Short presentation on fall of the 4th biggest investment bank firm in United States during the period of financial crisis in 2008 which ultimately started recession in Unites States Of America and subsequent impact on whole world of economy.
Short presentation on fall of the 4th biggest investment bank firm in United States during the period of financial crisis in 2008 which ultimately started recession in Unites States Of America and subsequent impact on whole world of economy.
About collapse of Lehman Brothers. A global financial services firm which filed bankruptcy in 2008, thereby, leading to worldwide crisis of economic downturn especially in US.
The presentation includes brief points, so it would be better if the reader goes through them in detail which would really help. This was created by our team for educational purpose.
Hope this helps.
On September 15, 2008, Lehman Brothers Holdings Inc filed for bankruptcy. It filed for protection under Chapter 11 of the U.S. Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York. It filed with $639 billion in assets and $619 billion in debt, Lehman's bankruptcy filing was the largest in history, as its assets far surpassed those of previous bankrupt giants such as WorldCom and Enron. Lehman was the fourth-largest U.S. investment bank at the time of its collapse, with 25,000 employees worldwide.
AIG: The Missing Piece of Its Failure Narrative & Why It MattersMercatus Center
The failure of American International Group Inc. was one of the main narratives from the financial crisis, prompting the push for greater financial market regulation and the adoption of Dodd-Frank. But what if the generally accepted account—that AIG’s supposedly unregulated derivatives activities sank the company—doesn’t actually tell the full story?
American International Group, Inc., also known as AIG, is an American multinational finance and insurance corporation with operations in more than 80 countries and jurisdictions. As of December 31, 2016, AIG companies employed 56,400 people.The company operates through three core businesses: General Insurance, Life & Retirement, and a standalone technology-enabled subsidiary
Founded in 1762, Barings was the oldest merchant bank in Britain famed for financing Napoleonic Wars, Louisiana Purchase and the Erie Canal.
The 233-year-old bank was brought down single-handedly by its employee, Nicholas William Leeson, a derivatives trader.
After landing the bank with a debt of $1.4 billion – largely through futures trading contracts – Leeson fled for Malaysia.
By the time of the bank’s collapse on 26 February 1995, it had accumulated losses amounting to $2.2 billion.
Leeson was sentenced to six-and-a-half years’ imprisonment in Singapore for two charges of fraud and forgery.
Wells Fargo is one of the largest banking and financial service providers in the US. However, the company has recently been accused of staggering fake accounts scam, which has put the company in deep trouble. Find the details about the scandal and the SWOT analysis of the company in this presentation.
About collapse of Lehman Brothers. A global financial services firm which filed bankruptcy in 2008, thereby, leading to worldwide crisis of economic downturn especially in US.
The presentation includes brief points, so it would be better if the reader goes through them in detail which would really help. This was created by our team for educational purpose.
Hope this helps.
On September 15, 2008, Lehman Brothers Holdings Inc filed for bankruptcy. It filed for protection under Chapter 11 of the U.S. Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York. It filed with $639 billion in assets and $619 billion in debt, Lehman's bankruptcy filing was the largest in history, as its assets far surpassed those of previous bankrupt giants such as WorldCom and Enron. Lehman was the fourth-largest U.S. investment bank at the time of its collapse, with 25,000 employees worldwide.
AIG: The Missing Piece of Its Failure Narrative & Why It MattersMercatus Center
The failure of American International Group Inc. was one of the main narratives from the financial crisis, prompting the push for greater financial market regulation and the adoption of Dodd-Frank. But what if the generally accepted account—that AIG’s supposedly unregulated derivatives activities sank the company—doesn’t actually tell the full story?
American International Group, Inc., also known as AIG, is an American multinational finance and insurance corporation with operations in more than 80 countries and jurisdictions. As of December 31, 2016, AIG companies employed 56,400 people.The company operates through three core businesses: General Insurance, Life & Retirement, and a standalone technology-enabled subsidiary
Founded in 1762, Barings was the oldest merchant bank in Britain famed for financing Napoleonic Wars, Louisiana Purchase and the Erie Canal.
The 233-year-old bank was brought down single-handedly by its employee, Nicholas William Leeson, a derivatives trader.
