Prepared by:

Patel Mitalee s.

Patel Sonal

Shah Pratik

Sakaria Ashish

Paresh

Lehman brothersLehman brothers

Henry Lehman Emanuel Lehman

Lehman familyLehman familyThe The Lehman familyLehman family was a prominent family of Jewish-German- was a prominent family of Jewish-German-

American businesspeople who founded the financial firm American businesspeople who founded the financial firm Lehman BrothersLehman Brothers. Some were also involved in American politics.. Some were also involved in American politics.

Some of the family members include:Some of the family members include: Allan S. LehmanAllan S. Lehman Arthur LehmanArthur Lehman, son of Mayer , son of Mayer Emanuel LehmanEmanuel Lehman, brother of Henry, co-founder of Lehman Brothers , brother of Henry, co-founder of Lehman Brothers Harold M. LehmanHarold M. Lehman Henry LehmanHenry Lehman, founder of H. Lehman, which became Lehman , founder of H. Lehman, which became Lehman

Brothers Brothers Herbert H. LehmanHerbert H. Lehman (1878-1963), U.S. senator, son of Mayer (1878-1963), U.S. senator, son of Mayer Irving LehmanIrving Lehman (1876-1945), U.S. lawyer and politician (1876-1945), U.S. lawyer and politician Mayer LehmanMayer Lehman, youngest brother of Henry and Emanuel, co-, youngest brother of Henry and Emanuel, co-

founder of Lehman Brothers founder of Lehman Brothers Philip LehmanPhilip Lehman (1861-1947), son of Emanuel (1861-1947), son of Emanuel Robert LehmanRobert Lehman (1891-1969), son of Philip (1891-1969), son of Philip Sigmund M. LehmanSigmund M. Lehman

Business Area of Lehman BrothersBusiness Area of Lehman Brothers

IndustryIndustry - - Investment servicesInvestment services

ProductsProducts - - Financial ServicesFinancial Services Investment BankingInvestment Banking Investment managementInvestment management

EmployeesEmployees - - 26,200 (26,200 (20082008))

WebsiteWebsite - - Lehman. COMLehman. COM

How big is Lehman Brothers?How big is Lehman Brothers? Founded in 1850 by three immigrants from Germany, Founded in 1850 by three immigrants from Germany,

Lehman Brothers has been a prominent investment bank Lehman Brothers has been a prominent investment bank in Wall Street for decades.in Wall Street for decades.

It operates at a wholesale level, dealing with It operates at a wholesale level, dealing with governments, companies and other financial institutions, governments, companies and other financial institutions, employing 25,000 people worldwide, including 5,000 in employing 25,000 people worldwide, including 5,000 in the UK.the UK.

Its core business includes buying and selling shares and Its core business includes buying and selling shares and fixed income assets, trading and research, investment fixed income assets, trading and research, investment banking, investment management and private equity.banking, investment management and private equity.

As the crisis in financial markets gathered momentum, it As the crisis in financial markets gathered momentum, it saw its share price collapse from $82 to less than $4. saw its share price collapse from $82 to less than $4. 

HistoryHistory Under the Lehman family (1850–1969)Under the Lehman family (1850–1969)

In 1844, 23-year-old Henry Lehman, the son of a cattle In 1844, 23-year-old Henry Lehman, the son of a cattle merchant,emigrated to the United merchant,emigrated to the United States from Rimpar,Bavaria.He settled in Montgomery, States from Rimpar,Bavaria.He settled in Montgomery, Alabama, where he opened a dry-goods store, "H. Alabama, where he opened a dry-goods store, "H. Lehman". In 1847, following the arrival of his Lehman". In 1847, following the arrival of his brother Emanuel Lehman, the firm became "H. Lehman and brother Emanuel Lehman, the firm became "H. Lehman and Bro." Bro." 

With the arrival of their youngest brother, Mayer Lehman, With the arrival of their youngest brother, Mayer Lehman, in 1850, the firm changed its name again and "Lehman in 1850, the firm changed its name again and "Lehman Brothers" was founded.Brothers" was founded.

In the 1850s Southern United States, cotton was one of the In the 1850s Southern United States, cotton was one of the most important crops. Capitalizing on cotton's high market most important crops. Capitalizing on cotton's high market value, the three brothers began to routinely accept raw value, the three brothers began to routinely accept raw cotton from customers as payment for merchandise, cotton from customers as payment for merchandise, eventually beginning a second business trading in cotton. eventually beginning a second business trading in cotton.

Merger with American Express (1969–94)

Under Peterson's leadership as Chairman and CEO, the firm acquired Under Peterson's leadership as Chairman and CEO, the firm acquired Abraham & Co. in 1975, and two years later merged with the Abraham & Co. in 1975, and two years later merged with the venerable, but struggling, venerable, but struggling, Kuhn, Loeb & Kuhn, Loeb & Co.Co.to form to form Lehman Brothers, Kuhn, Loeb Inc.Lehman Brothers, Kuhn, Loeb Inc., the country's fourth-largest , the country's fourth-largest investment bank, behind investment bank, behind Salomon BrothersSalomon Brothers, , Goldman SachsGoldman Sachs and  and First BostonFirst Boston..

Peterson led the firm from significant operating losses to five Peterson led the firm from significant operating losses to five consecutive years of record profits with a consecutive years of record profits with a return on equityreturn on equity among the  among the highest in the investment-banking industry.highest in the investment-banking industry.

However, hostilities between the firm's However, hostilities between the firm's investment bankersinvestment bankers and  and 

traderstraders (who were driving most of the firm's profits) prompted  (who were driving most of the firm's profits) prompted Peterson to promote Peterson to promote Lewis Lewis GlucksmanGlucksman, the firm's President, COO , the firm's President, COO and former trader, to be his co-CEO in May 1983. Glucksman and former trader, to be his co-CEO in May 1983. Glucksman introduced a number of changes that had the effect of increasing introduced a number of changes that had the effect of increasing tensions, which when coupled with Glucksman’s management style tensions, which when coupled with Glucksman’s management style and a downturn in the markets, resulted in a power struggle that and a downturn in the markets, resulted in a power struggle that ousted Peterson and left Glucksman as the sole CEO.ousted Peterson and left Glucksman as the sole CEO.

