Lehman Brothers

717 Words2 Pages
bulb-icon

Recommended: Subprime mortgage crisis of 2008

Lehman Brothers

On September 10, 2008, Lehman Brothers announced the lowest decline as the shares dropped to 45%. It left the market value at $5.4 billion after the Korea Development Bank rejected to make an investment deal that could rescue Lehman. The company would seek capital from other investors in order to recover their financial situation. These efforts faltered and the situation grew more severe, even after the US government had already saved the Bear Stearns and Fannie Mae and Freddie Mac. Though it is less likely that the US government will keep Lehman's bailout, there should be a resolution from the Federal Reserve System to bolster Lehman’s finance so as to prevent the US economic declination.

II Problems and Implications

Lehman Brothers is one of the four big investment banks with, 24,700 employees around the world. For 157 years they survived the economy crisis, until recently when they found themselves in debt after the sub-prime mortgages crisis

Lehman who once reached the peak of $84 per share had the share value gradually fallen from summer of 2007. After having an unsuccessful negotiation with the Korea Development Bank, Lehman faced the lowest dropping value of $14.15 per share on September 8. The share suddenly became half dropping value of $7.79 a day after. To bolster its financial status, Lehman kept on seeking potential suitors, to rescue the company. Two of them include: Bank of America and Barclay. However, these institutions need a guarantee from the Federal Reserve on a part of Lehman’s troubled assets.

It is not going to be easy for Lehman to be rescued by the US Government since the US Government has already provided aids to Bear Stearns, another collapsed bank, and just saved Freddie Ma...

... middle of paper ...

...izens may find it harder to get the bank loan; the government should lower the interest rates to stimulate the investments.

Talking points

- Assure the Idaho citizens that the government will not raise the tax rates and spend taxpayers’ money to support failed personal business

- Encourage the business investors in Idaho to diversify their investments in several banks to lower the risk

- Stimulate the investments and spending in Idaho by offering the low interest rates

Graphic Aids

The decline of Lehman’s share price in one year (Sep 2007 – Sep 2008)

Source: http://topics.nytimes.com/top/news/business/companies/lehman_brothers_holdings_inc/index.html?scp=1-spot&sq=lehman&st=cse

Source:

“Lehman Faces Mounting Pressures.” The Wall Street Journal. 10 September 2008: A1, A11.

“Lehman Lurches Into End Game.” The Wall Street Journal 10 September 2008: C20.

Show More
Related

  • The Financial Crisis of 2007-2008 and The Federal Reserve

    2612 Words  | 6 Pages

    The financial crisis of 2007–2008 is considered by many economists the worst financial crisis since the Great Depression of the 1930s. This crisis resulted in the threat of total collapse of large financial institutions, the bailout of banks by national governments, and downturns in stock markets around the world. The crisis led to a series of events including: the 2008–2012 global recessions and the European sovereign-debt crisis. The reasons of this financial crisis are argued by economists. The performance of the Federal Reserve becomes a focal point in this argument.

    Read More

  • Capital One Financial Corporation

    1052 Words  | 3 Pages

    Capital One uses IT through its information-based strategy (IBS) to “record, organize, and analyze data on the characteristics and behaviors of their customers,” as stated by CEO Richard Fairbank. Their philosophy was to exploit information by constructing scientific models that could be used to both assess the creditworthiness of potential cardholders through FICO scoring, and to customize product offerings for existing ones. This was done through data mining, sorting, customizing offers and marketing campaigns, and then analyzing this data to see what campaigns worked – for what reason and what it returned in revenue and profit generation. This differs from other financial institutions in that these other institutions were compiling data manually, accepting applicants based upon debt-income ratios and were all charging the same interest rate and annual fee.

    Read More

  • The Current Great Recession - Who Is To Blame

    1988 Words  | 4 Pages

    Not only were millions of Americans been put out of work due to these manager’s actions, the American financial markets themselves were pushed to the brink of collapse. Despite the fact that the global financial markets, in reality, are not perfectly efficient, there is a corrective mechanism built into the day-to-day trading in the market. When prices are driven down by large sells, either by large investors or a movement in a stock, there are usually new buyers for these stocks at the cheaper price. Managers of...