After landing the bank with a debt of $1.4 billion – largely through futures trading contracts – Leeson fled for Malaysia.
By the time of the bank’s collapse on 26 February 1995, it had accumulated losses amounting to $2.2 billion.
Leeson was sentenced to six-and-a-half years’ imprisonment in Singapore for two charges of fraud and forgery.
Wells Fargo is one of the largest banking and financial service providers in the US. However, the company has recently been accused of staggering fake accounts scam, which has put the company in deep trouble. Find the details about the scandal and the SWOT analysis of the company in this presentation.
Lehman Brothers Inc. was an American global financial services firm founded in 1847. Before filing for bankruptcy in 2008, Lehman was the fourth-largest investment bank in the United States, with about 25,000 employees worldwide.
TIME Magazine names 25 People To Blame For The Financial CrisisWayne Caswell
Homeowners of Texas (HOT) compiled the following TIME articles to provide insight into causes of the financial crisis. The authors did an outstanding job, but we contend they put too much blame on Wall Street and mortgage-backed derivatives. Some of the nation’s largest homebuilders were culprits too.
With a lack of accountability and minimal risk of lawsuits, the builders’ strong profit incentives prompted them to cut corners with substandard materials and workmanship, cover-up known defects and code violations, artificially inflate property appraisals, make risky loans, and then resell the loans to unsuspecting investors who did not understand the risks. That’s why we say companies building substandard homes share blame with those making subprime loans.
TOO BIG TO FAIL
Andrew Sorkin
PROLOGUE
Standing in the kitchen of his Park Avenue apartment, Jamie Dimon poured himself a cup of
coffee, hoping it might ease his headache. He was recovering from a slight hangover, but his head
really hurt for a different reason: He knew too much.
It was just past 7:00 a.m. on the morning of Saturday, September 13, 2008. Dimon, the chief
executive of JP Morgan Chase, the nation’s third-largest bank, had spent part of the prior evening
at an emergency, all-hands-on-deck meeting at the Federal Reserve Bank of New York with a
dozen of his rival Wall Street CEOs. Their assignment was to come up with a plan to save Lehman
Brothers, the nation’s fourth-largest investment bank—or risk the collateral damage that might
ensue in the markets.
To Dimon it was a terrifying predicament that caused his mind to spin as he rushed home
afterward. He was already more than two hours late for a dinner party that his wife, Judy, was
hosting. He was embarrassed by his delay because the dinner was for the parents of their
daughter’s boyfriend, whom he was meeting for the first time.
“Honestly, I’m never this late,” he offered, hoping to elicit some sympathy. Trying to avoid
saying more than he should, still he dropped some hints about what had happened at the meeting.
“You know, I am not lying about how serious this situation is,” Dimon told his slightly alarmed
guests as he mixed himself a martini. “You’re going to read about it tomorrow in the papers.”
As he promised, Saturday’s papers prominently featured the dramatic news to which he had
alluded. Leaning against the kitchen counter, Dimon opened the Wall Street Journal and read the
headline of its lead story: “Lehman Races Clock; Crisis Spreads.”
Dimon knew that Lehman Brothers might not make it through the weekend. JP Morgan had
examined its books earlier that week as a potential lender and had been unimpressed. He also had
decided to request some extra collateral from the firm out of fear it might fall. In the next
twenty-four hours, Dimon knew, Lehman would either be rescued or ruined. Knowing what he did,
however, Dimon was concerned about more than just Lehman Brothers. He was aware that Merrill
Lynch, another icon of Wall Street, was in trouble, too, and he had just asked his staff to make sure
JP Morgan had enough collateral from that firm as well. And he was also acutely aware of new
dangers developing at the global insurance giant American International Group (AIG) that so far
had gone relatively unnoticed by the public—it was his firm’s client, and they were scrambling to
raise additional capital to save it. By his estimation AIG had only about a week to find a solution,
or it, too, could falter.
Of the handful of principals involved in the dialogue about the enveloping crisis—the government
included—Dimon was in an especially unusual position. He had the closest thing to perfect,
real-time information. That ”deal flo w” enable ...