From 1983 to 1990, Peter A. Cohen was CEO and Chairman of From 1983 to 1990, Peter A. Cohen was CEO and Chairman of Shearson Lehman Brothers, where he led the one billion dollar Shearson Lehman Brothers, where he led the one billion dollar purchase of EF Huttonpurchase of EF Hutton

Divestment and independence (1994–Divestment and independence (1994–2008)2008)

In 1993, under newly appointed In 1993, under newly appointed CEOCEO, , Harvey Harvey GolubGolub, American , American Express began to divest itself of its banking and brokerage Express began to divest itself of its banking and brokerage operations. It sold its retail brokerage and asset management operations. It sold its retail brokerage and asset management operations  and in 1994 it spun off Lehman Brothers Kuhn Loeb in operations  and in 1994 it spun off Lehman Brothers Kuhn Loeb in an an initial public offeringinitial public offering, as Lehman Brothers Holdings, Inc., as Lehman Brothers Holdings, Inc.

Despite rumors that it would be acquired again, Lehman performed Despite rumors that it would be acquired again, Lehman performed quite well under CEO quite well under CEO Richard S. Richard S. FuldFuld, Jr., Jr.. In 2001, the firm acquired . In 2001, the firm acquired the private-client services, or "PCS", business of the private-client services, or "PCS", business of Cowen & CoCowen & Co..

and later, in 2003, aggressively re-entered the asset-management and later, in 2003, aggressively re-entered the asset-management business, which it had exited in 1989.Beginning with $2 billion in business, which it had exited in 1989.Beginning with $2 billion in assets under management, the firm acquired the assets under management, the firm acquired the Crossroads GroupCrossroads Group, , the fixed-income division of Lincoln Capital Management and the fixed-income division of Lincoln Capital Management and Neuberger BermanNeuberger Berman.These businesses, together with the PCS .These businesses, together with the PCS business and Lehman's private-equity business, comprised the business and Lehman's private-equity business, comprised the Investment Management Division, which generated approximately Investment Management Division, which generated approximately $3.1 billion in net revenue and almost $800 million in pre-tax $3.1 billion in net revenue and almost $800 million in pre-tax income in 2007. income in 2007.

Prior to going bankrupt, the firm had in excess of $275 billion in Prior to going bankrupt, the firm had in excess of $275 billion in assets under management. Altogether, since going public in 1994, assets under management. Altogether, since going public in 1994, the firm had increased net revenues over 600% from $2.73 billion the firm had increased net revenues over 600% from $2.73 billion to $19.2 billion and had increased employee headcount over 230% to $19.2 billion and had increased employee headcount over 230% from 8,500 to almost 28,600.from 8,500 to almost 28,600.

At the At the 2008 ALB China Law Awards2008 ALB China Law Awards, Lehman Brothers was , Lehman Brothers was crowned:crowned:

Deal of the Year - Debt Market Deal of the YearDeal of the Year - Debt Market Deal of the Year Deal of the Year - Equity Market Deal of the YearDeal of the Year - Equity Market Deal of the Year

Journey started by Lehman brosJourney started by Lehman brosU.S. investment bank Lehman Brothers has seen its shares shed U.S. investment bank Lehman Brothers has seen its shares shed

three-quarters of their value this week as it announced a record three-quarters of their value this week as it announced a record $3.9 billion loss and a restructuring plan. The bank faces the $3.9 billion loss and a restructuring plan. The bank faces the prospect of being acquired by rivals, raising the specter of an prospect of being acquired by rivals, raising the specter of an end to its 158-year history.end to its 158-year history.

18441844 Henry Lehman, an immigrant from Germany, opens a small dry Henry Lehman, an immigrant from Germany, opens a small dry

goods store in Montgomery, Alabama, in 1844.goods store in Montgomery, Alabama, in 1844.18501850 Henry is joined by brothers Emanuel and Mayer and they name Henry is joined by brothers Emanuel and Mayer and they name

the business Lehman Brothers.the business Lehman Brothers.18581858 The Lehmans -- who take cotton from farmers to settle accounts The Lehmans -- who take cotton from farmers to settle accounts

and trade the cotton for money and merchandise -- open a New and trade the cotton for money and merchandise -- open a New York office.York office.

1860s1860s After the Civil War, they move to New York and establish the New After the Civil War, they move to New York and establish the New

York Cotton Exchange.York Cotton Exchange.

18871887 Become members of the New York Stock ExchangeBecome members of the New York Stock Exchange18891889 Lehman underwrites its first public offering, for the Lehman underwrites its first public offering, for the

International Steam Pump Company.International Steam Pump Company.19291929 The Lehman Corporation is created, a closed-end investment The Lehman Corporation is created, a closed-end investment

company. company. 1930s1930s Lehman underwrites the IPO of DuMont, the first television Lehman underwrites the IPO of DuMont, the first television

manufacturer.manufacturer.1950s1950s Underwrites the IPOs of Digital Equipment and Hertz Rent-a-CarUnderwrites the IPOs of Digital Equipment and Hertz Rent-a-Car19601960 Opens a Paris office.Opens a Paris office.19621962 With Salomon Brothers, Merrill Lynch and Blyth and Company, With Salomon Brothers, Merrill Lynch and Blyth and Company,

Lehman forms an association nicknamed the "fearsome Lehman forms an association nicknamed the "fearsome foursome" that challenges the major firms for underwriting foursome" that challenges the major firms for underwriting business.business.

19721972 Becomes one of the first investment banks to open an office in Becomes one of the first investment banks to open an office in

London to take advantage of the booming bond market in Europe.London to take advantage of the booming bond market in Europe.19751975 Lehman acquires Abraham & Co.Lehman acquires Abraham & Co.

19841984 American Express acquires Lehman Brothers and merges it with American Express acquires Lehman Brothers and merges it with

Shearson.Shearson.19861986 Seat on the London Stock Exchange .Seat on the London Stock Exchange .19881988 Seat on the Tokyo Stock ExchangeSeat on the Tokyo Stock Exchange19931993 American Express divests Shearson, and the independent firm American Express divests Shearson, and the independent firm

once again becomes known as Lehman Brothers.once again becomes known as Lehman Brothers.19941994 Lehman becomes independent through a public stock offering and Lehman becomes independent through a public stock offering and

Lehman Brothers Holding Inc common stock begins trading on the Lehman Brothers Holding Inc common stock begins trading on the New York & Pacific stock exchanges.New York & Pacific stock exchanges.

19951995 Richard Fuld Jr takes the top job at Lehman.Richard Fuld Jr takes the top job at Lehman.

19981998 Fuld fights off rumors that the near collapse of Long Term Fuld fights off rumors that the near collapse of Long Term

Capital Management had caused a cash crunch at Lehman.Capital Management had caused a cash crunch at Lehman.19991999 Lehman establishes an alliance with Bank of Tokyo-Lehman establishes an alliance with Bank of Tokyo-

Mitsubishi for Japanese mergers and acquisitions.Mitsubishi for Japanese mergers and acquisitions.

