Lehman BrothersLegacy : The Rise And Fall Of Greed?

A decade ago the Lehman Brothers were the fourth largest investment bank in America. Dealing with Investment banking and investment management, the Lehman Brothers was one of the largest global financial service providers. Consequently, the subprime mortgage crisis left the company filing for the declaration of the chapter 11 bankruptcy protections, due to the unnecessary undertaken risk and obnoxious negligence accusations directed towards the group. Companies should utilize observational and analytical pundit functions in identifying the presence of crisis situations to avoid an economic downturn in the business (Pontell, 2014). The fraud would have prevented through stronger and better internal controls, which

A Colossal Failure of Common Sense was one of many books to be published in the aftermath of the Financial Crisis of 2007. After seeing the global economy stall in the face of massive losses in word financial markets, many Americans sought to better understand the crisis and its causes. This book, written from the perspective of a financial market insider, provides a glimpse into the world of global finance and also seeks to explain how the players in this world were involved in the crisis. In the words of the author Lawrence McDonald, “My objective in writing A Colossal Failure of Common Sense was twofold. First, to provide … a close-up, inside view of how markets really work…..And, second, to give… as crystal clear an explanation as possible about the real reasons why the legendary Lehman Brothers met with such a swift end”1. By writing about his personal experience at Lehman Brothers and recounting stories from within the famous investment banking firm, Mr. McDonald largely succeeds at his first goal. However, the elements of personal biography and the chronological order of the book make it difficult for the reader to fully appreciate all of the varied causes of the financial crash. I believe that the main value of reading this book is in understanding these causes, with Lehman Brothers acting as a microcosm of the greater financial universe. As such, in this review I have isolated elements from Mr. McDonald’s book which highlight how the crisis

In the wake of the recent financial crisis, many commentators attempted to analyze the roots of the conflict from a political or economic perspective. Anthropologist Karen Ho, a veteran of Wall Street as well as an academic, attempted to understand the reason that Wall Street behaves the way it does in her 2009 anthropological study of American finance entitled Liquidated: An ethnography of Wall Street from a cultural perspective. The central paradox with which Ho begins her book is: " the economy experienced not only record corporate profits and the longest rising stock market ever, but also record downsizings," further concentrating the wealth in America (Ho 2009: 1-2). But how can corporations grow richer as the American public as a whole grows poorer? Corporations no longer view themselves as responsible for taking care of their employees, creating good products, or serving their original mission. Instead, the focus is on generating shareholder wealth (Ho 2009:3). Shareholders, not the larger public, have become the symbolic and real focus of firm strategy. The shareholder "symbolized and 'stood in' for the whole of the corporation and became the sole locus of concern and analysis" during the time Ho conducted her study in the late 1990s and continues to this day (Ho 2009:175)

At the height of the 2008 financial crisis, Mr. Lawrence G. McDonald wrote a book on the fall of Lehman Brothers, entitled "A Colossal Failure of Common Sense." This book is a risk manager 's guide to the right and wrong moves on Wall St., and explains why investors must stay ahead of policies coming out

There has been a debate for years on what caused the Financial Crisis in 2008 and if there was one main cause, or a series of unfortunate events that led to the crisis. The crisis began when the market was no longer funding many financial entities. The Federal Reserve then lowered the federal funds rate from 5.25% to almost zero percent in December 2008. The Federal Government realized that this was not enough and decided to bail out Bear Stearns, which inhibited JP Morgan Chase to buy Bear Stearns. Unfortunately Bear Stearns was not the only financial entity that needed saving, Lehman Brothers needed help as well. Lehman Brothers was twice the size of Bear Stearns and the government could not bail them out. Lehman Brothers declared bankruptcy on September 15, 2008. Lehman Brothers bankruptcy caused the market tensions to become disastrous. The Fed then had to bail out American International Group the day after Lehman Brothers failed (Poole, 2010). Some blame poor policy making and others blame the government. The main causes of the financial crisis are the deregulation of banks and bank corruption.

This matter is subject to a deeper analysis. It can be looked at from a number of perspectives including anthropological, cultural and psychological. The paper design is presented in a form of a case study which aims to present to the reader the case and has a goal to teach the reader with key issues which were responsible for the financial crisis of 2008 i.e., over landing subprime mortgages, speculations which led to inflated prices and eventually burst the housing bubble causing the banks to be stuck with large amounts of toxic worthless assets etc. The case study gives a concise explanation and the analysis of the ethical/unethical conduct at Bear Stearns which brought it to its demise. It uses this company example to present the key learning objectives to the reader. The strategy used this besides presenting the findings in the case study form also uses narrative research technique which gives an insight of the Bear Stearns’ culture and its business. This case study by no means gives the opinion of the author and solely bases its conclusions on the materials used to design the paper. Therefore, the conclusions are built upon deductive reasoning based on the information available about the financial markets and bout Bear Stearns.

