Preview

Inside the Meltdown

Good Essays
Open Document
Open Document
490 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Inside the Meltdown
Inside the Meltdown Summary The stock of a global investment company, Bear Stearns, began to drop drastically on March 10th, 2008. A share of Bear Stearns was as high as $171 and by the afternoon dropped to $57. Former CEO of the company, Ace Greenberg, tells CNBC that all of these rumors are “ridiculous.” As time goes on, Bear Stearns’ cash reserves were disappearing and people invested in the company were immediately withdrawing. Bear Stearns was basically racing to find a company to buy them out or they would go under. Current CEO of Bear Stearns, Alan Schwartz, got ahold of JP Morgan’s CEO, Jamie Dimon, to buy out Bear. A ton of government officials come to Bear to look over their records and it is not a pretty sight. Bear was deep in toxic assets. The Federal Reserve was prohibited from lending any money to Bear so they used JP Morgan to bail out Bear Stearns. Unfortunately the company could not be saved and Bear Stearns was gone after being sold to JP Morgan at $2 per share. Fannie Mae and Freddie Mac, the two largest mortgage lenders in the world, lost 60% of their stock value in July 2008. The government fired the management and the feds took over both companies. Then in the beginning of September, Lehman Brothers, another investment bank, had their stock dropping quickly. It was once again toxic investments that once made them money before, but now was responsible for their company plummeting. The government would not intervene with Lehman and they let them fail. It turned out that Lehman Brothers was even more interconnected than anybody thought. Because of Lehman’s bankruptcy, no one could get a loan and everything freezes. The meltdown had begun. Then the world’s largest insurance company, AIG, has huge problems and doesn’t have the money to pay off promises they made that Lehman wouldn’t go bankrupt. AIG was in desperate need of cash and the government had to save them. The government used $85 billion dollars for bailout and now owned AIG.
Continue Reading
View Writing Issues

You May Also Find These Documents Helpful

  • Good Essays

    Summary on the Inside Job Documentary
    • 549 Words
    • 3 Pages

    Summary on the Inside Job Documentary

    This started with the company Bear Stearns declaring itself strapped of cash in March of 2008. Then Fannie Mae and Freddie Mac, two of the biggest housing loan agencies, were acquired by the federal government which rang bells throughout the economy that the ground was paving way right beneath their feet. What followed was a domino effect, with a succession of top investment banks and other financing houses either adopting bankruptcy or being bailed out by the government. The third approach taken by these companies to keep from collapsing within themselves was to request the Congress for a $700 billion bailout. Despite this and other initiatives adopted by the Bush administration, the…

    • 549 Words
    • 3 Pages
    Good Essays
    Read More
  • Best Essays

    A Comparison of 1929's Stock Market Crash and Today's Financial Crisis
    • 3019 Words
    • 13 Pages

    A Comparison of 1929's Stock Market Crash and Today's Financial Crisis

    The most recent financial crisis was an all encompassing meltdown that affected the entire global economy. It is nearly impossible to quantify the distress this crisis put on the American economy and the world has yet to see the long term damage. After any disaster, people are eager to point fingers. This financial meltdown was no different, as critics were quick to blame anything and anyone from Wall Street to fair value accounting. It’s hard to pinpoint exactly what caused the most recent financial crisis, and even time may not tell. Economists are still trying to figure out why the stock market crashed in 1929, and Ben Bernanke recently stated “to understand the Great Depression is the Holy Grail of macroeconomics.” (Bernanke) Most of the discussion aimed at identifying causes of the crisis is focused on the financial structure of our economy. This has led to incongruent conclusions by many financial experts. It may be more important to direct attention to the social mechanisms that could have influenced not only this most recent crisis, but also the stock market crash of 1929 that threw the United States into the Great Depression.…

    • 3019 Words
    • 13 Pages
    Best Essays
    Read More
  • Good Essays

    Lehman Brothers’ Perfect Storm: Where Ethical Lapses Met Bad Judgment
    • 998 Words
    • 4 Pages

    Lehman Brothers’ Perfect Storm: Where Ethical Lapses Met Bad Judgment

    Did Wall Street’s financial meltdown really have nothing to do with ethics or governance? Was it instead about bad business decisions and poor government oversight? That is what some business leaders, in a series of 30 interviews I recently conducted, have suggested.…

    • 998 Words
    • 4 Pages
    Good Essays
    Read More
  • Powerful Essays

    Inside the Meltdown
    • 49753 Words
    • 200 Pages

    Inside the Meltdown

    ... FDIC [Federal Deposit Insurance Corp.], established 75 years ago in the Great Depression. ... How does it feel being head of FDIC during another grand crisis?…