20012001 Under pressure to cut costs, Fund decides to pay staff less Under pressure to cut costs, Fund decides to pay staff less

and in stock, rather than lay off employees.and in stock, rather than lay off employees.20022002 Lehman establishes its wealth and asset management Lehman establishes its wealth and asset management

division and acquires Lincoln Capital Management's fixed division and acquires Lincoln Capital Management's fixed income business. income business. 

20032003 Lehman acquires Neuberger Berman and The Crossroads Lehman acquires Neuberger Berman and The Crossroads

Group.Group.20072007 Lehman posts record-high net revenues, net income and Lehman posts record-high net revenues, net income and

earnings per common share (diluted) for a fourth earnings per common share (diluted) for a fourth consecutive year and the highest volume of trade on the consecutive year and the highest volume of trade on the London Stock Exchange for a third year in a row.London Stock Exchange for a third year in a row.

Firm reached to fallFirm reached to fall

On September 15, 2008, Lehman Brothers filed for On September 15, 2008, Lehman Brothers filed for bankruptcybankruptcy. With $639 billion in assets and $619 billion in . With $639 billion in assets and $619 billion in debt, Lehman's bankruptcy filing was the largest in history, debt, Lehman's bankruptcy filing was the largest in history, as its assets far surpassed those of previous bankrupt as its assets far surpassed those of previous bankrupt giants such as giants such as WorldComWorldCom and and EnronEnron..

Lehman was the fourth-largest U.S. investment bank at the Lehman was the fourth-largest U.S. investment bank at the

time of its collapse, with 25,000 employees worldwide. time of its collapse, with 25,000 employees worldwide. Lehman's demise also made it the largest victim, of the U.S. Lehman's demise also made it the largest victim, of the U.S. subprimesubprime mortgage mortgage-induced financial crisis that swept -induced financial crisis that swept through global financial markets in 2008. through global financial markets in 2008.

Lehman's collapse was a seminal event that greatly Lehman's collapse was a seminal event that greatly intensified the 2008 crisis and contributed to the erosion of intensified the 2008 crisis and contributed to the erosion of close to $10 trillion in close to $10 trillion in market capitalizationmarket capitalization from global from global equity markets in October 2008, the biggest monthly equity markets in October 2008, the biggest monthly decline on record at the time. decline on record at the time.

BankruptcyBankruptcy On Saturday September 13, 2008, On Saturday September 13, 2008, Timothy F. Timothy F. GeithnerGeithner, the , the

president of the president of the Federal Reserve Bank of New YorkFederal Reserve Bank of New York called a  called a meeting on the future of Lehman, which included the meeting on the future of Lehman, which included the possibility of an emergency liquidation of its assets.possibility of an emergency liquidation of its assets.

Lehman reported that it had been in talks with Lehman reported that it had been in talks with Bank of AmericaBank of America and  and BarclaysBarclays for the company's possible  for the company's possible sale. However, both Barclays and Bank of America sale. However, both Barclays and Bank of America ultimately declined to purchase the entire company.ultimately declined to purchase the entire company.

The The International Swaps and Derivatives AssociationInternational Swaps and Derivatives Association (ISDA)  (ISDA) offered an exceptional trading session on Sunday, offered an exceptional trading session on Sunday, September 14, 2008, to allow market participants to offset September 14, 2008, to allow market participants to offset positions in various positions in various derivativesderivatives on the condition of a  on the condition of a Lehman bankruptcy later that day.Lehman bankruptcy later that day.

  Although the bankruptcy filing missed the deadline, many Although the bankruptcy filing missed the deadline, many dealers honored the trades they made in the special dealers honored the trades they made in the special session.session.

Financial falloutFinancial fallout

Immediately following the bankruptcy filing, an already Immediately following the bankruptcy filing, an already distressed financial market began a period of extreme distressed financial market began a period of extreme volatility, during which the Dow experienced its largest one volatility, during which the Dow experienced its largest one day point loss, largest intra-day range (more than 1,000 day point loss, largest intra-day range (more than 1,000 points) and largest daily point gain.points) and largest daily point gain.

What followed was what many have called the “What followed was what many have called the “

perfect stormperfect storm” of economic distress factors, from Wall ” of economic distress factors, from Wall Street layoffs to a spike in "durvexity",[Street layoffs to a spike in "durvexity",[citation neededcitation needed] and ] and eventually a $700bn bailout package (eventually a $700bn bailout package (Troubled Asset Relief ProgramTroubled Asset Relief Program) prepared by ) prepared by Henry PaulsonHenry Paulson, , Secretary of the TreasurySecretary of the Treasury, and approved by Congress. The , and approved by Congress. The Dow eventually closed at a new six-year low of 7,552.29 on Dow eventually closed at a new six-year low of 7,552.29 on November 20. November 20.

Some reason should be discuss:Some reason should be discuss: The Prime CulpritThe Prime Culprit

In 2003 and 2004, with the U.S. housing boom (read, In 2003 and 2004, with the U.S. housing boom (read, bubblebubble) well under way, Lehman ) well under way, Lehman acquiredacquired five mortgage five mortgage lenders, including lenders, including subprimesubprime lender BNC Mortgage and lender BNC Mortgage and Aurora Loan Services, which specialized in Aurora Loan Services, which specialized in Alt-AAlt-A loans loans (made to borrowers without full documentation). (made to borrowers without full documentation).

Lehman's acquisitions at first seemed prescient; record Lehman's acquisitions at first seemed prescient; record revenues from Lehman's real estate businesses enabled revenues from Lehman's real estate businesses enabled revenues in the capital markets unit to surge 56% from revenues in the capital markets unit to surge 56% from 2004 to 2006, a faster rate of growth than other businesses 2004 to 2006, a faster rate of growth than other businesses in investment banking or asset management. in investment banking or asset management.

The firm securitized $146 billion of mortgages in 2006, a The firm securitized $146 billion of mortgages in 2006, a 10% increase from 2005. Lehman reported record profits 10% increase from 2005. Lehman reported record profits every year from 2005 to 2007. In 2007, the firm reported every year from 2005 to 2007. In 2007, the firm reported net income of a record $4.2 billion on net income of a record $4.2 billion on revenuerevenue of $19.3 of $19.3 billion. billion.

Lehman's Colossal MiscalculationLehman's Colossal Miscalculation

In February 2007, the stock reached a record $86.18, giving In February 2007, the stock reached a record $86.18, giving Lehman a Lehman a market capitalizationmarket capitalization of close to $60 billion. However, of close to $60 billion. However, by the first quarter of 2007, cracks in the U.S. housing market by the first quarter of 2007, cracks in the U.S. housing market were already becoming apparent as defaults on subprime were already becoming apparent as defaults on subprime mortgages rose to a seven-year high. mortgages rose to a seven-year high.

