Government Intervention Paper: Lehman Brothers
Government Intervention Paper
University: FIN 820 25 July
Abstract
This paper attempts to illuminate the four year-old questions still hanging around regarding the financial crisis of 2007-2009. For example, this study will detail the events that led to the problem at Lehman Brothers. What was the exposure that put Lehman Brothers at risk? What did Lehman Brothers seek from the regulators? Was there a precedent for the request? What was the reasoning for the decision by the regulators and the government? What did the Federal government learn from the Lehman Brothers case that changed how it managed the AIG situation? What would potentially have happened if the Federal government had not intervened in the AIG situation? What is the role of government in inspiring and maintaining confidence in the market?
This examination of employs past, recent, and current scholarly research and media literature to support the history of financial crisis of 2007-2009. This topic is serious and still remains serious according to the literature, which has captivated academics, world and political leaders, researchers, and scholars alike with great fervor and aplomb in the past for over 12 years.
Keywords: Lehman Brothers, credit default swap (CDS), Valuation of Credit Default Swaps, debt securities, investment banks, Wall Street, Wall Street insider, regulators, Gaming as a Form of Institutional Corruption.
Government Intervention Paper
During the latter part of 2007 and during 2008, the federal government came to the rescue of, in their representatives estimate ‘safer less risky’ interventions, when really, what severity of public opinion were they willing and able to tolerate. In 2008, Lehman Brothers Holdings, Inc. became a casualty of a down economy by declaring bankruptcy. The federal government of the United States offered no intervention and permitted the company to fail. About a week later, however, the federal government intervened to prevent the fall of
University: FIN 820 25 July
Abstract
This paper attempts to illuminate the four year-old questions still hanging around regarding the financial crisis of 2007-2009. For example, this study will detail the events that led to the problem at Lehman Brothers. What was the exposure that put Lehman Brothers at risk? What did Lehman Brothers seek from the regulators? Was there a precedent for the request? What was the reasoning for the decision by the regulators and the government? What did the Federal government learn from the Lehman Brothers case that changed how it managed the AIG situation? What would potentially have happened if the Federal government had not intervened in the AIG situation? What is the role of government in inspiring and maintaining confidence in the market?
This examination of employs past, recent, and current scholarly research and media literature to support the history of financial crisis of 2007-2009. This topic is serious and still remains serious according to the literature, which has captivated academics, world and political leaders, researchers, and scholars alike with great fervor and aplomb in the past for over 12 years.
Keywords: Lehman Brothers, credit default swap (CDS), Valuation of Credit Default Swaps, debt securities, investment banks, Wall Street, Wall Street insider, regulators, Gaming as a Form of Institutional Corruption.
Government Intervention Paper
During the latter part of 2007 and during 2008, the federal government came to the rescue of, in their representatives estimate ‘safer less risky’ interventions, when really, what severity of public opinion were they willing and able to tolerate. In 2008, Lehman Brothers Holdings, Inc. became a casualty of a down economy by declaring bankruptcy. The federal government of the United States offered no intervention and permitted the company to fail. About a week later, however, the federal government intervened to prevent the fall of
References: Barr, C. (2010, September). Why the Fed saved AIG and not Lehman. CNN Money. Retrieved from http://finance.fortune.cnn.com/2010/09/02/why-the-fed-saved-aig-and-not-lehman/ Benelli, R Brealey, R.A., Myers, S.C., & Allen, F. (2011). Principles of Corporate Finance (2nd ed., concise). New York: McGraw-Hill. Breslow, J. M. (2010, April). Congress grills regulators, executives at Lehman Brothers hearing. PBS Newshour, The Rundown. Retrieved from http://www.pbs.org/newshour/rundown/2010/04/regulators-criticized-at-lehman-hearing.html Buck, J Gutowski, G. (2008, September 26). AIG Highway to Hell . Retrieved March 13, 2009, from http://financialskeptic.blogspot.com/2008/09/aig-highway-to-hell.html Hallman, B Holm, E., & Son, H. (2008, September 17). Fed Takes Control of AIG With $85 Billion Bailout . Retrieved March 12, 2009, from http://www.bloomberg.com/apps/news?pid=20601087&sid=a6QAz6YiyRAI&refer=worldwide# Kiel, P., & Nguyen, D Schich, S. (2008). Financial crisis: Deposit insurance and related financial safety net aspects. 95 OECD J: FIN. MKT. TRENDS Sender, H Son, H., & Schmidt, R. (2009, March 16). AIG Faces Pressure From Obama, Subpoena From Cuomo on Bonuses . Retrieved March 29, 2009, from http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=aK0IMlK2ThPo Stansberry, P The Financial Express. (2009, March 4). AIG’s meltdown has roots in Greenberg era. Retrieved March 15, 2009, from http://www.financialexpress.com/news/aigs-meltdown-has-roots-in-greenberg-era/430351/0 Thimann, C., Bracke, T., Weber, P-F., & Just, C Turner, M. (2008, September). Lehman Brothers: a timeline. Financial News. Retrieved from http://www.efinancialnews.com/story/2008-09-15/lehman-brothers-a-timeline U.S U.S. Securities & Exchange Commission, SEC . (2008). Office of the Chief Accountant and FASB Staff Clarifications on Fair Value Accounting, Press Release, No. 2008-234. Retrieved from http://www.sec.gov/news/press/2008/2008-234.htm Appendix A ------------------------------------------------- 3.1 % of total went to Toxic Asset Purchases – totaling $18.4B (Kiel, & Nguyen, 2012) Note. Totals of TARP funds to date. (Kiel, & Nguyen, 2012). * September 20, 2007 – Erin Callan replaces Lehman CFO O’Meara. O’Meara takes over global risk management division; * December 13, 2007 – Lehman reports FY07/Q4 profit $870MM and 12-month earnings of $4.2BN; * March 17, 2008 – Hubris is made over concerns DBS Group Holdings had asked its traders to stop working with Lehman Brothers. Then it was later abrogated; * March 18, 2008 – Lehman Brothers announce earnings of $489MM for FY08/Q1. * May 16, 2008 – Lehman Brothers cut 5 percent of their work force - 1,400 jobs; * June 9, 2008 – Lehman Brothers estimates a FY08/Q2 loss of $3BN, but was raising $6 billion in fresh capital; * September 2, 2008 – Insider reports that Korea’s state owned bank is considering a 25% stake in Lehman’s; * September 8, 2008 – Lehman Brothers stock plummets 52% due to fear Lehman cannot raise new capital or find new investors See Entire Documents and emails from the financial crisis published by Ezell, (2012) at the following links: https://www.documentcloud.org/documents/347678-whats-different-whats-the-same.html#document/p7/a54835