Case of Collapsing of Lehman Brothers and Their Impact on Other Financial Institutes.

Lehman Brothers (LB), established in 1850, a prominent investment bank which came to become the largest underwriter of US mortgage bonds. In investment banking services they were buying and selling US treasuries. During that time only 18 financial institutes were there and they came under the Federal Reverse Bank of New York. Since after the great depression in the year 1930 US faced second largest depression called as "GREAT ECONOMIC RECESSION". It was the longest recession which started in December 2007 and ended in June 2009. In great recession, an international market, as well as a domestic market were fully rattled. In the construction sector, the real estate market was fully teased by a great recession. Lots of financial markets like the Federal Institutions, the Federal Hom
e Mortgage Corporation, Bear Stearns, American International Group etc.were fully decimated by the Great Recession. That time Federal Reverse Bank an act as custodian and tried to protect the financial institutions from the effect of the great recession. But LB  was safe before filing the case of bankruptcy. The reason behind for bankruptcy was rehypothecation of assets of their hedge. They utilized that money for their prime brokerage services. In addition to that bank lending the funds during the financial crisis.

This was a tough situation so that the  Timothy Geithner president of Federal Reserve Bank called a meeting on the evening of Friday, 12 September 2008. In that meeting chairman of all big financial institute were present to decide what to do with LB.??. But no one was ready to take responsibility of LB because they did the statistical calculation before investing money in LB they did not find possibility returns from LB. KDB financial institute was ready before the hypothetical test (Statistical method) but after the test, they denied investing in LB.

Before failure of LB, there was one big financial institution named as  Long Term Capital Management (LTCM) had nearly decimated in the year 1998 because of Russian Economic Crisis The institute was well known for its massive wagers based on arbitrage. LTCM fully stranded in 1998 and custodians by another financial institute such as Chase, Barclays, Goldman Sachs, Merrill Lynch, Deutsche Bank and JP Morgan etc and all. This case was predominantly discussed in the meeting held on Friday, 15 September 2008. During the Great Economic Recession, both LB and LTCM react sharply because they affected a lot, as well as they,  did not get help from another financial institution. As a result, LB faced $200billion drown in the first quarter. Their primary dealers, stakeholders, saving and loans accounts, brokerage firms approximately decline by 3%. In subsequent quarters the loss was increased by $3.9billion and primary dealers, stakeholders, saving and loans accounts, brokerage firms also approximately decline by 4.5% in subsequent quarters and finally September 15, 2008, LB vanished from the market. In this recession period, the big financial institutions affect a lot rather than the smaller financial institute.

Thank You
Nimesh Waghela