On March 14, 2007, a day after the stock had its biggest one-day On March 14, 2007, a day after the stock had its biggest one-day drop in five years on concerns that rising defaults would affect drop in five years on concerns that rising defaults would affect Lehman's profitability, the firm reported record revenues and Lehman's profitability, the firm reported record revenues and profit for its fiscal first quarter. In the post-earnings profit for its fiscal first quarter. In the post-earnings conference callconference call, Lehman's , Lehman's chief financial officerchief financial officer (CFO) said that the (CFO) said that the risks posed by rising home delinquencies were well contained and risks posed by rising home delinquencies were well contained and would have little impact on the firm's earnings. would have little impact on the firm's earnings.

He also said that he did not foresee problems in the subprime He also said that he did not foresee problems in the subprime market spreading to the rest of the housing market or hurting the market spreading to the rest of the housing market or hurting the U.S. economy. U.S. economy.

The Beginning of the EndThe Beginning of the End As the credit crisis erupted in August 2007 with the failure of As the credit crisis erupted in August 2007 with the failure of

two Bear Stearns hedge funds, Lehman's stock fell two Bear Stearns hedge funds, Lehman's stock fell sharply. During that month, the company eliminated 2,500 sharply. During that month, the company eliminated 2,500 mortgage-related jobs and shut down its BNC unit. In mortgage-related jobs and shut down its BNC unit. In addition, it also closed offices of Alt-A lender Aurora in three addition, it also closed offices of Alt-A lender Aurora in three states. states.

Even as the correction in the U.S. housing market gained Even as the correction in the U.S. housing market gained momentum, Lehman continued to be a major player in the momentum, Lehman continued to be a major player in the mortgage market. In 2007, Lehman underwrote more mortgage market. In 2007, Lehman underwrote more mortgage-backed securitiesmortgage-backed securities than any other firm, than any other firm, accumulating an $85-billion portfolio, or four times its accumulating an $85-billion portfolio, or four times its shareholders' equity. shareholders' equity.

In the fourth quarter of 2007, Lehman's stock rebounded, as In the fourth quarter of 2007, Lehman's stock rebounded, as global equity markets reached new highs and prices for fixed-global equity markets reached new highs and prices for fixed-income assets staged a temporary rebound. However, the income assets staged a temporary rebound. However, the firm did not take the opportunity to trim its massive firm did not take the opportunity to trim its massive mortgage portfolio, which in retrospect, would turn out to be mortgage portfolio, which in retrospect, would turn out to be its last chance its last chance

Hurtling Toward FailureHurtling Toward Failure Lehman's high degree of Lehman's high degree of leverageleverage - the ratio of total assets  - the ratio of total assets

to shareholders equity - was 31 in 2007, and its huge to shareholders equity - was 31 in 2007, and its huge portfolio of mortgage securities made it increasingly portfolio of mortgage securities made it increasingly vulnerable to deteriorating market conditions. vulnerable to deteriorating market conditions.

On March 17, 2008, following the near-collapse of Bear On March 17, 2008, following the near-collapse of Bear Stearns - the second-largest underwriter of mortgage-backed Stearns - the second-largest underwriter of mortgage-backed securities - Lehman shares fell as much as 48% on concern it securities - Lehman shares fell as much as 48% on concern it would be the next would be the next Wall StreetWall Street firm to fail. firm to fail.

Confidence in the company returned to some extent in April, Confidence in the company returned to some extent in April, after it raised $4 billion through an issue of after it raised $4 billion through an issue of preferred stockpreferred stock that was convertible into Lehman shares at a 32% premium that was convertible into Lehman shares at a 32% premium to its price at the time. However, the stock resumed its to its price at the time. However, the stock resumed its decline as hedge fund managers began questioning the decline as hedge fund managers began questioning the valuation of Lehman's mortgage portfolio.  valuation of Lehman's mortgage portfolio.  

On June 9, Lehman announced a second-quarter loss of On June 9, Lehman announced a second-quarter loss of $2.8 billion, its first loss since being spun off by American $2.8 billion, its first loss since being spun off by American Express, and reported that it had raised another $6 billion Express, and reported that it had raised another $6 billion from investors. from investors.

The firm also said that it had boosted its The firm also said that it had boosted its liquidityliquidity pool to an pool to an estimated $45 billion, decreased gross assets by $147 estimated $45 billion, decreased gross assets by $147 billion, reduced its exposure to residential and commercial billion, reduced its exposure to residential and commercial mortgages by 20%, and cut down leverage from a factor of mortgages by 20%, and cut down leverage from a factor of 32 to about 25. 32 to about 25.

Too Little, Too LateToo Little, Too Late However, these measures were perceived as being too little, However, these measures were perceived as being too little,

too late. Over the summer, Lehman's management made too late. Over the summer, Lehman's management made unsuccessful overtures to a number of potential partners. unsuccessful overtures to a number of potential partners.

The stock plunged 77% in the first week of September 2008, The stock plunged 77% in the first week of September 2008, amid plummeting equity markets worldwide, as investors amid plummeting equity markets worldwide, as investors questioned CEO Richard Fuld's plan to keep the firm questioned CEO Richard Fuld's plan to keep the firm independent by selling part of its asset management unit and independent by selling part of its asset management unit and spinning off commercial real estate assets. spinning off commercial real estate assets.

Hopes that the Korea Development Bank would take a stake Hopes that the Korea Development Bank would take a stake in Lehman were dashed on September 9, as the state-owned in Lehman were dashed on September 9, as the state-owned South Korean bank put talks on hold.South Korean bank put talks on hold.

     The news was a deathblow to Lehman, leading to a 45% The news was a deathblow to Lehman, leading to a 45%

plunge in the stock and a 66% spike in credit-default swaps plunge in the stock and a 66% spike in credit-default swaps on the company's debt. The company's hedge fund clients on the company's debt. The company's hedge fund clients began pulling out, while its short-term creditors cut credit began pulling out, while its short-term creditors cut credit lines. On September 10, Lehman pre-announced dismal fiscal lines. On September 10, Lehman pre-announced dismal fiscal third-quarter results that underscored the fragility of its third-quarter results that underscored the fragility of its financial position. financial position.

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

The same day, Moody's Investor Service announced that it The same day, Moody's Investor Service announced that it was reviewing Lehman's credit ratings, and also said that was reviewing Lehman's credit ratings, and also said that Lehman would have to sell a majority stake to a strategic Lehman would have to sell a majority stake to a strategic partner in order to avoid a rating downgrade. These partner in order to avoid a rating downgrade. These developments led to a 42% plunge in the stock on September developments led to a 42% plunge in the stock on September 11. 11.

