lessons from collapse - lehman brothers (eco)

8/10/2019 Lessons From Collapse - Lehman Brothers (Eco)

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Company OverviewLehman Brothers Holdings Inc. was a global financial-services firm.

It participated in businesses which included :Investment banking,Equity and fixed-income sales,Research and trading,Investment management,Private equity & banking.

A primary dealer in the U.S. Treasury securities market.

The firm's worldwide headquarters were in New York City, with regional

headquarters in London and Tokyo, as well as offices located throughoutthe world.

On September 15,2008, the firm filed for Chapter 11 Bankruptcyprotection.


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1850 : Three brothers Henry, Emanuel and Mayer Lehman, foundedLEHMAN BROTHERS.

1862 : Facing difficulties as a result of the Civil War, the firm teamed up John Durr (Cotton Merchant) to form Lehman Durr & Co.

1906 : Firm partnered with Goldman, Sachs & Co. to bring the GeneralCigar Co. to market.

1969 : Robert Lehman died leaving no member of the Lehman familyactively involved with the partnership.

1973 : Pete Peterson was brought in to save the firm through the hardtimes.

1975 : The firm acquired Abraham & Co. and two years later merged withthe Kuhn, Loeb & Co., to form Lehman Brothers, Kuhn, Loeb Inc., thecountry's fourth-largest investment bank.

History Of Lehman Brothers


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HISTORY TIMELINE 1850 - 2006


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So, Why Lehman Collapsed ?


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Funding long term assets with short term liabilities.

High Leverage.

Low Cash Holding.

Mortgage Backed Securities and not securitize them.

Assets also includes Long Position and Collateralized Lendings.

Sub Prime Mortgage Crisis.

Reasons For Fall OF Lehman brothers

Funding long term assets with short term liabilities.High Leverage.

Low Cash Holding.

Mortgage Backed Securities and not securitize them.

Assets also includes Long Position and Collateralized Lendings.

Sub Prime Mortgage Crisis.

Reasons For Fall OF Lehman brothers


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So, How did it all began?


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How did it all start ???

Huge sections of population looking to borrowmoney for their dream home.

A Big Fat Global money pool ready to be

invested somewhere.

A very low interest rate being offered by US

Treasury bonds - So Global money pool was

looking for an alternative investments.


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What happened next???


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Where did the problem start??? Borrowers started defaulting.

House prices started falling.

Foreclosures could not recover losses.

Asset prices of CDOs fell since backed by houses.

Wall street firms turned more cautious and reducedlending.

Global money pool also became cautious realizedCDOs were filled with Toxic Debt (sub primemortgage).

No one ready to invest even in money marketsecurities.

Credit squeeze.


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Sub Prime Mortgage Crisis


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Bankruptcy Of Lehman brothers

Filed for Chapter 11 bankruptcy protection on September 15, 2008.

The largest bankruptcy filing in U.S. history with Lehman holding over$600 billion in assets.


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Impact Of Lehman Fall on Global Economy


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Impact Of Lehman Fall on Global Economy

1. Stock exchanges across the globe faced plunged badly.2. Economies exporting heavily to US got a jolt.

3. As US dollar weakens against various currencies, the tradedeficit takes a hit.

4. Buy-out, merger & acquisition deals kept on hold.

5. Credit crunch & Liquidity shortages across the globe.

6. Unemployment rate increased all over the economies.


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Impact Of Lehman Fall on Indian Economy

1. Various Hedge Funds abroad & FIIs began to Sell.

2. Rupee Depreciates.

3. Liquidity Tightens.

4. Interest Rates Goes Up So, High Cost Of Funds for Companies.

5. Growth Slows Down So, Reduction In GDP.

6. IT & Software Industry affected.


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lessons from collapse - lehman brothers (eco)

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