Investment Banking in 2008 (B): Brave New World Harvard Case Solution & Analysis

In recent years, Lehman Brothers, one of the five largest investment banks in the U.S. has grown increasingly reliant on their fixed income and underwriting department, which served as the main engine for its strong profit growth. The Bank also significantly increased its leverage over the same time period, moving from debt to equity ratio of 23.7x in 2003 to 35.2x in 2007. As leverage increases, the ongoing erosion of the mortgage industry began to influence Lehman significantly and its share price plummeted. Unfortunately, the public outcry over taxpayer assumption of $ 29 billion in potential losses Bear did repeat this step politically untenable. Surreal scene of potential buyers traipse headquarters of investment bank over the weekend to consider various merger or separation scenario repeated itself again. This time, the Fed refused to support the absence of bank liabilities, instead of trying to play at the last minute suitors Bank of America, HSBC, Nomura Securities, and Barclay apart jawboning them, arguing that it can not move to save Lehman will destructive counterpart works in office capital. Fed's desperate attempts to arrange his second save of major investment banks in the U.S. for six months failed, when he refused to support losses on holdings of toxic Lehman, mortgage. Complicating matters was Lehman reliance on short-term repurchase agreements to finance its balance sheet. Unfortunately, these loans need constant updating of contractors, who are increasingly nervous that Lehman would have lost the opportunity to fulfill their bidding. With this feeling swirling around Wall Street, Lehman was forced to announce a major Chapter 11 filing in U.S. history, listing assets of $ 639 billion and liabilities of $ 768 billion. The second domino fell. It will not be the last. "Hide
by David P. Stowell, Evan Meagher Source: Kellogg School Management 17 pages. Publication Date: Mar 06, 2009. Prod. #: KEL380-PDF-ENG

Investment Banking in 2008 (B): Brave New World Case Solution Other Similar Case Solutions like

Investment Banking in 2008 (B): Brave New World

Share This