With only $1 billion left in cash by the end of that week, With only $1 billion left in cash by the end of that week, Lehman was quickly running out of time. Last-ditch efforts Lehman was quickly running out of time. Last-ditch efforts over the weekend of September 13 between Lehman, over the weekend of September 13 between Lehman, Barclays PLC and Bank of America, aimed at facilitating a Barclays PLC and Bank of America, aimed at facilitating a takeover of Lehman, were unsuccessful. On Monday takeover of Lehman, were unsuccessful. On Monday September 15, Lehman declared bankruptcy, resulting in the September 15, Lehman declared bankruptcy, resulting in the stock plunging 93% from its previous close on September 12. stock plunging 93% from its previous close on September 12.

IMPACT OF LEHMAN BROTHERS IMPACT OF LEHMAN BROTHERS

BANKRUPTCYBANKRUPTCY to different sectors to different sectors ON THE TECHNOLOGY SECTORON THE TECHNOLOGY SECTOR

The bankruptcy of Lehman marks a milestone that will bear a The bankruptcy of Lehman marks a milestone that will bear a direct impact on the technology sector overall. The tech direct impact on the technology sector overall. The tech sector was already experiencing some level of pain but it was sector was already experiencing some level of pain but it was mostly contained to limited to a few companies with specific mostly contained to limited to a few companies with specific exposure in the financial services arena and even then was exposure in the financial services arena and even then was mostly limited to smaller tech firms. mostly limited to smaller tech firms.

Most tech companies are likely to be affected by current Most tech companies are likely to be affected by current events, regardless of size. In our estimates, the financial events, regardless of size. In our estimates, the financial services sector represents about 20% of overall tech spending services sector represents about 20% of overall tech spending worldwide and about 27-28% of purchases of leading edge, worldwide and about 27-28% of purchases of leading edge, advanced technology. advanced technology.

This spending is going to come under pressure as IT This spending is going to come under pressure as IT organizations in finance are going to freeze and/or limit their organizations in finance are going to freeze and/or limit their discretionary spending budgets and try to contain their day-discretionary spending budgets and try to contain their day-to-day operating budgets. to-day operating budgets.

Companies that are vertically focused on financial services Companies that are vertically focused on financial services will feel the direct impact of this crisis, but many firms that will feel the direct impact of this crisis, but many firms that provide hardware, networking gear, and software will feel provide hardware, networking gear, and software will feel the slowdown as the additional feedback loop of slower the slowdown as the additional feedback loop of slower economy and unfavorable exchange rate trends will spread economy and unfavorable exchange rate trends will spread to the sector as a whole. to the sector as a whole.

It believe that the current phase of the financial services crisis It believe that the current phase of the financial services crisis will bring about a more negative investor outlook for the will bring about a more negative investor outlook for the tech industry and meaningfully destroy much of the tech industry and meaningfully destroy much of the optimism that was holding the tech industry above the fray optimism that was holding the tech industry above the fray

Little impact of Lehman Brothers' Little impact of Lehman Brothers' collapse on Indiacollapse on India

New Delhi/Mumbai:New Delhi/Mumbai: Even as global markets tottered Even as global markets tottered under the impact of the buyout of Merrill Lynch and under the impact of the buyout of Merrill Lynch and collapse of Lehman Brothers, the world's third and fourth collapse of Lehman Brothers, the world's third and fourth largest investment banks, the India impact will be limited, largest investment banks, the India impact will be limited, experts said on Monday. experts said on Monday.

"The impact will be limited and restricted to three areas "The impact will be limited and restricted to three areas mainly - stock markets, realty and outsourcing," a person mainly - stock markets, realty and outsourcing," a person familiar with Lehman and Merrill's operations in India said familiar with Lehman and Merrill's operations in India said on condition of anonymity. on condition of anonymity.

"A large part of the impact on equity markets has already "A large part of the impact on equity markets has already been discounted by today's slide in Indian markets," said been discounted by today's slide in Indian markets," said Naresh Pachisia, managing director of leading merchant Naresh Pachisia, managing director of leading merchant banker and securities brokerage house, the Kolkata-based banker and securities brokerage house, the Kolkata-based SKP Securities Ltd. "I do not expect any more bad news at SKP Securities Ltd. "I do not expect any more bad news at least in the next few months," he said, adding that markets least in the next few months," he said, adding that markets may fall a little more but should begin to recover once the may fall a little more but should begin to recover once the Indian festive season kicks in. Indian festive season kicks in.

It will certainly have a negative impact on those areas in It will certainly have a negative impact on those areas in India where these two companies have operations, India where these two companies have operations, specifically in the realty sector,? said Anuj Puri, country specifically in the realty sector,? said Anuj Puri, country head, Jones Lang Lasele Meghraj, a global real estate head, Jones Lang Lasele Meghraj, a global real estate consultancy firm. "The sector is already facing a fund consultancy firm. "The sector is already facing a fund crunch. Even if the immediate implication on India cannot crunch. Even if the immediate implication on India cannot be assessed it will certainly shake the confidence of the be assessed it will certainly shake the confidence of the industry in general which was banking too much on foreign industry in general which was banking too much on foreign institutional investors," Puri said. institutional investors," Puri said.

Earlier during the day, however, many Indian information Earlier during the day, however, many Indian information technology companies such as software and outsourcing technology companies such as software and outsourcing giants Wipro and TCS issued statements that they may not giants Wipro and TCS issued statements that they may not see much impact. see much impact.

Lehman has investments in Indian companies such as Spice Lehman has investments in Indian companies such as Spice Communications, Spice Mobile, Edelweiss Cap, IVRCL Infra, Communications, Spice Mobile, Edelweiss Cap, IVRCL Infra, Development Credit Bank, Champagne Indage, Golden Development Credit Bank, Champagne Indage, Golden Tobacco and Emkay Global. "Many Indian companies draw Tobacco and Emkay Global. "Many Indian companies draw liquidity from these investment firms and may be liquidity from these investment firms and may be impacted,? said Religare Securities President Amitabh impacted,? said Religare Securities President Amitabh Chakraborty. Chakraborty.

"I believe the US Federal Reserve Bank chairman Ben S. "I believe the US Federal Reserve Bank chairman Ben S. Bernanke will come out with a statement any time to help Bernanke will come out with a statement any time to help stop this financial tsunami," said Jagannadham Thunuguntla, stop this financial tsunami," said Jagannadham Thunuguntla, equity head of Nexgen Capitals Ltd, India's fourth largest equity head of Nexgen Capitals Ltd, India's fourth largest securities brokerage firm SMC Group.securities brokerage firm SMC Group.

