Lehman Brothers Presentation 395y1g
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Bankruptcy of Lehman Brothers Banking and Financial Institutions
Bado Riccardo, Rauchs Michel, Todesco Tommaso, Tuffal Bertille
+
BACKGROUND LOW INTEREST RATES 2002-2004 IN THE US
3 MONTHS T-BILLS
+
BACKGROUND
RISE IN THE HOUSING PRICES
NEW PRODUCTS
LOW DOCUMENTATION
SECURITIZATION
+
BACKGROUND DEREGULATION 2004, SECURITY AND EXCHANGE COMMISION
+ BANKRUPTCY
The entire financial system was collapsing at the beginning of 2007
The first big US investment bank that fell was Bear Stearns
On September 13, 2008, the president of the Federal Reserve Bank of New York convened a meeting to discuss the future of The Lehman Brothers
The interest of Barclays and Bank of America ended
On the night of September 15, 2008, the Board of Directors of Lehman voted unanimously for the bankruptcy, including Richard Fuld
Lehman Brothers Holdings announced in New York its intention to file Chapter 11 bankruptcy petition
+
WHY WAS LEHMAN ALLOWED TO FAIL? In 2008 many US financial institutions were at a “point of no return”, but they were all saved, purchased, nationalized or placed into conservatorship Nothing was done for Lehman Brothers, why?
Two different explanations: The government did not have the legal authority to intervene
The government consciously Lehman Brothers go bust
let
Lehman Brothers did not have the adequate collaterals that the FED required to provide a guarantee
Lehman Brothers was the sacrificed lamb in a political game which involved global players
It was meant to go bankrupt considering its excessive leverage, huge losses, liquidity drain
At that time a turning point was needed to reestablish a normal situation in which banks are not allowed anymore to take excessive risks
+
CONSEQUENCES Parts of Lehman Brothers sold to Barclays and Nomura Stock markets plunge all over the world Collapse of credit markets “Too big to fail” argument bail-out Trouble Asset Relief Program (TARP) Effects on the real economy New Regulation: Basel III Change in the public perception of banks
+
QUESTIONS ?
+
Sources
http://mbslive.mortgagenewsdaily.com/knowledgebase/arti cles/21671-what-is-an-mbs-underwriter
www.thestreet.com/story/10375812/1/lehman-brothersamputates-mortgage-arm.html
http://economics.journals.cz/documents/Vol2/Untitled06.pd f
www.telegraph.co.uk/finance/financialcrisis/6173145/Thecollapse-of-Lehman-Brothers.html
www.thefiscaltimes.com/Blogs/TFTalk/2014/01/02/TARPProfitable-Bank-Bailout-Keeps-Giving
http://janeneel.wordpress.com/2013/01/11/the-effect-oflehman-brothers-and-its-effect-on-global-credit-crisis/
www.nytimes.com/2008/12/04/business/04lehman.html?_r =0
www.aba.com/Tools/Economic/Documents/TARPBankPro gramsHaveBeenRepaidinFull.pdf
http://timeline.stlouisfed.org/index.cfm?p=timeline
Bankruptcy of Lehman Brothers Banking and Financial Institutions
Bado Riccardo, Rauchs Michel, Todesco Tommaso, Tuffal Bertille
+
BACKGROUND LOW INTEREST RATES 2002-2004 IN THE US
3 MONTHS T-BILLS
+
BACKGROUND
RISE IN THE HOUSING PRICES
NEW PRODUCTS
LOW DOCUMENTATION
SECURITIZATION
+
BACKGROUND DEREGULATION 2004, SECURITY AND EXCHANGE COMMISION
+ BANKRUPTCY
The entire financial system was collapsing at the beginning of 2007
The first big US investment bank that fell was Bear Stearns
On September 13, 2008, the president of the Federal Reserve Bank of New York convened a meeting to discuss the future of The Lehman Brothers
The interest of Barclays and Bank of America ended
On the night of September 15, 2008, the Board of Directors of Lehman voted unanimously for the bankruptcy, including Richard Fuld
Lehman Brothers Holdings announced in New York its intention to file Chapter 11 bankruptcy petition
+
WHY WAS LEHMAN ALLOWED TO FAIL? In 2008 many US financial institutions were at a “point of no return”, but they were all saved, purchased, nationalized or placed into conservatorship Nothing was done for Lehman Brothers, why?
Two different explanations: The government did not have the legal authority to intervene
The government consciously Lehman Brothers go bust
let
Lehman Brothers did not have the adequate collaterals that the FED required to provide a guarantee
Lehman Brothers was the sacrificed lamb in a political game which involved global players
It was meant to go bankrupt considering its excessive leverage, huge losses, liquidity drain
At that time a turning point was needed to reestablish a normal situation in which banks are not allowed anymore to take excessive risks
+
CONSEQUENCES Parts of Lehman Brothers sold to Barclays and Nomura Stock markets plunge all over the world Collapse of credit markets “Too big to fail” argument bail-out Trouble Asset Relief Program (TARP) Effects on the real economy New Regulation: Basel III Change in the public perception of banks
+
QUESTIONS ?
+
Sources
http://mbslive.mortgagenewsdaily.com/knowledgebase/arti cles/21671-what-is-an-mbs-underwriter
www.thestreet.com/story/10375812/1/lehman-brothersamputates-mortgage-arm.html
http://economics.journals.cz/documents/Vol2/Untitled06.pd f
www.telegraph.co.uk/finance/financialcrisis/6173145/Thecollapse-of-Lehman-Brothers.html
www.thefiscaltimes.com/Blogs/TFTalk/2014/01/02/TARPProfitable-Bank-Bailout-Keeps-Giving
http://janeneel.wordpress.com/2013/01/11/the-effect-oflehman-brothers-and-its-effect-on-global-credit-crisis/
www.nytimes.com/2008/12/04/business/04lehman.html?_r =0
www.aba.com/Tools/Economic/Documents/TARPBankPro gramsHaveBeenRepaidinFull.pdf
http://timeline.stlouisfed.org/index.cfm?p=timeline
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