Lehman Brothers Brankruptcy

On September 15, Lehman Brothers the fourth largest banks in the world became bankrupted as it came down in the U.S. history with Lehman holding over $600 billion in assets

Three important lesson from the collapse

1. The complex financial system is very fragile.

-The bankruptcy caused a chain reaction as financial institution’s were paralyzed and feared who to trust.

2. Government has enough power to avoid a financial panic, moreover if they do so it will lead to a complete economic disaster.

-“In the early 1930s, powerful voices at the Treasury and Federal Reserve argued that the deep pain of financial crisis was a necessary economic corrective. “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate,” Treasury Secretary Andrew Mellon advised President Herbert Hoover.”

:However to soften the situation (bail out the company) it would cost trillions of taxpayer dollars at risk. Thus, it has worked, and the economy is gradually rebounding back.

3. Avoids injecting too much government interventions.

-Financial markets should workout their own problems.


~ by scioneconblog on September 15, 2009.

2 Responses to “Lehman Brothers Brankruptcy”

  1. Its good in that you clearly specify the three points specifically. However, you could elaborate on the third point. What does it mean by “Financial markets should workout their own problems.” Also, I don’t see so much analyzation, there could be more insight into why things happen and how things could be prevented next time.

  2. Well done Scion on finding the video clip. To improve you post you might have given more I your own opinion. Do you think they deserved to fail?

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