The Collapse Of Lehman Brothers

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“The collapse of Lehman Brothers, a sprawling global bank, in September 2008 almost brought down the world’s financial system. It took huge taxpayer-financed bailouts to shore up the industry.” ("The Economist," 2013, para. 1) The credit crunch that soon followed along with the bad mortgages that were written was one of the main culprits in the nearly historic depression. Had the Fed not stepped in, along with government assistance, we would have surely faced a depression. The Fed has used alternative methods to shore up the economy and the Legislative and Executive branches of the government used their powers to help ease the burden of the slowing economy. Some programs designed to help stave off a fully fledged depression was the “Cash for clunkers” program that encouraged consumers to purchased more economic vehicles while being paid above market value for their vehicles if they met certain criteria. The Cash for Clunkers program used the appropriated funds well short of the deadline and congress added an additional two billion dollars to the CARS program. ("Congress Daily PM," 2009, para. 1) The Federal Open Market Committee began reducing the Federal funds rate to historic lows and keeping them at near zero for an extended length of time. “Since 2008, the Federal Reserve has relied on unconventional policy measures to fulfill its dual mandate” (Smith & Becker, 2015, p. 57) The “bad” mortgages banks were writing, high interest rates, and world financial uncertainty were the main culprits to the financial crisis of 2008. “Some three years after the collapse of the financial industry, a bipartisan report from the Senate’s Permanent Subcommittee on Investigations has determined that banks, regulators and credit agencies ... ... middle of paper ... ...g a recession like economy, or when leading indicators lean toward a recessing economy. We could borrow more when the economy is growing as we could anticipate future revenues from the borrowed money. If conditions are favorable for investment in overseas operations, we would place reserves of money in these markets until the dollar was stronger than it currently would be. The same could be said for foreign money, invest in the dollar until foreign currency is stronger than the dollar. A business with global operations should definitely employ analyst to keep an eye on historical trends to take the best advantage of coming economic conditions. As the saying goes, history repeats itself, a keen analyst could spot the trends and ticks in the market and compare them to previous market conditions and advise the best possible avenue for the business to proceed.

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