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The Collapse of "Lehman brothers"
The document summarizes the rise and fall of Lehman Brothers, a major investment bank. It describes Lehman's growth from the 1850s as a cotton trader to a global investment bank. By the 2000s, Lehman had heavily invested in the real estate market, acquiring subprime lenders. However, the collapse of the housing market and subprime crisis in 2007-2008 led to Lehman's heavy losses. Despite emergency measures by the Federal Reserve, Lehman filed for bankruptcy on September 15, 2008, contributing to the global financial crisis.
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The Collapse of "Lehman brothers"
- 1. Financial Meltdown The collapseof Lehman brothers Group 7 Members : 1. Abhal 2. Abhishek 3. Hemant 4. Pallav 5. Rahul 6. Suraj
- 2. Scenario from 1850-2001 •1850: Founded, Traded cotton. • 1858: A New York office was opened • 1870: NY Cotton E ,Coffee & Petroleum Exchange. • Railroad: Commodities business to include the sales and trading of securities. • 1887: New York Stock Exchange, commodities business to a merchant-banking firm. • 1930: Private placement. • Oil movies radio computer Biotechnology • 1984: acquired by American Express to form Shearson Lehman Brothers. • 1993: Lehman Brothers.
- 3. Short lived recession (Terroristattack, Dotcom bubble, Accounting Scandals, Fear) Slashing Interest rates by Fed Collateralized Debt Obligation market and housing boom Further slashing Interest rates and NINJA mortgage Collapse of Real Estate & InterBank/CDOs Market Subprime Crisis Market in 2001-2008
- 4. The Success High •U.S. Housing Boom • Acquired five mortgage lenders. • Acquired Sub-Prime mortgage lenders: • BNC Mortgage • Aurora Loan Services • Record Revenues from Real Estate 56% from 2004-06 • Increase in Mortgages by 10% in 2006 • In 2007, Net Income of $4.2 billion on revenue of $19.3 billion
- 5. 2007-2008 Crisis 2007 1. 14March : Big one day drop (of stocks) in five years. 2. August : Stocks fell and rebounded, degree of leverage. 2008 1. 17 March : Lehman shares fell as much as 48%. 2. 9 June : 2nd loss of 2.8 billion. 3. September : Stocks plummeted in 1st week. 4. 10 September : Pre-announced dismissal Q3 results. 5. 11 September : 42% stocks plunged, takeover of Lehman unsuccessful . 6. 15 September : Lehman declared bankruptcy- 93% stocks plunged.
- 6. World and FederalReserve 1. Landslide Began : Interbank market froze. Case of Northern Rock. 2. Move of Federal Reserve : Slashing interest rates. 3. National Economic Stabilization Act,2008. 4. March 24,2008: Special Financing to Barclays and Bank of America. 5. September 16,2008: Federal Reserve helps AIG. 6. Trouble Asset Relief Program (TARP).
- 7. Alternatives to Lehman’sstrategies • 1. long term loans. • 2. resizing mortgage portfolio. • 3. bailout package.
- 8.