Results for "Financial Crisis"
Business Encyclopedia Entry 1782101427
Lehman Brothers was a prominent American investment bank that played a significant role in the 2008 global financial crisis, filing for bankruptcy on September 15, 2008. ## Overview Lehman Brothers was a multinational investment bank, financial services firm, and private bank that operated for over 158 years. Founded in 1850 by three brothers, Henry, Emanuel, and Mayer Lehman, the company began as a dry goods business in Montgomery, Alabama. Over time, the brothers expanded their operations to include commodities trading, and eventually, investment banking. By the early 20th century, Lehman Brothers had become one of the largest and most respected investment banks in the world. Lehman Brothers was known for its aggressive expansion and innovative financial products, including mortgage-backed securities (MBS) and collateralized debt obligations (CDOs). The company's success was largely driven by its ability to create complex financial instruments that allowed investors to diversify their portfolios and manage risk. However, this success also created a culture of risk-taking and excessive leverage, which ultimately contributed to the company's downfall. ## History/Background Lehman Brothers was founded in 1850 by the three Lehman brothers, who immigrated to the United States from Germany. The company began as a dry goods business, selling textiles and other commodities to merchants in the Southern United States. Over time, the brothers expanded their operations to include commodities trading, and eventually, investment banking. In 1900, Lehman Brothers was officially incorporated as a partnership, and by the 1920s, the company had become one of the largest and most respected investment banks in the world. During the 1980s, Lehman Brothers underwent a significant transformation under the leadership of CEO Peter G. Peterson. Peterson, a former Secretary of Commerce under President Richard Nixon, implemented a series of cost-cutting measures and expanded the company's operations into new areas, including private equity and asset management. This period of growth and expansion was followed by a series of mergers and acquisitions, including the acquisition of Neuberger Berman in 2003. ## Key Information Lehman Brothers was a major player in the global financial markets, with operations in over 30 countries and a client base that included some of the world's largest corporations and financial institutions. The company was known for its expertise in investment banking, including mergers and acquisitions, equity and debt capital markets, and advisory services. Lehman Brothers was also a major player in the securitization market, creating and trading complex financial instruments such as mortgage-backed securities (MBS) and collateralized debt obligations (CDOs). In the years leading up to the 2008 financial crisis, Lehman Brothers faced significant challenges, including a decline in profitability and a series of high-profile losses on its subprime mortgage portfolio. Despite these challenges, the company continued to expand its operations, including the acquisition of a significant stake in the investment bank, Neuberger Berman. ## Significance The collapse of Lehman Brothers on September 15, 2008, marked a turning point in the global financial crisis, triggering a wave of panic selling and a significant decline in global stock markets. The company's bankruptcy filing was followed by a series of bailouts and government interventions, including the passage of the Troubled Asset Relief Program (TARP) and the creation of the Federal Reserve's emergency lending facilities. The collapse of Lehman Brothers had significant consequences for the global economy, including a sharp decline in economic output, a rise in unemployment, and a significant increase in government debt. The crisis also led to a major overhaul of financial regulations, including the passage of the Dodd-Frank Act, which aimed to prevent similar crises in the future. INFOBOX: - Name: Lehman Brothers - Type: Investment Bank, Financial Services Firm, Private Bank - Date: Founded in 1850, Filed for bankruptcy on September 15, 2008 - Location: New York City, USA - Known For: Creating and trading complex financial instruments, including mortgage-backed securities (MBS) and collateralized debt obligations (CDOs) TAGS: Investment Banking, Financial Crisis, Mortgage-Backed Securities, Collateralized Debt Obligations, Private Equity, Asset Management, Mergers and Acquisitions, Global Economy.
Economics & BusinessBusiness Encyclopedia Entry 1777167065
** The **Global Economic Crisis of 2008**, also known as the **Great Recession**, was a worldwide financial downturn that lasted from 2007 to 2009, resulting in widespread job losses, home foreclosures, and a significant decline in global economic output. ## Overview The **Global Economic Crisis of 2008** was a complex and multifaceted event that involved the collapse of the housing market, a global credit crisis, and a sharp decline in international trade. It was the worst economic downturn since the **Great Depression** of the 1930s, with many countries experiencing severe recessions and some even slipping into depression. The crisis began in the United States, where a housing bubble had formed in the early 2000s. As housing prices began to fall, many homeowners found themselves "underwater" on their mortgages, meaning they owed more on their homes than they were worth. This led to a surge in foreclosures, which in turn caused a sharp decline in housing prices and a freeze in the mortgage market. The crisis then spread to other countries, including those in Europe and Asia, as banks and other financial institutions became increasingly exposed to toxic assets such as subprime mortgages. ## History/Background The roots of the crisis date back to the early 2000s, when the US government and the Federal Reserve, led by Chairman Alan Greenspan, kept interest rates low to stimulate economic growth. This led to a surge in borrowing and spending, particularly in the housing market. Many banks and other financial institutions began to offer subprime mortgages to borrowers who could not afford them, often with low introductory interest rates that would later reset to much higher levels. As housing prices continued to rise, many homeowners refinanced their mortgages to extract equity from their homes, which they then used to finance consumer spending and other investments. However, when the housing market began to decline, many of these homeowners found themselves unable to afford their mortgages, leading to a surge in foreclosures. The crisis then spread to other countries, including those in Europe and Asia, as banks and other financial institutions became increasingly exposed to toxic assets such as subprime mortgages. The crisis reached its peak in 2008, when the US investment bank Lehman Brothers filed for bankruptcy in September, causing a global credit crisis and a sharp decline in international trade. ## Key Information * **Causes:** Housing bubble, subprime mortgages, global credit crisis * **Key Dates:** + 2007: Housing market begins to decline + September 2008: Lehman Brothers files for bankruptcy + 2009: Global economic output declines by 2.2% * **Key Players:** + Alan Greenspan, Chairman of the Federal Reserve + Ben Bernanke, Chairman of the Federal Reserve + Henry Paulson, US Secretary of the Treasury * **Economic Impact:** + Global economic output declines by 2.2% + Unemployment rises to 10% + Home foreclosures surge to 9.4 million ## Significance The **Global Economic Crisis of 2008** was a major turning point in the global economy, leading to widespread job losses, home foreclosures, and a significant decline in global economic output. It also led to a major overhaul of financial regulations, including the passage of the **Dodd-Frank Act** in the US, which aimed to prevent similar crises in the future. The crisis also highlighted the interconnectedness of the global economy and the need for coordinated policy responses to address global economic challenges. It also led to a major shift in the global economic landscape, with emerging markets such as China and India playing a increasingly important role in the global economy. INFOBOX: - **Name:** Global Economic Crisis of 2008 - **Type:** Economic crisis - **Date:** 2007-2009 - **Location:** Global - **Known For:** Worst economic downturn since the Great Depression TAGS: **Global Economic Crisis, Great Recession, Housing Bubble, Subprime Mortgages, Credit Crisis, Financial Crisis, Economic Downturn, Global Economy**