financial crisis - What was the financial crisis What...

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4/7/2014 What was the financial crisis? What caused it? Who knew what when? September 15, 2008 - the first day of the beginning of the financial crisis Day that Lehman Brothers goes bankrupt To say that the collapse of them is the cause of the financial crisis is saying that fort sumter is the cause of the civil war. Why is it that one company going bankrupt causes such a crisis? Because after LB went bankrupt, every other firm that was holding similar securities and holding it in their balance sheet at a certain level had to immediately write down their assets because nobody could say that the MBS were worth anything pg. 113 What’s happening in this very short time frame, all these financial institutions have to shrink their balance sheet Can’t claim that these assets exist It does 2 things… It freezes them You don’t have money anymore to loan money to loan anybody else No longer had excess capital to loan to people There was no capital for the “next microsoft” to be started
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