    Read More

  • The Dodd-Frank Wall Street Reform and Consumer Protection Act

    1575 Words  | 4 Pages

    The presence of systemic risk in the current United States financial system is undeniable. Systemic risks exist when the failure of one firm may topple others and destabilize the entire financial system. The firm is then "too big to fail," or perhaps more precisely, "too interconnected to fail.” The Federal Stability Oversight Council is charged with identifying systemic risks and gaps in regulation, making recommendations to regulators to address threats to financial stability, and promoting market discipline by eliminating the expectation that the US federal government will come to the assistance of firms in financial distress. Systemic risks can come through multiple forms, including counterparty risk on other financial ...

    Read More

  • Keating Five Scandal Pros And Cons

    472 Words  | 1 Pages

    After the fall of Lincoln Savings and Loan Association many employees were out a job, and the U.S. was out around three billion dollars.

    Read More

  • JP Morgan Chase Bank

    1808 Words  | 4 Pages

    The banking industry is under pressure in today’s business climate. Banks have been through big changes. There is opportunity, but there is also increasing competition. To be the preferred bank means changing “good enough” into a unique value proposition. And that means changing the way people have always done things, change on this level requires cutting edge technology. Change cannot be achieved with a simple directive or surface adjustment especially within the banking industry. It requires an innovative rethink of the entire system, in a strong partnership between bank leaders and their change agents. New systems and policies must support the strategy to be successful. The real test of a good strategy implementation plan is whether the people understand the strategy, are motivated and enabled to implement it, and actually start achieving its goals.

    Read More

  • Summary: The 2008 Financial Crisis

    886 Words  | 2 Pages

    Government involvement to boost the credit and domestic demand of the private sector could lead to the economy being exposed to the risk of lower private investment growth and high-inflation.

    Read More

  • Apple: Continuing to Flourish in a Down Economy

    1011 Words  | 3 Pages

    The recent economic crisis has the world is shambles. The real estate market has seen the lowest values and large amount of foreclosures. Wall Street has fallen apart and many people have lost their life savings. Throughout this great ordeal Apple Inc. has stayed afloat. They have been able to hit record numbers in sales, both domestically and internationally. Apple’s upper management has been inventive and has been proactively trying to make sure Apple continues to grow.

    Read More

  • JP Morgan

    1321 Words  | 3 Pages

    In the late 1800s' economy there were many Americans who considered themselves to be business affiliated, but really didn't understand the full meaning of a business or knowing any financial obligations within a business. However, there was one peculiar man John Pierpont Morgan also know as J.P. Morgan who stood out to be a triumphant entrepreneur of many Americans in the late 1800s U.S. Economy.

    Read More

  • Enron

    1167 Words  | 3 Pages

    Enron started about 18 years ago in July of 1985. Huston Natural Gas merged with InterNorth, a natural gas company. After their merge they decided to come up with a new name, Enron. Enron grew in that 18-year span to be one of America's largest companies. A man named Kenneth Lay who was an energy economist became the CEO of Enron. He was an optimistic man and was very eager to do things a new way. He built Enron into an enormous corporation and in just 9 years Enron became the largest marketer of electricity in the United States. Just 6 years after that, in the summer of 2000 the stock was at a tremendous all time high and sold for more than 80 dollars a share. Enron was doing great and everything you could see was perfect, but that was the problem, it was what you couldn't see that was about to get Enron to the record books.

    Read More

  • 2008 Financial Crisis Essay

    1536 Words  | 4 Pages

    The "subprime crises" was one of the most significant financial events since the Great Depression and definitely left a mark upon the country as we remain upon a steady path towards recovering fully. The financial crisis of 2008, became a defining moment within the infrastructure of the US financial system and its need for restructuring. One of the main moments that alerted the global economy of our declining state was the bankruptcy of Lehman Brothers on Sunday, September 14, 2008 and after this the economy began spreading as companies and individuals were struggling to find a way around this crisis. (Murphy, 2008) The US banking sector was first hit with a crisis amongst liquidity and declining world stock markets as well. The subprime mortgage crisis was characterized by a decrease within the housing market due to excessive individuals and corporate debt along with risky lending and borrowing practices. Over time, the market apparently began displaying more weaknesses as the global financial system was being affected. With this being said, this brings into question about who is actually to assume blame for this financial fiasco. It is extremely hard to just assign blame to one individual party as there were many different factors at work here. This paper will analyze how the stakeholders created a financial disaster and did nothing to prevent it as the credit rating agencies created an amount of turmoil due to their unethical decisions and costly mistakes.