With regard to Merrill's acquisition by Bank of America, With regard to Merrill's acquisition by Bank of America, experts said the impact is likely to be limited as Merrill Lynch experts said the impact is likely to be limited as Merrill Lynch was already in the process of offloading its India assets. was already in the process of offloading its India assets.

BlackRock Inc, one of the largest quoted asset management BlackRock Inc, one of the largest quoted asset management companies in the world, is currently in the process of companies in the world, is currently in the process of acquiring Merrill Lynch's 40 percent stake in its joint venture acquiring Merrill Lynch's 40 percent stake in its joint venture with noted Indian investor Hemendra Kothari's DSP group.with noted Indian investor Hemendra Kothari's DSP group.

DSP Merrill Lynch, had announced a few months ago that DSP Merrill Lynch, had announced a few months ago that

once BlackRock picks up Merrill's stake, the two joint venture once BlackRock picks up Merrill's stake, the two joint venture entities in India - the investment banking arm and a mutual entities in India - the investment banking arm and a mutual fund - will be renamed DSP BlackRock Investment Managers fund - will be renamed DSP BlackRock Investment Managers and DSP BlackRock Mutual Fund. While BlackRock currently and DSP BlackRock Mutual Fund. While BlackRock currently manages assets worth $1.3 trillion, DSP Merrill Lynch has manages assets worth $1.3 trillion, DSP Merrill Lynch has some $9 billion worth of assets under its management. some $9 billion worth of assets under its management. (IANS)(IANS)

Short term impact of Lehman crisis on Short term impact of Lehman crisis on outsourcing industry: Nasscomoutsourcing industry: Nasscom

NEW DELHI: With the tentacles of Lehman Brothers fiasco unfolding NEW DELHI: With the tentacles of Lehman Brothers fiasco unfolding on the Indian software companies, the industry body Nasscom today on the Indian software companies, the industry body Nasscom today said there would be short term and company specific impact. said there would be short term and company specific impact.

Stating that the Indian IT-BPO sector is a part of the global financial Stating that the Indian IT-BPO sector is a part of the global financial system that has seen a lot of turbulence in the recent past, the apex system that has seen a lot of turbulence in the recent past, the apex body said "our preliminary analysis of the current situation indicates body said "our preliminary analysis of the current situation indicates that the impact will be short term and company specific; we will that the impact will be short term and company specific; we will continue to keep a watch on any further downstream impacts." continue to keep a watch on any further downstream impacts."

With nearly half of their revenues coming from banking and financial With nearly half of their revenues coming from banking and financial services segments, India's top software exporters are closely services segments, India's top software exporters are closely monitoring the financial crisis spreading across markets. monitoring the financial crisis spreading across markets.

While Infosys and TCS, the country's two largest IT firms, said they While Infosys and TCS, the country's two largest IT firms, said they do not comment on individual clients, the third largest IT firm in the do not comment on individual clients, the third largest IT firm in the country, Wipro said it was in dialogue with failed Lehman Brothers, country, Wipro said it was in dialogue with failed Lehman Brothers, although revenues from it were modest. although revenues from it were modest.

HCL Technologies, however, said that the two US majors -- HCL Technologies, however, said that the two US majors -- Lehman and Merrill Lynch -- were not its clients and Lehman and Merrill Lynch -- were not its clients and therefore would not adversely affect the company. therefore would not adversely affect the company.

When one puts all of this together, there is some loss but When one puts all of this together, there is some loss but given that most of the top five companies have over 40-45 given that most of the top five companies have over 40-45 per cent exposure to BFSI space, then mood is worried and per cent exposure to BFSI space, then mood is worried and concerned right now, said an analyst. concerned right now, said an analyst.

Already finding it tough to cope with the slowdown in the Already finding it tough to cope with the slowdown in the US, the beleaguered Indian IT vendors are likely to see some US, the beleaguered Indian IT vendors are likely to see some reversal in revenues coming out of their banking practice reversal in revenues coming out of their banking practice with the recent happenings at global level. with the recent happenings at global level.

Nasscom, which is of the view that the current crisis is a Nasscom, which is of the view that the current crisis is a consequence of the sub-prime crisis which began last year, consequence of the sub-prime crisis which began last year, said many companies that were being directly impacted by said many companies that were being directly impacted by the turmoil last year had prepared for this eventuality. the turmoil last year had prepared for this eventuality.

But the association is optimistic on the challenge But the association is optimistic on the challenge being contained as it said "India's value being contained as it said "India's value proposition continues to be strong. As an proposition continues to be strong. As an industry, we have worked as partners with our industry, we have worked as partners with our customers and will continue to do so, even as the customers and will continue to do so, even as the financial services sector realigns itself." financial services sector realigns itself."

But analysts and industry watchers holding a not But analysts and industry watchers holding a not so optimistic view, feel India's outsourcing so optimistic view, feel India's outsourcing industry could be cut to size coupled with lower industry could be cut to size coupled with lower revenue, job loss and poorer salary hikes. revenue, job loss and poorer salary hikes.

ICICI Bank has Rs 375 crore exposure in ICICI Bank has Rs 375 crore exposure in Lehman BrothersLehman Brothers

Country's largest private sector lender, ICICI Bank today Country's largest private sector lender, ICICI Bank today said its London subsidiary has 57 million Euro (about Rs 375 said its London subsidiary has 57 million Euro (about Rs 375 crore) exposure in the Lehman Brothers which has filed for crore) exposure in the Lehman Brothers which has filed for bankruptcy protection.bankruptcy protection.

    "ICICI Bank UK Plc holds 57 million euro of senior bonds of "ICICI Bank UK Plc holds 57 million euro of senior bonds of Lehman Brothers Inc...Potential losses are not material," Lehman Brothers Inc...Potential losses are not material," the bank said in a statement.the bank said in a statement.

The bank said it had undertaken transactions with the US-The bank said it had undertaken transactions with the US-based troubled investment banker as part of treasury based troubled investment banker as part of treasury operations.operations.

"The exposure to Lehman Brothers' entities on account of "The exposure to Lehman Brothers' entities on account of these transactions and potential loss thereon are not these transactions and potential loss thereon are not material," it said.material," it said.

ICICI Bank shares plunged by 5.82 per cent to Rs 591.35 on ICICI Bank shares plunged by 5.82 per cent to Rs 591.35 on the Bombay Stock Exchange.the Bombay Stock Exchange.

