1. Exploring the Global Financial Crisis (original) (raw)

The Lehman Brothers Bankruptcy H: The Global Contagion

SSRN Electronic Journal, 2015

When Lehman Brothers filed for bankruptcy on September 15, 2008, it was the largest such filing in U.S. history and a huge shock to the world's financial markets, which were already stressed from the deflated housing bubble and questions about subprime mortgages. Lehman was the fourth-largest U.S. investment bank with assets of $639 billion and its operations spread across the globe. Lehman's clients and counterparties began to disclose millions of dollars of potential losses as they accounted for their exposures. But the impact of Lehman's demise was felt well beyond its counterparties. Concern regarding its real estate assets, its large derivative book, and its significant involvement with collateralized debt obligations (CDOs)-a new type of security that incorporated subprime mortgages-soon "infected" the shadow banking system, contributing to a retraction of wholesale funding and a severe liquidity crisis for many firms, including many with no direct links to Lehman. In this case, we explore the concept of "financial contagion" and how a sudden shock to one firm, such as Lehman, can lead to other firms and markets experiencing similar impacts that are not totally explained by direct linkages.

NORTHERN ROCK: THE CRISIS OF A" UK MORTGAGE LENDER

Review of Economic and …, 2008

The global market liquidity squeeze for securities that initiated in 2007 has increased pressure among banks to sell, pushed down prices, and impacted the market for interbank loans, leading to a funding gap at Northern Rock, Britain's fifth largest mortgage bank. This paper presents an analysis of the events that lead to the collapse of Northern Rock in the second half of 2007 and its rescue by the UK Government towards the end of the same year and the beginning of 2008. The paper presents the implications and banking reforms proposed by the UK financial authorities.

The Financial Crisis of 2007-09: Why Did It Happen and What Did We Learn?

SSRN Electronic Journal, 2013

This review of the literature on the 2007-2009 crisis discusses the precrisis conditions, the crisis triggers, the crisis events, the real effects, and the policy responses to the crisis. The precrisis conditions contributed to the housing price bubble and the subsequent price decline that led to a counterparty-risk crisis in which liquidity shrank due to insolvency concerns. The policy responses were influenced both by the initial belief that it was a market-wide liquidity crunch and the subsequent learning that insolvency risk was a major driver. I suggest directions for future research and possible regulatory changes. (JEL G20, G21, E58, G28) In its analysis of the crisis, my testimony before the Financial Crisis Inquiry Commission drew the distinction between triggers and vulnerabilities. The triggers of the crisis were the particular events or factors that touched off the events of 2007-2009-the proximate causes, if you will. Developments in the market for subprime mortgages were a prominent example of a trigger of the crisis. In contrast, the vulnerabilities were the structural, and more fundamental, weaknesses in the financial system and in regulation and supervision that served to propagate and amplify the initial shocks.

The Financial Crisis of 2007-9 and the British Experience

Oxonomics, 2009

This paper traces the course of the international financial crisis from its outbreak in mid 2007 to the easing of financial turmoil in May 2009, based on the British experience. The crisis resulted from excessive risk-taking following a prolonged period of macroeconomic stability, combined with financial innovation. Problems arose initially with rising defaults in the US market for subprime mortgages, which induced a breakdown in the market for asset backed securities in mid-2007. The drying up of the money market threatened the liquidity of several UK banks, notably Northern Rock, while falling asset prices undermined their solvency. A critical point was reached when Lehman Brothers failed in September 2008. This event confirmed that the world faced a systemic financial crisis. Fortunately monetary and fiscal authorities took vigorous action to stem the crisis and as a result some confidence has been restored in ailing banks. This has not prevented a sharp decline in economic activity and a persistent shortage of credit.

The Financial Crisis of 2007–2009: Why Did It Happen and What Did We Learn?

Review of Corporate Finance Studies, 2015

This review of the literature on the 2007-2009 crisis discusses the precrisis conditions, the crisis triggers, the crisis events, the real effects, and the policy responses to the crisis. The precrisis conditions contributed to the housing price bubble and the subsequent price decline that led to a counterparty-risk crisis in which liquidity shrank due to insolvency concerns. The policy responses were influenced both by the initial belief that it was a market-wide liquidity crunch and the subsequent learning that insolvency risk was a major driver. I suggest directions for future research and possible regulatory changes. (JEL G20, G21, E58, G28) In its analysis of the crisis, my testimony before the Financial Crisis Inquiry Commission drew the distinction between triggers and vulnerabilities. The triggers of the crisis were the particular events or factors that touched off the events of 2007-2009-the proximate causes, if you will. Developments in the market for subprime mortgages were a prominent example of a trigger of the crisis. In contrast, the vulnerabilities were the structural, and more fundamental, weaknesses in the financial system and in regulation and supervision that served to propagate and amplify the initial shocks.

The Global Financial Crisis During the Years 2008 and 2009

Journal of Business Administration Research, 2023

During a global financial crisis, the exchange rate reacts to economic conditions in a volatile manner. During the financial crisis between 2008 and 2009, the exchange rate incurred losses of individual countries' overall currency value. The losses occurred because of the lack of confidence in investors. The losses affected the banking and financial institutions, collapsing the housing market. The purpose was to explore existing research on the great financial crisis that affected the world and compare countries with the largest economic influences in the world. The study is grounded in the fact that this crisis disrupted the banking system worldwide, causing several major financial institutions, such as commercial banks, mortgage firms, insurance agencies, and credit unions, to fail. In addition to the financial industry, many large and small businesses failed to survive during the Great Financial Crises. The data came from sources such as scholarly literature from sources related to the causes and effects of the financial crises. The literature reflected behavior patterns and purposes that disrupted the global economy used by various countries. This research reflected that government leaders respond proactively and collaborate and share ideas, information, and resources to prevent a financial crisis of this magnitude from happening again. Bank managers must provide records publicly and promptly. As the United States, China, and Japan represent the largest economies, the U.S. governmental leaders must align with Japan to encourage China to support a global collaboration between the other global leaders to ensure sterner banking regulations. Consequently, this study could lead to a more stable global economy to prevent a future disaster of this magnitude.