The Weekend That Changed Wall Street

Presented By – Rohan Popli Rohit Seth Rohit Yadav Sameer Kalra

Fact File • In 2003 and 2004 Lehman acquired five mortgage lenders, including subprime lender BNC Mortgage and Aurora Loan Services, which specialized in Alt-A loans.

• In 2007, Lehman underwrote more mortgage-backed securities than any other firm, accumulating an $85-billion portfolio, or four times its shareholders' equity which was $ 21 billion.

•Lehman's high degree of leverage - the ratio of total assets to shareholders equity was 31.

• On September 10, The firm reported a loss of $3.9 billion, including a write-down of $5.6 billion, and also announced a sweeping strategic restructuring of its businesses.

•September 15, Lehman declared bankruptcy leading more than $46 billion of its market value wiped out.

•It had a bank debt of $613 billion, $155 billion in bond debt, and assets worth $639 billion.

•Lehman's collapse greatly intensified the 2008 crisis and contributed to the erosion of close to $10 trillion in market capitalization from global equity markets in October 2008.

The Whole Cycle

House Bubble

Conditions on Takeovers

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31-08-2008

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Income Side Fall

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Operating ActivitesInvesting ActivitiesFinancing Activities

Cash Flow Side Fall

Lehman Takeovers

North America

Asia Division

Collapse and Commercial Paper Market

Lehman Brothers and Commercial Paper Market Freeze

- U.S. policy makers meet-Real Estate plummeting in value-Bailout ruled out -Barclays and Bank of America takeover abandon.

Lehman Brothers and Commercial Paper Market Freeze

-Lehman files bankruptcy . -Client start to pull the money market fund.-Reserve Primary , holder of $785 million in Lehman commercial paper.-Yield rising overnight.-Client withdraw 60% from within a day.

Lehman Brothers and Commercial Paper Market Freeze

-U.S. Treasury announces a $50 billion temporary guarantee for money market funds.-Yields came down for first time .- Federal Reserve help to raise fund for satisfying withdrawal.

Lehman Brothers and Commercial Paper Market Freeze

-House Representatives rejects the $700 billion Troubled Asser Relief Program (TARP).- Yield surge most in more than a decade.

Lehman Brothers and Commercial Paper Market Freeze

-House Representatives approves the $700 billion Troubled Asser Relief Program (TARP).

Lehman Brothers and Commercial Paper Market Freeze

-Companies not able to find buyer.- Federal to create special fund to invest itself.

Lehman Brothers and Commercial Paper Market Freeze

-Buying begins directly from companies , example GE.-Market grows for the first time.

Lehman Brothers and Commercial Paper Market Freeze

-Recession results companies in need for cash.-Market shrinks for 16th straight week.

Collapse and Stock Market

Dow Jones Industrial Average

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Lehman Brothers (Stock Price)

HANG SENG INDEX

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NIFTY Index

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Top 10 Bankruptcy

Company Date Assets worth ($billion)

Lehman Brothers Holdings 9/15/08 691

Washington Mutual 9/26/08 327.9

WorldCom 7/21/02 103.9

General Motors 6/1/09 91

Enron 12/02/01 65.5

Conseco 12/17/02 61

Chrysler 4/30/09 39

Thornburg Mortgage 5/1/09 36.5

Pacific Gas and Electric Co. 4/6/01 36

Texaco 4/12/87 34.9

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