    Read More

  • JP Morgan

    4943 Words  | 10 Pages

    John Pierpont Morgan is considered one of the founding fathers of the modern United States economy. He was an industrial genius that is accredited with the founding of many companies including General Electric and AT&T. However, Pierpont is looked upon as a saint and demon the same. He received a honorary degree from Harvard university that read: "Public citizen, patron of literature and art, prince among merchants, who by his skill, wisdom and courage, has twice in times of stress repelled a national danger of financial panic." But Robert LaFollette, the Wisconsin progressive, saw him as "a beefy, red-faced thick-necked financial bully, drunk with wealth and power." Despite conflicting opinion on his persona, his influence and character shaped the business world more so than any other person at the turn of the century. Morgan was a banker, railroad czar, industrialist, financier, philanthropist, yachtsman, and ladies' man. He was king to a handful of millionaire barons who controlled the country's wealth in an era of little government regulation.

    Read More

  • Goldman Sachs Case Study

    776 Words  | 2 Pages

    In 1882, Samuel Sachs, Goldman’s son-in-law, joined the company. Henry Goldman and Ludwig Derfuss later joined the business, which later made the company adapt the well-known name, Goldman Sachs & Co. According to William Cohan 2012, Money and power: How Goldman Sachs Came to rule the world, The Niche the company found in selling commercial paper for entrepreneurs, contributed to the firm being invited to join the NYSE and its revenue of $1.6 million in 1896.Even though it was still considered a small firm, Goldman Sachs branched out into handling debts and currencies overseas. William Cohan goes on to state that because Henry Goldman’s had a relationship with the owner of Sears, Julius Rosenwald, it made the deal possible, and the interests of other companies such as, Roebuck and company, F.W. Woolworth and Continental Can, contributed to Goldman Sachs entrance into the (IPO) initial public offering market in 1906. With the company now being led by the Sachs family. Goldman Sachs changed its focus and began to expend and recruit in other areas. The company started a Trading Corp operation, which failed one year later due to the 1929 stock market crash. This hurt the firm’s reputation for years to come because of accusations of shares manipulation and insider trading according to William Cohan

    Read More

  • Capitalism vs. Communism: an Everlasting Debate

    966 Words  | 2 Pages

    ...crease unemployment. Investors are an important factor to consider because without investment the economy will decline. To sum up, investment solves vital economic problems and is a nourishing factor to the economy. Investors desire to invest in a capitalist economy because they make their own decisions not like communist economy and they set their own prices and they are not restricted to minimum wages.

    Read More

  • Financial Intermediaries

    1653 Words  | 4 Pages

    Functions performed by financial intermediaries can be categorized into three functions; (1) maturity transformation, (2) risk transformation, and (3) convenience denomination. With maturity transformations, intermediaries convert short-term liabilities to long term assets. This conversion is common with banks and other institutions that provide liquidity for entrepreneurs, giving a short term debt a match with a long term loan. Rather than constantly evaluating short term loan options and rolling over the debt balance, a longer term commitment is able to be made that locks in a lower rate to benefit all parties. Additionally, intermediaries can provide risk transformation, which offer the ability to convert risky investments into relatively risk-free by lending to multiple borrowers to spread the risk. By pooling the funds of multiple investors, the intermediary – such as a mutual fund – inherently provides diversification and tolerance against a single investment producing undesirable results. Finally, convenience denomination is provided by an intermediary. With a large quantity of deposits being held at a financial intermediary, they are able to match small deposits with large loans, and larger deposit...

    Read More

More about Lehman Brothers

Open Document