So in the presentation will be looking upon the reliment brothers and how they have been made in the company and the bank rate means the company has been settle down due to the severals on taken with the see you so the board of members and they couldn't could feel that dreams and their projects in the middle of the thing and hear in PDF
"Whether we like it or not, the laws of gravity work in financial markets as well and what goes up ultimately comes down," Jagannadham Thunuguntla, head of the capital markets arm of India's fourth largest share brokerage firm, the Delhi-based SMC Group, told IANS.
1. Do you believe that the US government treated some financial in.docxSONU61709
1. Do you believe that the US government treated some financial institutions differently during the crisis? Was that appropriate?
The issue faced by Lehman Brothers is just a consequence of bad decisions from many parties involved. The fact that this investment bank had been the only one that didn't receive any governmental help, begs the question why the US government did not struggle to let Lehman Brothers survive. Many issues were out of control. Merrill Lynch, another major investment bank, was also facing a similar situation. After an emergency meeting called by the Federal Reserve (Fed); Bank of America announced its decision to buy Merrill Lynch.
The Investment banks Morgan Stanley, JP Morgan, and Golden Sachs were called by the Fed to find a way to rescue Lehman; however, no bank was interested in investing in the firm (Ferguson 2010). Just one week before Lehman’s bankruptcy, Fannie Mae, and Freddy Mac had to bail out with the intervention of the US Treasury and the Fed. Two days after its bankruptcy, the Fed provided $85 billion loan to American International Group (AIG) as an insurance conglomerate to prevent its failure (Elteman et al 2011, 132 – 134). Both, Fed and Treasury, argued that while Lehman could not post sufficient security in affording reasonable assurance that a loan from the Fed would be repaid, the Fed credit was adequately secured by AIG’s assets (USNews 2008).
Whether US government position was appropriate or not, depends on the interest of the parties involved. Hank Paulson, the US Treasury Secretary said, bailing out Lehman Brothers might still not be enough to halt the large crisis. Although it is true that the US government’s threat was not the same among the institutions affected by the crisis, it is also true that the firm was facing the effect of putting itself in too much risk for high profits. Merrill Lynch was also facing the same problem at that time; however, because of the pressure from the US Treasury and some Fed regulators, it was acquired by Bank of America (Mybanktracker.com 2009).
The intervention of the government through those institutions was highly criticized. They didn't look the same interest in Lehman Brothers case, and when British regulators from Barclays, the only bank interested in buy the firm demanded financial warranty from the US Government; both Hank Paulson, and Ben Bernanke, FED Chairman 2008; were reluctant arguing that bail out Lehman was just unfeasible, whenever the Treasury did not have the authority to absorb billions of dollars of expected losses to facilitate Lehman’s acquisition by another firm (USNews 2008). At the end, the firm was the scapegoat who faced the consequences of an uncontrolled financial system, and its fall was seen as a wake- up call in dealing with the ensuring financial crisis.
2. Many experts argue that when the government bails out a private financial institution it creates a problem called “moral hazard“, meaning that if the institution knows it w ...
Bharat Site Oct 3, 2008 - Inside the financial tsunami: what brought it on?Jagannadham Thunuguntla
The financial tsunami now inundating global economies and markets was brought on by imprudent easing of US lending norms and extreme over-leveraging by giant US investment banks, analysts say.
2. •Lehman Brothers is no more. Merrill Lynch has gone down the Bank
of America maw. AIG too could go belly up.
•With a doubt, these developments in America are the most shocking
events to have hit global financial markets.
•So where did it all begin? And what does it mean for the Indian stock
markets? Find out. . .
3. What is (or was) Lehman Brothers?
•America's fourth-largest investment bank Lehman Brothers Holdings Inc has
filed the biggest bankruptcy petition known to mankind.
•The 158-year-old firm was founded by brothers Henry, Emanuel and Mayer
Lehman, Jewish immigrants to the US from Germany, in 1850.
•Henry set up a general store in Alabama in 1844 and was later joined by his
brothers.
•In 1850 they set up the merchant bank in New York after having made
money in railway bonds.
4. So what went wrong?
Lehman Bros, which till June 2008 had not reported
a quarterly loss even once, had earlier survived many
an economic crises, like railroad bankruptcies of the
1800s, the Great Depression in the 1930s, and the
collapse of Long-Term Capital Management in the
1990s.
