Question

Why did Lehman Bros. fail? (Financial crisis)

This question is under credit derivative course. I need details and good feedbacks with the answer. thank you.

Answer 1

The reason by which Lehman Bro's fail was that

As when credit crisis encupted in the year 2007 because of the failure of two bear Stearns hedge funds. The stock of the Lehman was also fell down very sharply. Then company can closed its unit that is BNC unit . Apart from this they also closed their offices in three states. During this period company has eliminated near about 2500 jobs of mortgage.Even though the corrections in the US housing market gained momentum, lehmans. Continued in the mortgage market as major player. In 2007 Lehman also underwrote some mortgage backed securities which is four times of shareholders equity or near about to 85$ billion. In the last quarter of 2007 stock of Lehman was rebounded as that time global market is at new high prices. However the firm does not take opportunity to reduce or redesign it's portfolio. Which is found retrospectively the last chance for them