    • 49753 Words
    • 200 Pages
    Powerful Essays
    Read More
  • Good Essays

    Dodd Frank Wall Street Reform
    • 222 Words
    • 1 Page

    Dodd Frank Wall Street Reform

    In 2008 there was a significant banking crisis that led to "the great recession," during which millions of people lost their homes, their jobs, and their standard of living. This disaster was caused by reckless behavior on Wall Street.…

    • 222 Words
    • 1 Page
    Good Essays
    Read More
  • Powerful Essays

    The Gramm-Leach-Bliley Act
    • 1796 Words
    • 8 Pages

    The Gramm-Leach-Bliley Act

    The financial crisis of 2008 is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s. First signs of the crisis started to show in 2007 when the price of houses started to fall rapidly in the United States and then around the world. This financial crisis resulted in the failure of many large US financial institutions, banks to be bailout by the United States government, and the stock markets around the world were affected. One of the major issues leading to the financial crisis was the rising default on subprime lending. Large financial institutions were in completion with each other for revenue and market share,…

    • 1796 Words
    • 8 Pages
    Powerful Essays
    Read More
  • Best Essays

    What Caused the Economic Collapse of 2008?
    • 1077 Words
    • 5 Pages

    What Caused the Economic Collapse of 2008?

    In the fall of 2008, AIG, the world’s largest Insurance Company, collapsed. Also, at the same time, the United States investment bank, Lehman Brothers, went bankrupt. These events triggered one of the most devastating financial failures that affected nearly every industrialized country on the planet. The failures of these two financial giants:…

    • 1077 Words
    • 5 Pages
    Best Essays
    Read More
  • Satisfactory Essays

    Dodd Frank Thesis
    • 755 Words
    • 4 Pages

    Dodd Frank Thesis

    There were several factors that contributed to the market failure that can be observed as far back as the repeal of The Glass-Steagall legislation in 1998. Banks became involved with precarious investments, asset managers began dealing in high-yield mortgage-backed securities, and credit agencies such as Moody’s, S&P and Fitch presented AAA ratings on the junk securities all of which was just the start of the breakdown in the market. Then in 2006, there was a strong drive for short-term profits in which 84% of sub-prime mortgages were issued by private lending firms to low and moderate income borrowers (Swift, 2011). The lack of regulation allowed companies to write trillions of dollars in derivatives all while not reserving any dollars against future claims. Additionally, with combination of the majority of the sub-prime lenders not being obligated to the standard mortgage laws and regulations, the use of nonbank underwriters, and exempt status from federal regulations lead to the financial crisis of…

    • 755 Words
    • 4 Pages
    Satisfactory Essays
    Read More
  • Powerful Essays

    2008 Recession
    • 1511 Words
    • 7 Pages

    2008 Recession

    The downfall that many if not all bank and lending institutions faced, catapulted the economy dramatically. The previous lending habits of these institutions show a direct correlation with the credit bubble that occurred from 2001 until 2007. The results of these lending habits were experienced not only in the United States, but worldwide issues began to surface. Though, many believe that the final factor may have been the “bursting” of the U.S housing bubble. The housing “burst” causing many individuals to default on their mortgages. The National Bureau of Economic Research stated that, “while large on an absolute scale, are modest relative to the $8 trillion lost in U.S. stock market wealth between October 2007 and October 2008” ("The National Bureau of Economic Research"). Additionally, In Deciphering the Liquidity and Credit Crunch 2007-2008 (NBER Working Paper No.14612), Markus Brunnermeier describes how those lesser and larger losses were linked and shows how economic mechanisms amplified losses in the mortgage market into broad dislocation and turmoil in the financial market” (Brunnermeier,2009,pp 77-100). Yes, the depression did in fact begin in 2008, however, the actions that occurred in the aforementioned time period were notable confounding influences on the depression of 2008. Other causation factors include the collapse of Lehman Brothers. Yes, this financial institution is based in the United Stated, yet their demise, as The Economist indicated that, “ In September 2008 almost brought down the world’s financial system” ("The Economist", 2013). The saving grace for Lehman Brothers, was that they were to “large” to fail. The monetary and fiscal abilities of the United States tax payers prevented the less than favorable quote “buddy-can-you-spare-a-dime” depression” ("The Economist", 2013). The United States practices further…

    • 1511 Words
    • 7 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    Bear Stearns Bailout
    • 2153 Words
    • 9 Pages