Thus the collapse of the giant investment bank came
as a major shock for the entire world markets that
plunged after Lehman filed a Chapter 11 petition with
US Bankruptcy Court in Manhattan.
The $613 billion (some estimates put the size at $639
billion) bankruptcy thus throws up the question:
why did the Wall Street giant go bust? Here's why. .
5. Why did Lehman Brothers go bankrupt?
•The giant investment bank succumbed to the sub-prime mortgage crisis
that has rocked the United States and the global economy.
•Lehman was strangled by a massive credit crisis and fast plummeting
real estate prices.
•The gargantuan $60 billion loss in bad real estate loans forced the bank
to file for bankruptcy.
.
6. However
However, the fall of the 158-year-year
institution that started cotton trade in
US before the American Civil War and
financed the railroad that built a nation,
got hit by a large dose of bad luck,
pride, arrogance and greed.
Primarily, the pride of its Chief
Executive Officer Richard Fuld
7. But there were more reason. Check
out what they were. . .
•Lehman's collapse was also triggered by the refusal of other banks to do
business with it because of its complex and, at times, opaque ways of
trading
•Housing loans made by the bank to people with little support made these
loans very risky, and when interest rates rose, these borrowers could no
more repay Lehman
•This led to huge losses, the extent of which is not yet clear.
8. Conti..
Thus other banks stopped trading with Lehman. This
led to it losing almost all business and triggered its
fall.
The final straw for Lehman was the fact that both
Barclays Plc of the United Kingdom and Bank of
America Corp pulled out of takeover talks. BofA
bought out Merrill Lynch for $50 billion.
However, Barclays has now said that it is in
discussions with Lehman Brothers about buying
certain assets of the stricken US investment bank.
"Barclays confirms that it is discussing with Lehman
Brothers the possible acquisition of certain Lehman
Brothers assets on terms that would be attractive to
Barclay's shareholders," Britain's third largest bank
said in a statement.
9. When other banks do not want to buy
Lehman, why is Barclays interested?
•Barclays wanted to buy Lehman out
at a discount, so to speak. But when
Lehman CEO Fuld decided that his
bank was worth much more than
what Barclays had apparently offered,
Barclays stepped back.
•Now that Lehman has filed for
bankruptcy, its assets are available
fairly cheap. However, the biggest
problem is to take on Lehman's
enormous liabilities.
10. How far is the CEO of the company
responsible for Lehman's fall?
•Wall Street analysts believe that it was
the 'hubris' of Richard Fuld, the 62-year-
old CEO of Lehman, who did not take the
telltale signs of impending doom very
seriously.
•Fuld, nicknamed The Gorilla for his foul
temper, intimidating presence and tough
talk, rejected many bids to save Lehman
because he thought that the sinking giant
was much bigger than Wall Street was
giving it credit for, and wanted to get
more price for the sale of the company.
11. Result
Analysts say if the bank was sold just a week
before it went kaput, it could have been saved
the ignominy of a bankruptcy, but Fuld was far
too adamant to see reason.
Result: the end of a 158-year-old
financial giant
12. Could the United States government helped, like it
helped Bear Stearns in May this year, and Fannie
Mae and Freddie Mac earlier this month?
•The US government could have
helped, but US Treasury Secretary
Henry Paulson said that it would not
use up any more taxpayer dollars to
bail out Lehman Brothers as it would
lead to investment banks getting
away with their gambling ways.
•Paulson had bailed out Fannie Mae,
Freddie Mac and Bear Stearns,
saying that if the government had
not done so, the US housing loan
market would have collapsed leading
to gigantic losses for hundreds of
banks all over the globe that have
invested in US property.
13. Conti….
Paulson, however, believes that a
brokerage major like Lehman, which
does not have a direct connection with
ordinary people who have taken on
home loans, need not be bailed out as it
would not cause any systemic damage
to the US economy.
14. Some Lehman Brothers' employees leaving
the bank's Canary Wharf office in London
Has everyone in Lehman lost their jobs?
15. Has everyone in Lehman lost their jobs?
The bankruptcy administrators,
PricewaterhouseCoopers, feels that as
Lehman's operations were essentially
centralized at New York, the folding up of
the investment banker in the US will have a
telling impact on all its operations globally.
