Financial MeltdownThe collapse of Lehman brothers

Group 7 Members : 1. Abhal 2. Abhishek 3. Hemant 4. Pallav 5. Rahul 6. Suraj

Scenario from 1850-2001• 1850: Founded, Traded cotton.

• 1858: A New York office was opened

• 1870: NY Cotton E ,Coffee & Petroleum Exchange.

• Railroad: Commodities business to include the sales and trading of securities.

• 1887: New York Stock Exchange, commodities business to a merchant-banking firm.

• 1930: Private placement.

• Oil movies radio computer Biotechnology

• 1984: acquired by American Express to form Shearson Lehman Brothers.

• 1993: Lehman Brothers.

Short lived recession (Terrorist attack, Dotcom

bubble, Accounting Scandals, Fear)

Slashing Interest rates by Fed

Collateralized Debt Obligation market and

housing boom

Further slashing Interest rates and NINJA

mortgage

Collapse of Real Estate & InterBank/CDOs MarketSubprime Crisis

Market in 2001-2008

The Success High • U.S. Housing Boom

• Acquired five mortgage lenders.

• Acquired Sub-Prime mortgage lenders:

• BNC Mortgage• Aurora Loan Services

• Record Revenues from Real Estate 56% from 2004-06

• Increase in Mortgages by 10% in 2006

• In 2007, Net Income of $4.2 billion on revenue of $19.3 billion

2007-2008 Crisis2007

1. 14 March : Big one day drop (of stocks) in five years.

2. August : Stocks fell and rebounded, degree of leverage.

2008

3. 17 March : Lehman shares fell as much as 48%.

4. 9 June : 2nd loss of 2.8 billion.

5. September : Stocks plummeted in 1st week.

6. 10 September : Pre-announced dismissal Q3 results.

7. 11 September : 42% stocks plunged, takeover of Lehman unsuccessful .

8. 15 September : Lehman declared bankruptcy- 93% stocks plunged.

World and Federal Reserve

1. Landslide Began : Interbank market froze. Case of Northern Rock.

2. Move of Federal Reserve : Slashing interest rates.

3. National Economic Stabilization Act,2008.

4. March 24,2008: Special Financing to Barclays and Bank of America.

5. September 16,2008: Federal Reserve helps AIG.

6. Trouble Asset Relief Program (TARP).

Alternatives to Lehman’s strategies

• 1. long term loans.

• 2. resizing mortgage portfolio.

• 3. bailout package.

Thank You.