • 18. Reserve Primary , holder of $785 million in Lehman commercial paper.
      • 19. Yield rising overnight.
      • 20. Client withdraw 60% from within a day.
    • Lehman Brothers and Commercial Paper Market Freeze
      -U.S. Treasury announces a $50 billion temporary guarantee for money market funds.
      -Yields came down for first time .
      - Federal Reserve help to raise fund for satisfying withdrawal.
    • 21. Lehman Brothers and Commercial Paper Market Freeze
      -House Representatives rejects the $700 billion Troubled Asser Relief Program (TARP).
      - Yield surge most in more than a decade.
    • 22. Lehman Brothers and Commercial Paper Market Freeze
      -House Representatives approves the $700 billion Troubled Asser Relief Program (TARP).
    • 23. Lehman Brothers and Commercial Paper Market Freeze
      -Companies not able to find buyer.
      - Federal to create special fund to invest itself.
    • 24. Lehman Brothers and Commercial Paper Market Freeze
      -Buying begins directly from companies , example GE.
      -Market grows for the first time.
    • 25. Lehman Brothers and Commercial Paper Market Freeze
      -Recession results companies in need for cash.
      -Market shrinks for 16th straight week.
    • 26. Collapse and Stock Market
    • 27. Dow Jones Industrial Average
    • 28.
    • 29. HANG SENG INDEX
    • 30. NIFTY Index
    • 31. Top 10 Bankruptcy
    • 32.
    • 33. THANK YOU !