Executive Summary of Too Big To Fail
Andrew Sorkin wrote a book titled Too Big To Fail. This book focus on the collapse of the investment bank Lehman Brothers, Merrill Lynch was sold by Bank of American, Freddie Mac and Fannie Mae was nationalized, and the government took 80 percent of AIG that took place on the weekend of September, 15, 2012. Significantly, he examined the financial markets reactions to the bankruptcy of Lehman Brothers. It starts with the failure of Bear Stern, one of the biggest banks in American. Bear Stern found the bank having too many toxic assets and could not cover its liabilities. The United States implement their own economy in the history of the largest and deepest government intervention. In May of 2008, the Federal Reserve did sale support to the fail Bear Stern to JP Morgan. Something similar happened to Lehman Brothers in September 2008, Lehman was one of the American five original investment banks. The author discusses that because of bad investment in the subprime mortgage market, insolvency, and shattered investor confidence led to the inevitable downfall of Lehman. At the beginning, Lehman was looking for 30 to 50 billion dollars in financial support by Warren Buffett. Moreover, Lehman tried to seek the financial assistance of the Korea Development Bank. The bank also wanted the government to provide financial assistance. But the results have failed. On September 12, 2008, many different banks including bank of America, JP Morgan, Goldman Sachs, Merrill Lynch, and Barclays met at the Federal Reserve in New York to try to come up with a way to save Lehman. Bank of America was the first bank to show interest in buying Lehman, however, bank of America had misgiving. First, they wanted to buy Lehman’s stock, but they did not want to buy the toxic assets which Lehman was carrying on its balance sheet. Second, the Federal Reserve would not provide sale support and financial guarantees of Lehman’s toxic assets therefore; bank of...
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