The Failure of Lehman

The Failure of Lehman

  • Submitted By: richaarora
  • Date Submitted: 01/25/2009 10:47 PM
  • Category: English
  • Words: 408
  • Page: 2
  • Views: 398

The failure of Lehman - whose $US639 billion in assets and $US613 billion in debt make it about five times bigger

than Westpac - and the sale of Merrill Lynch to the Bank of America mean just two of the top five Wall Street

investment firms have survived the credit crisis that started with the collapse of the US sub-prime mortgage market

13 months ago.

Lehman filed for bankruptcy in the early hours of Monday morning in New York after last-ditch efforts to organise a

sale collapsed when the US Federal Reserve refused to provide financial guarantees to cover losses.

She said the biggest risk was that financial institutions would be forced into a vicious downward spiral as their

efforts to offload assets at fire-sale prices forced even greater problems in their balance sheets.
The 158-year-old Lehman is a major financier of commercial property in the US, where prices that are already weak

will be sent tumbling by foreclosures.

Worldwide bank losses and writedowns from the global credit crunch total $US620 billion, more than half from US

This is one of the many unintended little side effects of the government bailout of Bear Stearns....: to greatly

reduce the interest of the people who do business with Lehman Brothers in the survival of Lehman Brothers ...

After all, the Federal Reserve will give them their money back, re-insure their credit defaults, take another pile

of these distressed assets out of the market.

We'll see: I have a feeling that the NY Fed won't be able to easily find a buyer for Lehman this time around, and

that it won't feel any great need to bail out the bank itself. A Lehman default would send shock waves through the

financial system, to be sure -- but if it happens slowly and with a lot of advance warning, those shock waves might

not be substantially larger than some of the other events which Wall Street has weathered over the past 14 months.

Indeed, in a case...

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