NEGATIVE IMPACT OF CREDIT CRUNCH AND RECESSION

Negative Impact of Credit Crunch and Consequent Global Recession of 2008/9 on a firm

Negative Impact of Credit Crunch and Consequent Global Recession On Lehman Brothers

Lehman Brothers Holdings Inc (LBHI) was a global financial services firm and the fourth biggest investment bank in the U.S. before announcing bank-ruptcy on Sept. 15, 2008. LBHI insolvency was the biggest bank- ruptcy in the history of U.S. resulted due to the collapse of U.S. mortgage market. Indeed, in previous years LBHI been investing most of its assets in such market.

L.B.H.I. bonds supported by the policies of insurance which were sold to many investors of Europe. These insurance products are usually indexed policies, which combines financial instruments such as bonds with the insurance features such as the extra amount of money appointed may receive in case of death of the investor. Theoretically, this combination was conceived in order to obtain a more secure and profitable investments. Insurance policies are sold throughout the regions wherever the bank operates a retail for example, Citibank and Deutsche Bank in Belgium and UniCredit Banca Unipol and Italy. (Geisst, 1997, pp. 51)

Indeed, national authorities, usually works on the side of management companies. For instance, on 15 September 2008 the German Federal Financial Supervisory Authority (BaFin) has stopped payments & disposal for Lehman Brothers Bankhaus AG (Lehman), as well as forbade the bank to receive payments that are not designed to pay debts to him (Freeze), whereas in the United Kingdom, Lehman Brothers Ltd, Lehman Brothers International (Europe), L.B United Kingdom Re-Holdings Ltd & L.B Holdings PLC was positioned into management. Its of no value, for example, Italian jurisprudence believes that, when performing duties control and supervision of financial prospectuses services supervisory authority of the dministrative must act in accordance with the "neminem laedere" principle. This principle implies that such The administrative body should have acted with due attention. (Geisst, 1997, pp. 51)

Lehman Brothers subsequently follow the massive use of the Credit Facility of Fed's new Primary Dealer, but did not issue new equities to make its balance sheet stronger. The Federal Reserve Bank's president of New York arranged a week-end meeting with all major banks' most senior executives to secure Lehman's future. Primarily, Bank of America & Barclays Bank were named as possible suitors. Though, they refused to take over Lehman with-out a guarantee of the government.

Eventually, officials identified not to present a guarantee ...