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The following article was published in our article directory on September 22, 2010.
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Article Category: Business
Author Name: Amanda xzh
Two years ago, on Sept. 14, before the financial turmoil sweeping the globe in the occasion of the fourth-largest Wall Street investment bank Lehman Brothers declared bankruptcy. This 158-year-old furniture in the world actually burst of sudden collapse of financial predators. Wall Street staged a real tragedy.
A more serious crisis and panic ensued: Lehman collapse of the day, the U.S. Dow down 500 points. The second day, the value of trillions of assets of American International Group (AIG) is also an emergency; several Monetary Fund, the United States in huge losses, leading to large-scale investors to run the cash; banks are not lending each other, the entire credit market freeze was deadlocked state . All the investment banks and many financial companies into financial crisis. Greater disaster just around the corner.
At this time, the U.S. government began at all costs, going all out to rescue the market, to save all the "too big to fail" financial institutions: investment 87 billion U.S. dollars to fill the hole in AIG; the investment bank giant Morgan Stanley and Goldman Sachs converted to bank holding companies, protected by U.S. Federal Reserve; through the 700 billion U.S. dollars bailout of bad assets, reduce the burden of loss of bank assets. The U.S. government's determination and measures are recognized as a market, panic began to get relief.
Now hard to Lehman Brothers had, if not collapse will make the situation better then? Lehman was head of Fuld has blamed the U.S. government not to bail, he has been reassured, as is generally believed that the Government will La Leiman Brothers 1. But then U.S. Treasury Secretary Henry Paulson has insisted that he had explicitly Fuld said the Government would not extend a helping hand, and find dozens of urging Fuld buyers or stable financing, or insist on not going. Paulson said that Fuld "the most optimistic one," "there is only he wanted to hear", so take it for granted, therefore, "I gave him a lesson."
In fact, had the threat of bankruptcy Lehman Brothers is more than one, all the lines in the same predicament Wall Street, which with their high-risk and high-leverage the business model. Investment bank's assets / equity interests in the leverage ratio is generally about 25 times, when the crisis comes, assets shrunk more than 4%, it is de facto insolvent, precarious. Meanwhile, the financing of these investment banks is short-term borrow billions of dollars a day, if the market lost confidence, no longer provide financing for its operations, then bankruptcy flew into reality. At that time all the investment bank balance sheets are a large number of real estate mortgage derivatives, this part of the assets with the spread of the subprime crisis suffered heavy losses (Goldman Sachs sell early because of the loss is limited).
America's top five investment banks financial crisis Shan Hu finally disappeared under the tsunami. But in addition to Lehman, all the other survived, turned the corner, and now begins to create substantial profits. The tragedy of Lehman Brothers, in addition to the main due to its senior management, particularly its autocrat Fuld self-righteous bent in times of crisis, as if no other better explanation.
In fact, the Lehman Brothers crisis in the whole process has been no lack of buyers. March 2008, Lehman stock was 38 dollars, 40 dollars per share, Buffett is willing to buy, but Fuld sold for 56 U.S. dollars; when the sovereign funds of Kuwait interested in Lehman Brothers, Fuld Also wild speculations to 65 dollars; when merger talks with U.S. bank, Lehman Brothers also insisted to get the majority of control. Finally, Fuld to bet the body in the United Kingdom's Barclays Bank, but also because the latter need to go through legal proceedings and catch up time. In short, Fuld has been cherry-picking and waste the best opportunity to save.
At the same time, Lehman Brothers U.S. Government throughout the course of events there really is no help. At that time, the U.S. government rescue of Bear Stearns in March as has been widely criticized, is considered collusion with financial institutions, the growth of the financial system of moral hazard. Under such pressure, the U.S. government began to try to bankrupt financial institutions, try the market will bear. If the U.S. government was determined to save Lehman Brothers, then, is not impossible. In considering the purchase of U.S. banks Lehman Brothers, he had asked the U.S. Treasury Department to provide loss guarantee, but was denied. Barclays in talks with Lehman Brothers, had hoped the Fed can provide assistance, was also rejected. Fuld told the New York Fed suggested that Lehman Brothers transferred into bank holding companies, but are considered nonsense. However, a few days after the collapse of Lehman Brothers, Goldman Sachs and Morgan Stanley of their peers but had turned into bank holding companies.
Perhaps the financial crisis of Lehman Brothers also is in need of such a heavy bomb detonated, to arouse the vigilance of the world down. Unfortunately, with the Lehman Brothers-related employees, shareholders, creditors and other affected deep. Its 25,000 employees work is not lost, most also have a stake in Lehman Brothers, the value of 50 dollars a few months ago, an blink of an eye become worthless.
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