lehman bros

LEHMAN BROTHERS

Presented By.......

Rajesh Bhagade (08)

Amrin Khan (17)

Deepali Magadum (27)

Mary Rayan (37)

Shaikh M Jahir (47)

Wandrick Maruf (58)

Content

• Introduction

• History

• Sub prime Crisis

• Bankruptcy

• Quick Look At Lehman Chronology

• Lessons From Collapse

• Conclusion

Introduction

• Founded in 1850

• Founders : Henry Lehman

Emanuel Lehman

Mayer Lehman

• Global financial service firm

• The U.S. Treasury securities market

• History

• In layman terms What do we mean by Sub Prime Crisis

Why Did Lehman Brother Collapsed?

In short, Other bank refuses to trade with Lehman. Without the ability to trade, and without investor prepared to bet on its long-

term viability, Lehman Effectively had no Business

Why Would the other Banks not traded?

on 15 September 2008:•Q3 2007: 1.1% growth•Q4 2007: 0.9% growth•Q1 2008: 0.6% growth•Q2 2008: 0.4% growth•Q3 2008: 0.1% growth

US government bail-outsThe cost of US government bail-outs so far,according to Forbes:• Bear Sterns: $US29 billion• AIG: $US144 billion and rising• Fannie Mae: $US100 billion• Freddie Mac: $US100 billion• Wall Street: $US700 billion• Car industry: $US200 billion so far• IndyMac: $US8 billion

Would The US Government have stepped in?

What's going on at AIG?

WASHINGTON MUTUAL

Who's next?

SHALLOW RECESSION

Will it make a recession worse?

QUICK LOOK AT THE LEHMAN CHRONOLOGY

Sept 15, 2008: Lehman Bros filed for bankruptcy sending the Dow

plummeting 504 points.

Sept 17: the Dow falls 449 points in reaction to AIG bailout.

Oct 3:the House passes Financial Rescue Plan (TARP) The Dow falls 818 points. Oct 7:the Fed creates the Commercial Paper Funding Facility to backstop the commercial paper market. Two weeks later, Bernanke announces the Money Market Investor Funding Facility to make loans of longer maturities.

Sept 29:the Dow tumbles 777 points after House votes "No" on TARP.

Lessons from collapse of Lehman brothers

Incentives Matter • Borrowers with no equity in their properties

are more likely to default• Loan officers and brokers focused on

volume get maximization Fragility in financial institution• Financial institution proves to fragile to

handle stress

• Its really hard for democracy to make big changes

• US & other economy fails in the process of decoupling

• Need of regulatory reforms

• Street name or firm name

• Rehypothication or pawning

• Street Name or Firm Name

• Rehypothication or Pawning

• Derivatives

• False safety valves of SIPC (Securities Investor’s Protection Corporation) and Excess SIPC.

CONCLUSION

ANALYSIS…………