    Bear Stearns Bailout

    “The Fed did not bailout Bear at taxpayer expense, but enabled – as it is mandated – the financial markets to continue to function. History will call the Fed’s action the right move at the right time”, says Jeremy Siegel, Ph.D. The Bear Stearns Company began a financial meltdown in July 2007. By March 2008, it was ready to file Chapter 11 bankruptcy. Some people believe that the Federal Reserve should not have stepped in to bailout Bear Stearns because it was rewarding reckless business behavior and Bear should have been left to file bankruptcy. The deal of Bear Stearns was not a government bailout; it was rather a loan to preserve jobs, homes, savings, the economy, the shareholders of Bear, and the financial markets on Wall Street.…

    • 2153 Words
    • 9 Pages
    Powerful Essays
    Read More
  • Good Essays

    Bear Stearns: Surviving The Great Recession
    • 270 Words
    • 2 Pages

    Bear Stearns: Surviving The Great Recession

    In 2008, the economy took an unexpected turn that experts themselves was in disbelief when it happened. The U.S economy was headed in a recession. The first sign was when Bear Stearns put itself up for sale, one of the largest as well as the oldest investment company that survived the Great Depression, but when the mortgage crises started, Bear Stearns was having a hard time (Solomon, 2011). When this happened, experts knew this was a sign of trouble. A few months later, Lehman Brother that was established before the Civil War was leaving the market as well. With these types of companies leaving the market, this caused the government to bail out banks as well as big automakers. This also caused the Dow Jones Industrial average to drop below 10,000 for the first time in years and the Dow continued to drop in the year 2009 to 7,000. Due to all the changes, this also caused unemployment to reach an all record high of 8.5 percent.…

    • 270 Words
    • 2 Pages
    Good Essays
    Read More
  • Good Essays

    2008 Crisis
    • 660 Words
    • 3 Pages

    2008 Crisis

    The major cause of the 2008 Financial Crisis is the Subprime Mortgage and Subprime Landing. Economists warned of the dangers, but one wants to interrupt the party. Consumers were happy to marking money. By the end, “When the United States sneezes, the world catches a cold” which will result in it happening again. Eventually everyone is affected. The people who are specifically affected are house owners, investors, lenders, brokers, Wall Street, and Bankers. Other causes…

    • 660 Words
    • 3 Pages
    Good Essays
    Read More
  • Better Essays

    The Great Depression and Money Supply
    • 838 Words
    • 4 Pages

    The Great Depression and Money Supply

    In the years 1930-1933, more than 9,000 banks suspended operations, often defaulting on their depositor. This caused the money supply to fall by altering the behavior of the depositors and the bankers. In the recession, the financial system was not able to perform normal operations, and the profitability of companies was called into question. When investment banks packed heaps of risky mortgages into mortgage-back securities then sold them to buyers that weren’t aware of the risks they were acquired.…

    • 838 Words
    • 4 Pages
    Better Essays
    Read More
  • Powerful Essays

    Global Financial Crisis
    • 9748 Words
    • 39 Pages

    Global Financial Crisis

    The financial crisis has been linked to reckless and unsustainable lending practices resulting from the deregulation and securitization of real estate mortgages in the United States. The US mortgage-backed securities, which had risks that were hard to assess, were marketed around the world. A more broad based credit boom fed a global speculative bubble in real estate and equities, which served to reinforce the risky lending practices. The precarious financial situation was made more difficult by a sharp increase in oil and food prices. The emergence of Sub-prime loan losses in 2007 began the crisis and exposed other risky loans and over-inflated asset prices. With loan losses mounting and the fall of Lehman Brothers on September 15, 2008, a major panic broke out on the inter-bank loan market. As share and housing prices declined many large and well established investment and commercial banks in the United States and Europe suffered huge losses and even faced bankruptcy, resulting in massive public financial assistance.…

    • 9748 Words
    • 39 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    Economic Meltdown
    • 2687 Words
    • 11 Pages

    Economic Meltdown

    The global financial crisis originated with the collapse of the U.S. housing market, as many sub prime borrowers defaulted on their mortgages. Lack of government regulation; easy lending in the US housing market meant anyone could qualify for a home loan with no government regulations in place (commondreams.org, 2011). Although the financial crisis that swept the world on 2008 may have started on Wall Street, it has brought down governments and shredded economic security worldwide, resulting in the loss of millions of jobs and homes as businesses collapse, foreclosures grow, credit tightens and communities are devastated. One estimate of the damage: $197 trillion (Al-Jazeera, 2011).…

    • 2687 Words
    • 11 Pages
    Powerful Essays
    Read More

Related Topics