While investment banks are in the business of taking calculated risks they must consider risk within the firms’ risk appetite. In March 2006 Lehman Brothers adopted a new business strategy to grow its proprietary business from a lower risk brokerage model to a higher risk, capital‐intensive banking model with a focus on expanding three specific areas of principal investment: commercial real estate, leveraged loans and private equity businesses to consume more capital. This strategy was risky due to the firm’s high leverage and small equity. This impacted their risk taking significantly because this strategy was generally riskier and more illiquid than their traditional lines of business. “As some Lehman officers described it, Lehman shifted from focusing almost exclusively on the “moving”business – a business strategy of

Under the leadership of Peterson, Lehman brothers saw huge profits and gained recognition worldwide and had developed offices internationally through acquisitions. They were able to operate in three main areas of finance which were investment banking, capital markets and client services. Lehman faced serious problems during the 1980 recession when internal conflict broke out between the investment bankers and traders. Lehman brothers were financially sound and generated healthy profits, the trading partners only received a small portion of the profits which they thought was unfair towards them. Lewis L. Glucksman, a 20-year Lehman veteran and highly successful trader with a straightforward, but engaging, style that some bankers thought

On September 15th, 2008, Lehman Brothers filed for Chapter 11 Bankruptcy, the largest filing for bankruptcy in the history of the United States (U.S.). During this time, Lehman Brothers was the fourth largest investment firm in the U.S. It declared $639 billion in assets and $613 billion in debts (Wiggins, Piontek, & Metrick, 2014). They had come a long way from a general store in Alabama back in the 1800’s. This company’s downfall can mostly be blamed on the subprime mortgage crisis of 2007/2008, surely there are many other reasons though. The U.S. government did not employ any bailout tactics for Lehman Brothers like it did for J.P. Morgan Chase. The government did let some other firms go bankrupt, but their biggest mistake was leaving Lehman Brothers out to dry. Their downfall had a much worse impact on the economy. It is estimated that this crisis cost the U.S. economy (based on lost output) (goods and services not yet produced) anywhere from a couple trillion to $10 trillion dollars (Wiggins et al., 2014). This is despite the vigorous efforts of the U.S. government and governments from around the world to stabilize and maintain their economies.

Until 2007, Lehman Brothers has generated a significant portion of its revenue through the issuance of mortgage-backed and asset-backed securities. Lehman Brothers had grown increasingly reliant on its fixed income trading and underwriting division which served as the primary engine for its strong growth throughout the first half of the decade as shown in Exhibit 1 (Stowell, 2010). When the collapse of the U.S. subprime mortgage industry started, it result in credit crisis and the mortgage default rates began to rise and the demand for these securities began to disappear. Lehman Brothers was left with billions of dollars of rapidly depreciating securities on its balance sheet,

the key ingredient for the criteria for an effective culture was missing. The culture at Lehman was not strong, as it was lacking high agreement.Lehman’s informal structure was comprised of a clear divide between the traders and the bankers. Lewis L. Glucksman was appointed by Peter G. Peterson to serve as his co-chief executive officer. However, as a man full of resentment, Glucksman used his new power to gain revenge against the investment bankers, whom he felt condescended him. He was frustrated with the notion that bankers controlled the firm, despite the fact that the traders generated two-thirds of the profits. Bankers were stereotyped as the elite and the traders were

This Essay will debate whether “bank CEO incentives were a major factor in the credit crisis. In the quest of description of the dramatic breakdown of the stock market capitalization of a great part of the banking industry in the U.S. during the credit crisis, one main argument is that CEO at banks had poor incentives.This collapse had a cascading effect on the entire major financial or credit market across the world. In this downfall, many of the financial services providers like Goldmansach , Royal Bank of Scotland and Lehman Brothers have reported bankruptcy on the heels of severe losses in their mortgages. Many of the researcher and scholarsVarious scholars such as XXXXXX have debated the have mentioned various reasons for the 2008

In 1994, Richard S. Fuld took control of Lehman Brothers as its Chief Executive Officer (CEO). Under Fuld’s aggressive leadership, the company flourished and became one of the largest investment banks in the United States. （Crossley-Holland 2009) reported that in 1994, each Lehman Brothers stock was averaging at $4 and by 2007 it catapulted to $82 creating a 20 fold increase. From 1994, Lehman Brothers gradually adopted an aggressive growth business strategy by expanding into highly complex and risky products such as Credit Default Swaps (CDS) and Mortgage-Backed Securities (MBS). By 2007, Lehman Brothers was the biggest underwriter of mortgage-backed securities of the U.S. real estate market.

When it filed for bankruptcy, Lehman was subjected to the political competitive environments in all the regions it had operations. However, each country or jurisdiction has its own insolvency laws which have different impacts on the company. For instance, while it filed for bankruptcy in New York, its foreign subsidiaries either filed for bankruptcy or liquidation depending on the political environment in the countries they were operating in. In this regard, every foreign subsidiary was exposed to different sets of bankruptcy laws and political interests. As a consequence, depending on the political environment, every Lehman subsidiary office was liquidated depending on the interests of different stakeholders and the different

This work will examine the case 'Banking Industry Meltdown: The Ethical Financial Risk Derivatives" and determine which moral philosophy is most applicable to an understanding of the banking industry meltdown and explain the rationale. The case study will be analyzed and white-collar crimes considered as to whether they are different in any substantive manner from other more blue-collar crimes. This study will determine and discuss the role that corporate culture played in banking industry scenario and the response will be supported with specific examples. This work will postulate how leaders within the banking industry could have used their influence to avert the industry meltdown.