Impact of the Financial Crisis on Lehman Brothers

Impact of the fiscal Crisis on Lehman Br early(a)sThe clashing of the pecuniary crisis that leads to the loser of the Lehman Brothers.AbstractThe 2007-2008 fiscal crisis merchantman be defined as the collapse of the world financial food market and it is the miserliness financial nuclear nuclear meltdown since the great depression. The financial crisis begins in the get together States of America and spread to other part of the global sparing in different countries. During this time, it affects many invention and other business such as the collapsing of any(prenominal) banking groundworks one of which is the Lehman Brother. These banking systems in America and abroad suffers s perpetuallyed sparing losses which forced them into unsuccessful person. The economy was in the worst condition than ever and businesses was basically reluctant in combating this devastating financial crisis. The giving medications put strengthen st treasuregic pictures that will help stabilize the economy condition, they try to help the banking system from collapsing but financial crisis continued for many long time as a worldwide recession in the European Union and debt crisis. yet though the government intervention was prolonged this was not sufficient for nearly of the banking institution. On September 15, 2008, the Lehman Brothers fi guide for loser due the collapse of the financial system. This topic is written to show the causes of the financial crisis and what strategic strategy the feds took to combat the situation. It in addition looks at the how the 2007-2008 financial crisis trigger the bankruptcy of the Lehman Brother.Keywords ( monetary meltdown, Lehman Brothers, Bankruptcy, Recession).The impact of the financial crisis that leads to the bankruptcy of the Lehman Brothers.The Lehman Brothers was one of the largest enthronement banking institution in the United States of America. During the financial meltdown of the 2007-2008 financial crisis the state o f the chaotic economy was in such a devastating condition. There were many sustainable factors that was used to help shelter the economy, but even though several financial institutions were saved by the government proactive strategies, the bankruptcy and collapse of the Lehman Brothers remains a cataclysm and preferably of following protocol of rescuing the Lehman Brothers company the government sat spikelet and allow the Lehman Brothers to fail. The seemingly triggers and panic of the crisis was basically hidden losses.Causes of the 2007-2008 financial crisis angiotensin-converting enzyme of the primary cause of the 2007-2008 financial crisis was the overflowing of the housing sector in the United States of America that rises in 2005-2006 and because of this, the mortgage rate become indifference and people cannot pay their mortgage. According to Fried (2012), due to this situation, the banks commence in providing more credits to home owners resulting in higher interest rate and growing housing price. The rise in the housing price seen in the United States in earlier years following the financial meltdown was as a result of the amount of credit make getable that was driven by the enormous cashflow of foreign currency into the country. The real the three acress market similarly struggled in the United States because of the increase of the real estate standards and careless consumer spending (WEB 2012, Fried). During this time is was very easy for individuals to retrieved loans such as credit card, car loan, mortgage etc., which results in the unexpected debt of loan add among banking institutions and consumers. The was also a rise in the collateralized debt organization and mortgage securities that obtained their judge from mortgage payments. This makes it easier for investors from all over the world to invest in the housing sector and as the housing price went down, the financial institutions that borrow silver to invest went down and repost huge losses.Secondly, another factor that is responsible for the 2007-2008 financial crisis was the existence of easy credit obtained by consumers. In the previous years onwards the financial crisis, the federal officials decrease the federal vault requirement to 1.0% from 6.5%. This was in the main to rebel against the danger of deflation in the economy, but this aggressive move on with other factors create an increase in the demand of financial assets and at that placefore, increase housing price while reducing the interest rate (WEB 2012, Fried). some other reason behind the financial crisis was the sublime lending by financial institutions such as the banking systems. The rapid increase in the real estates exertion created intensive rivalry among mortgage lender competitors and the quantity of creditworthy borrowers dwindled and this made many lenders institutions feel comfortable in extending credits to borrowers. The government also subsidized business enterprises who maintai ned minimal underwriting standards during the previous years before the financial crisis. As this happen, it increases the chances of the mortgage standards to decrease and risky loans.Some of the statistical figure release by the international monetary fund (IMF), on that point was some major banking institution that incurred losses of more than one cardinal from bad loans assets credits and there would be greater losses if the federal official didnt do something to financial aided these banking institutions. The financial meltdown as led to the bankruptcy of many mortgage institution lenders and because of this several