banking_part1 - Lehman Brothers Case Lehman Brothers Case 1...

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ehman Brothers‘ Case Lehman Brothers Case 1
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Lehman Brothers‘ Case EVEN by the standards of the worst financial crisis for at least a generation, the events of Sunday September 14th 2008 and the day before were extraordinary. The weekend began with hopes that a deal could be struck, with or without government backing, to save Lehman Brothers, America’s fourth-largest investment bank. Early Monday morning Lehman filed for Chapter 11 bankruptcy protection. It has more than $613 billion of debt .(…) Lehman Brothers one of the oldest and the most ccessful investment banks successful investment banks… The biggest worry is the effect on derivatives markets, particularly the giant one for credit-default swaps. Lehman is a top-ten counterparty in CDSs, holding contracts with a notional value of almost $800 billion. On Sunday, banks called in their derivatives traders to assess their exposures to Lehman and work on mitigating risks. The Securities and Exchange Commission, Lehman’s main regulator, said it is working with the bank to protect clients and trading partners and to “maintain orderly markets”. 2
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Lehman Brothers‘ Case This left Lehman with no option but to prepare for bankruptcy. Though the bank has access to a Fed lending facility, introduced after Bear’s takeover by JP Morgan Chase, the collapse of its share price left it unable to raise new equity and facing crippling downgrades from rating agencies. Moreover, rival firms that had continued to trade with it in recent weeks — at the urging of regulators — had begun to pull away in the past few days. The inability to find a buyer is a huge blow to Lehman’s 25,000 employees , who own a third of the company’s now-worthless stock ; in such a difficult environment, most will struggle to find work at other financial firms. It also makes for an ignominious end to the career of Dick Fuld, Lehman’s boss since 1994, who until last year was viewed as one of Wall Street’s smartest managers. 3
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ehman losses on the 13th September, 2008 Lehman losses on the 13th September, 2008 4
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Lehman Brothers headquarters in New York City on September 15, 2008 6
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Some Lehman Brothers' employees leaving the bank's anary Wharf office in London England Canary Wharf office in London, England 7
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Financial crisis – an investment banker of Goldman Sachs, London 8
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eaction of the stock exchanges Reaction of the stock exchanges 9
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Reaction of the stock exchanges 10
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he scope of our course The scope of our course hy Study Financial Markets? Why Study Financial Markets? – Channel funds from savers to investors, thereby promoting economic efficiency Affect personal wealth and behavior of business firms p Why Study Banking and Financial Institutions? – Financial Intermediation • Helps get funds from savers to investors Banks and Money Supply • Crucial role in creation of money – Central Bank • Role of the Central Bank in providing financial stability Why Study Money and Monetary Policy?
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This note was uploaded on 05/30/2011 for the course ACC 101 taught by Professor Worfy during the Winter '08 term at Akademia Ekonomiczna w Poznaniu.

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banking_part1 - Lehman Brothers Case Lehman Brothers Case 1...

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