Lehman Brothers, which is a 158-years-old-financial Lehman Brothers, which is a 158-years-old-financial institution has filed for bankruptcy protection, after losing institution has filed for bankruptcy protection, after losing around $60 billion (About Rs 2,76,000 crore) in sinking real-around $60 billion (About Rs 2,76,000 crore) in sinking real-estate market.estate market.

Another investment bank Merrill Lynch is being bought over Another investment bank Merrill Lynch is being bought over by Bank of America for $50 billion, while world's largest by Bank of America for $50 billion, while world's largest insurer American International Group (AIG) is also facing insurer American International Group (AIG) is also facing financial crisis.financial crisis.

Meanwhile, Lehman has suspended operations of its three Meanwhile, Lehman has suspended operations of its three Asian arms.Asian arms.

Lehman Brothers Asia, Lehman Brothers Securities Asia and Lehman Brothers Asia, Lehman Brothers Securities Asia and Lehman Brothers Futures Asia Ltd have suspended its Lehman Brothers Futures Asia Ltd have suspended its operations with immediate effect, including ceasing to trade operations with immediate effect, including ceasing to trade on the Hong Kong Securities Exchange and Hong Kong on the Hong Kong Securities Exchange and Hong Kong Futures Exchange, until further notice.Futures Exchange, until further notice.

How does it affect to common people?How does it affect to common people? Nobody has a Lehman Brothers cheque book or current account. The Nobody has a Lehman Brothers cheque book or current account. The

company is an investment bank that specializes in big and complex company is an investment bank that specializes in big and complex deals and investments.deals and investments.

Despite this, Lehman's collapse and the troubles of other financial Despite this, Lehman's collapse and the troubles of other financial institutions will probably be felt by millions of people around the institutions will probably be felt by millions of people around the world - at least indirectly.world - at least indirectly.

Most of our banks and pension funds have dealings with Lehman, or Most of our banks and pension funds have dealings with Lehman, or with firms like hedge funds that traded extensively with Lehman.with firms like hedge funds that traded extensively with Lehman.

Unwinding Lehman's complex deals will take months if not years. Unwinding Lehman's complex deals will take months if not years. During that time the global financial system will be snarled up. During that time the global financial system will be snarled up. Many banks won't know for sure how much they are exposed to Many banks won't know for sure how much they are exposed to Lehman, and will have difficulty freeing up the money in those deals.Lehman, and will have difficulty freeing up the money in those deals.

This in turn is likely to intensify the credit crunch, with potentially This in turn is likely to intensify the credit crunch, with potentially dire consequences for businesses and consumers.dire consequences for businesses and consumers.

And the dramatic collapse of Lehman Brothers has also shaken the And the dramatic collapse of Lehman Brothers has also shaken the financial markets, with share prices slumping around the world.financial markets, with share prices slumping around the world.

You will feel the impact even if you are not a banker or shareholder.You will feel the impact even if you are not a banker or shareholder.

Your pension fund may have a wobble. Your employer may find it Your pension fund may have a wobble. Your employer may find it more difficult to do business. And you yourself may have more more difficult to do business. And you yourself may have more difficulty getting a personal loan or mortgage.difficulty getting a personal loan or mortgage.

Points to be rememberPoints to be remember Why has Lehman Brothers collapsed?Why has Lehman Brothers collapsed?

In short, other banks refused to trade with it. Without the In short, other banks refused to trade with it. Without the ability to trade, and without investors prepared to bet on its ability to trade, and without investors prepared to bet on its long-term viability, long-term viability, LehmanLehman effectively had no business. effectively had no business.

Why would the other banks not trade?Why would the other banks not trade?It is a repeat of the It is a repeat of the Northern RockNorthern Rock debacle. Lehman, while debacle. Lehman, while it was a large and complex business trading in a web of it was a large and complex business trading in a web of assets, also supported 100% mortgage loans offered by assets, also supported 100% mortgage loans offered by specialist lenders to people with few visible means of specialist lenders to people with few visible means of support. When interest rates jumped, borrowers could no support. When interest rates jumped, borrowers could no longer afford their monthly payments. longer afford their monthly payments. Like Northern Rock, it mattered less that 80% of its assets Like Northern Rock, it mattered less that 80% of its assets were rock solid if 20% were considered toxic. We don't were rock solid if 20% were considered toxic. We don't know the exact proportions at Lehman and neither do the know the exact proportions at Lehman and neither do the bank's trading partners, which is why they refused in bank's trading partners, which is why they refused in growing numbers to do business or buy it once the bank growing numbers to do business or buy it once the bank was up for sale.was up for sale.

Could the US government have stepped in?Could the US government have stepped in?The US treasury has reached the limit of taxpayer funds it is willing The US treasury has reached the limit of taxpayer funds it is willing to gamble on propping up investment banks. Henry Paulson, the to gamble on propping up investment banks. Henry Paulson, the treasury secretary, committed £3 trillion last week to saving Fannie treasury secretary, committed £3 trillion last week to saving Fannie Mae and Freddie Mac. If they had failed, the mortgage market in the Mae and Freddie Mac. If they had failed, the mortgage market in the US would have collapsed and hundreds of banks around the world US would have collapsed and hundreds of banks around the world that invested in US property would suffer huge losses. that invested in US property would suffer huge losses. Paulson bailed out Paulson bailed out Bear StearnsBear Stearns earlier this year, but he appears to earlier this year, but he appears to believe a trading house like Lehman, which has little direct believe a trading house like Lehman, which has little direct connection with retail markets and ordinary homeowners, could be connection with retail markets and ordinary homeowners, could be allowed to go bust without causing the kind of systemic risk posed allowed to go bust without causing the kind of systemic risk posed by Fannie and Freddie.by Fannie and Freddie.

Why was Barclays interested?Why was Barclays interested?BarclaysBarclays joined the talks at the weekend to buy Lehman because it joined the talks at the weekend to buy Lehman because it was interested in picking up the bank on the cheap. It is a re-run of was interested in picking up the bank on the cheap. It is a re-run of the proposed deal for Northern Rock by the proposed deal for Northern Rock by Lloyds TSBLloyds TSB at the time of at the time of its collapse last summer. its collapse last summer. Lloyds TSB offered to buy Northern Rock and accept its liabilities if Lloyds TSB offered to buy Northern Rock and accept its liabilities if the government was prepared to set aside £30bn in discounted the government was prepared to set aside £30bn in discounted loans to support the takeover. Barclays asked Paulson for the same loans to support the takeover. Barclays asked Paulson for the same kind of guarantee. He refused. The main City regulator, the Financial kind of guarantee. He refused. The main City regulator, the Financial Services Authority, was also believed to have expressed concerns to Services Authority, was also believed to have expressed concerns to Barclays boss John Varley that it was unwise to buy a US investment Barclays boss John Varley that it was unwise to buy a US investment bank at this time.bank at this time.