banking systems went under pressure and some was hold backn over by government institutions. Several of these institutions are Lehman Brothers, Citigroup, Merrill Lynch, etc.,The impact of the financial crisis on Lehman Brothers.The article entitled cut in Course there was no doubt that the downfall of the investment bank the Lehman Brothers was a major cause of the financial crisis meltdown. There were doubtable reasons circulating as to why the government allow the financial institution to collapse, because the government bailed appear other institution such as JPMorgan Chase, and Bear Sterns. Nevertheless, several months down the line of the comparable year the Lehman Brothers was left all alone where they had to file for bankruptcy because the Fed slowly declined to rescue them from the financial crisis (WEB 2013, Crash Course).According to Thomas and Hirsh (2009), on September 2008, the Lehman Brothers filed for bankruptcy, this move nearly caused the collapse of the financial system. President chaparral expressed his opinion of the economy going down when he say that this sucker could go down (Mason, 2009, p.28). umpteen concur that the bankruptcy of the Lehman Brothers could neuter everything for the country. Economist believed that the failure of the Lehman Brothers has a huge impact on the economy and before it happens the recession was under control, but after the collapse of the investment bank the economy was altered (Lucas, 2009, p.67). According to a well enjoy economist, everything fell apart after the Lehman Brothers went over the cliff, because no financial institution was safe (Blinder, 2009).It was said by the Treasury Secretary that the failure of the Lehman Brothers had led to a systematic crisis where the credit markets frozen and banks significantly had to limit interbank lending, because the dominance of the institution was extremely compromised throughout their financial system. He further explained that the financial system was on the verge of collapsing due to the preexisting of the economy downturn. Many believed that the bankruptcy of the Lehman Brothers was primarily due to the inconsistency and pretermit of planning in the policies that was applied to the Lehman Brothers in the 2008 crisis. One of the stipulating rumors of why the Lehman Brothers filed for bankruptcy was that they didnt enforce foreseeable risks in the system and the firms risks taking shrank. The Feds on the other hand, didnt intervene instead they let the investment bank collapse and they sent a essence stating that the firm needs to take responsibilities for their lack of planning and failure to take risks.The Feds reaction to the financial crisisBased upon the 2007-2008 financial crisis, the Fed government employ the Emergency Economic Stabilization Act of 2008, which is also known as the U.S. bailout plan in cases as critical as the financial crisis. With this plan the United States Secretary of Treasury is authorized to used seven one C billion dollars ($700) to help assist businesses during financial crisis especially securities backed by mortgages as well as supply liquid cash to banks to look that depositors dont lose their savings. Majority of the funds will be put into banks and other financial institutions to bailout businesses in distressed. The 2008 Act will not only a ssist locals, but also international businesses worldwide. The plan was implemented to bail out and improve the liquidity assets to stabilize the economy. Upon the implementation of the bailout plan the American economy started to recover because companies such as General Motors that was on the brink of bankruptcy showed improvement by recorded revenues and increase in profit margins. cobblers lastMany people believed that the 2007-2008 financial crisis could be in possession of been handle differently and it could squander been avoided if the Feds had taken actions. The bankruptcy of the Lehman Brothers during the financial crisis has impacted the financial system drastically and the fed government did not bail out the bank because of their lack of planning and risk taking pertaining the preexisting economy crisis. The fed believes that if the Lehman Brothers had get down proper planning and develop strategic policy then they could have avoided the bankruptcy. The federal govern ment also believe that because the Lehman Brothers was in financial bother from previous years before the 2007-2008 financial crisis and they didnt do anything to help the firm, during the crisis they were not willing to take action and prevent themselves. During the crisis it took a large mountain of taxpayer money to bail out the economy.ReferencesBlinder, A. S. (2009, January 24). Six Errors on the Path to the Financial Crisis The New York Times. Retrieved February 21,2017, from http//www.nytimes.com/2009/01/25/business/economy/25view.htmlFried, J. (n.d.). Who Really Drove the economy into the Ditch? New York, NY Algora Publishing. Retrieved February 21, 2017, from https//www.questia.com/library/120076524/who-really-drove-the-economy-into-the-ditchLucas, R. (2009). In the defense of the dismal science. The Economist. Retrieved February 21, 2017, from http//www.economist.com/ customer/14165405Mason, P. (2009). Meltdown The end of the Age of Greed, Verso London. Retrieved Februa ry 21, 2017, from https//www.amazon.com/Meltdown-End-Greed-Paul-Mason/dp/1844676536WEB (2013). Crash course. The origins of the financial crisis. Retrieved February 21, 2017, from http//www.economist.com/news/schoolsbrief/21584534-effects-financial-crisis-are-still-being-felt-five-years-article