This question asks questions about the movie called the BIG SHORT Discussion- Changes in company values...

This question asks questions about the movie called the BIG SHORT

Discussion- Changes in company values from market conditions

Questions--Talk about what happened in the marketplace, and what impact the market had on the values of the securities in question. Where did the value go from Bear Stearns and Lehman Brothers?

Expert Solution

Lehman brothers and Bear Stearns had a lot of exposure in real estate sectors and they had issued various collateral debt obligations and they had also issued loans on the basis of sub standard rated bonds and that lead to bad landing as they were having those houses as collateral which were not capable to realise their value.

When the crisis unfolded, the exposure of this company into these sectors were on high leverage, So, the company were not able to pay off their debt because they were not generating any kind of income because their assets were bad, and the real estate sector was in complete mess, as the houses prices has completely shattered, So, the Assets of Lehman brothers and Bear Stearns completely evaporated because their value was completely Nil as the housing sector has lost its value so it lead to a widespread contagion and finally crisis in the United States market leading to depression.

jeff jeffy answered 1 year ago

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