Analysis on Lehman Brothers' Bankcruptcy

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Analysis on Lehman brothers' bankruptcy

Table of contents

Abstract……………………………………………………………………………………..…3

Introduction……………………………………………………………………………………3

Company history…………………………………………………………………………….3-4

Company performance and financial position during 2003 and 2008………………………3-5

The cause of Lehman's demise…………………………………………………………….6-12

CEO............................................................................................................................................7

Risk management……………………………………………………………………………7-8

Asset manipulation…………………………………………………………………………..8-9

Lenders………………………………………………………………………………………...9

Regulators and rating agencies………………………………………………………………10

Government……………………………………………………………………………….10-11

Actions taken to minimise losses…………………………………………………………….11

The impact on global market………………………………………..……………………12-13

Conclusion…………………………………………………………………………………... 14

References…………………………………………………………………...……………15-18

Abstract

The paper offers a critical analysis on the possible causes of Lehman Brothers' bankruptcy in 2008 and the impact on global financial market. It reviews the brief history of Lehman, the financial performance during 2003 and 2008, and in particular, possible actions which could have been taken to avoide this failure.

Introduction

The current global financial crisis caused by subprime mortgage defaults in the US has caused a great damage on global economy. Many financial institutions either failed or bailed out by government during the crisis. This paper discusses the cause of Lehman's failure and the impact of the collapse of Lehman Brothers on global financial market.

It also provides some suggestions that how Lehman could have avoided the collapse, were proper actions taken by the company and the government.

Company history

Lehman Brothers was started by a German immigrant family (Henry Lehman and his two brothers) in 1850. Since 1850, as is driven by the increasing value of cotton in US, Lehman Brothers changed their core business (general store) to commodities trading and brokerage operations. With its head quarter shifted to New York City, the firm had gradually grown to a national icon coinciding with the US economy boom over the following decades. The road to success, however, was not a bed of roses. Lehman Brothers weathered several challenges in front of it: Great Depression in1930s, two world wars, great capital shortage in 1994 and 1998. However, it is the subprime...