Will everyone at Lehman's get the sack?Will everyone at Lehman's get the sack?The administrators, PricewaterhouseCoopers, said the bank The administrators, PricewaterhouseCoopers, said the bank was centrally run from New York and therefore all its main was centrally run from New York and therefore all its main businesses across Europe are wrecked. That puts 5,000 businesses across Europe are wrecked. That puts 5,000 people who are employed at the bank, largely in Canary people who are employed at the bank, largely in Canary Wharf, out of work.Wharf, out of work.

Will the whole bank be liquidated?Will the whole bank be liquidated?in the US allows PwC to take its time while it tries to find in the US allows PwC to take its time while it tries to find buyers for the least affected businesses. The year-long buyers for the least affected businesses. The year-long protection offered by Chapter 11 shields a company from protection offered by Chapter 11 shields a company from creditors while it is reshaped or sold as a whole or in parts.creditors while it is reshaped or sold as a whole or in parts.

PWC said a number of group companies remain solvent and PWC said a number of group companies remain solvent and will continue to trade. "These companies include Lehman will continue to trade. "These companies include Lehman Brothers Asset Management (Europe) and a series of Brothers Asset Management (Europe) and a series of special-purpose vehicles designed to manage portfolios of special-purpose vehicles designed to manage portfolios of residential and commercial real estate assets and non-residential and commercial real estate assets and non-performing loans."performing loans."

What are the risks for other banks?What are the risks for other banks?Share prices have tumbled and are likely to fall further as Share prices have tumbled and are likely to fall further as investors take flight from a sector that appears to be run by a investors take flight from a sector that appears to be run by a group of bankers who are in denial about the extent of their group of bankers who are in denial about the extent of their mistakes and the problems their firms now face. mistakes and the problems their firms now face.

A flight of investors will make their situation worse because A flight of investors will make their situation worse because they are to a great extent dependent on their shareholders for they are to a great extent dependent on their shareholders for capital. The capital provided by shareholders is the bedrock capital. The capital provided by shareholders is the bedrock for their lending and without it they cannot continue trading.for their lending and without it they cannot continue trading.

What is the position with Bank of America and Merrill What is the position with Bank of America and Merrill Lynch?Lynch?In many ways the sale of In many ways the sale of Merrill LynchMerrill Lynch to Bank of America is to Bank of America is a more startling development in the year-long credit crunch a more startling development in the year-long credit crunch than the collapse of Lehman. It is understood that once it was than the collapse of Lehman. It is understood that once it was obvious Lehman's was going under, Merrill realised it was obvious Lehman's was going under, Merrill realised it was vulnerable. The "thundering herd", as Merrill is affectionately vulnerable. The "thundering herd", as Merrill is affectionately known, was approached by Bank of America earlier this year, known, was approached by Bank of America earlier this year, but rebuffed takeover talks. Now it was Merrill that went cap but rebuffed takeover talks. Now it was Merrill that went cap in hand to the US's largest retail bank for a rescue deal. in hand to the US's largest retail bank for a rescue deal. Sceptics say the deal does little to resolve the problems faced Sceptics say the deal does little to resolve the problems faced by both firms, which are heavily mired in the US sub-prime by both firms, which are heavily mired in the US sub-prime home debacle. home debacle.

Who's next?Who's next?Washington Mutual is named by several analysts as the next to find itself in Washington Mutual is named by several analysts as the next to find itself in serious trouble. It was the subject of a rescue led by private equity firm Texas serious trouble. It was the subject of a rescue led by private equity firm Texas Pacific group in the spring. But the billions poured into its coffers no longer look Pacific group in the spring. But the billions poured into its coffers no longer look sufficient to satisfy investors and they are taking flight. It is possible sufficient to satisfy investors and they are taking flight. It is possible shareholders will flee Bank of America, if they consider Merrill Lynch a bad buy. shareholders will flee Bank of America, if they consider Merrill Lynch a bad buy.

Another victim could be the US mono line insurers, so called because they only Another victim could be the US mono line insurers, so called because they only insure the bonds of large companies, including mortgage lending institutions. insure the bonds of large companies, including mortgage lending institutions. Like AIG, the insurance cover they provide could be invoked by customers and, Like AIG, the insurance cover they provide could be invoked by customers and, like a tsunami, overwhelm their finances. like a tsunami, overwhelm their finances. In the UK, mortgage banks such as Halifax owner HBOS, Alliance & Leicester In the UK, mortgage banks such as Halifax owner HBOS, Alliance & Leicester and Bradford & Bingley, could suffer further if investors switch to safer havens. and Bradford & Bingley, could suffer further if investors switch to safer havens.

Will it make a recession worse?Will it make a recession worse?Yes. The CBI predicts a "shallow recession" next year, but this now appears Yes. The CBI predicts a "shallow recession" next year, but this now appears optimistic. If the last five years of our decade-long economic boom were optimistic. If the last five years of our decade-long economic boom were characterised by reckless lending, then living standards, along with property characterised by reckless lending, then living standards, along with property prices, have a long way to fall. prices, have a long way to fall.

We are all spending money we simply don't have and when we stop it will spell We are all spending money we simply don't have and when we stop it will spell the end for many jobs in retail, hospitality and may other industries. A fall in the the end for many jobs in retail, hospitality and may other industries. A fall in the value of the pound will help exporters and that will offset the worst of the value of the pound will help exporters and that will offset the worst of the economy's problems. But without banks willing or able to lend money to economy's problems. But without banks willing or able to lend money to millions of people, except at sky-high interest rates, a long and deep recession millions of people, except at sky-high interest rates, a long and deep recession seems inevitableseems inevitable

ConclusionConclusion

Lehman's collapse roiled global financial markets for weeks, Lehman's collapse roiled global financial markets for weeks, given the size of the company and its status as a major given the size of the company and its status as a major player in the U.S. and internationally. player in the U.S. and internationally.

Many questioned the U.S. government's decision to let Many questioned the U.S. government's decision to let Lehman fail, as compared to its tacit support for Bear Lehman fail, as compared to its tacit support for Bear Stearns (which was acquired by JPMorgan Chase) in March Stearns (which was acquired by JPMorgan Chase) in March 2008.2008.

Lehman's bankruptcy led to more than $46 billion of its Lehman's bankruptcy led to more than $46 billion of its market value being wiped out. Its collapse also served as market value being wiped out. Its collapse also served as the catalyst for the purchase of Merrill Lynch by Bank of the catalyst for the purchase of Merrill Lynch by Bank of America in an emergency deal that was also announced on America in an emergency deal that was also announced on September 15. September 15.