Over 5,000 employees in the UK have
already lost their jobs, while about 20,000
in the US might as well forget going back to
their work stations. About 2,500 Lehman
employees in India too face the axe.
16. Will the whole bank be liquidated?
Unlikely, at least for now. The US Chapter 11 that deals with
bankruptcy says that PwC, the administrators, can go about taking its
time to find good offers and buyers for Lehman's 'least affected
businesses.'
The entire exercise can take months before all of Lehman's assets are
sold, given the complexities linked to the bankruptcy.
17. What about the Bank of America and
Merrill Lynch deal?
Merrill Lynch's buy
out by Bank of
America is also a
shocking
development. ML,
saw the writing on
the wall once it
guessed that
Lehman was going
bust, and decided
to sell out before it
actually has to file a
bankruptcy
petition..
18. What about the insurance giant AIG?
The world's largest insurer, American International Group,
has been downgraded by credit rating agencies and is racing
against time to find a multi billion dollar infusion to stay afloat.
US Federal Reserve officials and two leading banks, JPMorgan
Chase and Goldman Sachs, were negotiating to put together
$75 billion package to save the insurance giant to stave off
crisis.
AIG has sought $40 billion in bridge loan to stave off the crisis.
But the Fed rebuffed the request. AIG's ills came to fore, when
three leading credit rating agencies - Standard and Poor's
Moody's and Fitch - lowered the company's credit scores.
19. Who could be the next to fall?
Some Wall Street analysts, reports The Guardian, name
Washington Mutual as the next financial major to 'find itself
in serious trouble.'
20. Conti.
However, the even bigger
worry is whether the
world's largest securities
firms, Goldman Sachs and
Morgan Stanley, would be
able to survive this brutal
financial crisis.
But many say that these
two gaints will not melt
down as they have 'done a
better job of spreading
their bets across world
markets and are also more
diversified, less leveraged
and have managed such
risks much better.'
21. What do Indian markets fear?
The fall of two global financial behemoths -- Lehman Brothers and
Merrill Lynch -- is expected to dent India Inc's ability to raise
resources via the equity route.
Experts feel that such events significantly increase the risk
perception, which in turn will put all future investments by
institutional investors such as pension or endowment funds, on the
back burner.
While the public issue market has already dried up, the private
equity funds are also becoming conservative in terms of pricing.
This is resulting in either inordinate delays in concluding deals or
transactions being called off.
There are many instances of private equity fund managers
refusing to go ahead with deals after signing the term sheet.
Sources said that a leading fund conducted due diligence on two
companies in the last fortnight but did not close either deal
primarily because of the developments in the US, their home
country.
The crisis faced by Merrill LynchandLehman Brothers is expected
to have a cascading effect on PE firms too.
23. Will it hit the Indian growth story?
The ongoing financial sector crisis in the United States
and its repercussions on developed markets
worldwide will result in lower capital inflows into
emerging markets like India, economists and
government officials said today.
At the same time, they called for the government to
make it easier for Indian companies to borrow
overseas by easing the restrictions that have been
imposed in the past to reduce excessive liquidity in
the system and control inflation.
This will, in turn, lead to a slowing in investment
growth in the months ahead. As lending gets tighter
and investment flows dry, corporate India will find it
more difficult to raise both equity and debt.
24. Will it hit the Indian growth story?
Technology firms are shivering. Lehman Brothers' bankruptcy filing
may well prove to be the last straw for Indian IT firms, which were
expecting the second half of FY09 to be better. As a result of the
US financial market crisis, analysts do not expect Indian IT firms
to sign any significant contracts in the banking, financial services
and insurance (BFSI) space in the months to come.
While IT firms do not disclose client-specific details, it's estimated
that Lehman Brothers has outsourced deals amounting to
anywhere between Rs 550 crore and Rs 700 crore (annually) to
numerous IT firms, including majors like Tata Consultancy
Services, Satyam Computer Services and Wipro. Lehman Brothers,
say sources, works with 14 service providers in India - Wipro and
TCS being the largest. It also has investments in a few IT firms.
It's not clear if these holdings will be liquidated to raise funds.
Moreover, the sources add that Lehman Brothers' unit in India has
issued termination letters to a majority of its 2,500 employees.