Economic Impact Caused by Lehman Brothers
经济论文作业代写 And when the bank came down on them, trying to pressurize them to pay up. They gave back the properties they had taken out……
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Introduction 经济论文作业代写
The case of Lehman Brother’s bankruptcy is one of the most famous cases that created a domino effect and led to an economic crisis that would affect the world for years to come. There are still many countries which are trying to struggle out of the effects of this event. It wasn’t just about Lehman Brothers collapsing though.
It was more about what the authorities were doing when this was happening and why did they let it take place. Many people are of the opinion that had the issue been addressed earlier, then this would never have happened and the government could have bailed out the bank, but it didn’t.
In my opinion, the decision of the banks to start lending money to people who did not have a strong credit history or provide proper documentation was flawed to its very core. Any logical person would know that this was going to cost the bank millions. As people are likely to disappear with the money or default on their payments. 经济论文作业代写
And as stated previously, when the prices sky rocketed, the borrowers started defaulting with their payments.
And when the bank came down on them, trying to pressurize them to pay up. They gave back the properties they had taken out on mortgage instead of paying the money which they did not have. Eventually the situation got so worse. The many banks were acquired by others, whereas, others liked Lehman filed for bankruptcy.
So, why was Lehman’s bankruptcy and closure such an immense hit to the economy? It was because the bank was considered to be one of the biggest investment banks of the United States. And had contributed much to the economy. The bankruptcy of the bank came as a huge blow to the US economy. And while the government could have bailed it out, it did not.
Much to the people’s dismay. Even the organizations that were hired to conduct audit of the company way before any of this happened. Failed to report what was really going on with the bank. Which could have prevented Lehman Brothers demise.
Thesis 经济论文作业代写
When one of America’s largest investment banks’ Lehman Brothers fell on 15 September in the year 2008. It was the largest bankruptcy ever, and to date it still is. The bank had assets of $639 billion, five times more that of the biggest bankruptcies that followed (Investopedia Staff, 2010).
It can be agreed that the nature of investment banking is such. That there will always be a tradeoff between risk and returns. However, the steps taken by the bank during the years prior to its collapse were foolish and thus. The resulting doom could have been anticipated. 经济论文作业代写
The thesis that I have presented in my previous assignment was that the bankruptcy of Lehman Brothers could have been avoided had the authorities involved taken the right course of action. It was their moral obligation to do so, but they failed.
I stand by this premise.
And I would like to add that had they focused on what was ethical then they would have alerted the government and the FBR. Along with the Federal Reserve Bank that Lehman Brothers books show that the bank is on its way to collapsing unless something is done about it. Many experts are of the opinion that had the people at that time not been lax about this issue. Then it could have easily been prevented.
Based on virtue ethics which states that an action is right, if and only if. It is similar to how a virtuous agent, purely out of habit and character, decides to do (Rosalind Hursthouse, 1999), the company should have made the public aware that it was in trouble much earlier, and perhaps the outcome could have been different.
The authorities had been involved earlier and they could have reported the audit reports which clearly indicated that the bank’s liabilities had increased to the point that its assets were not enough to cover them.
Objection to the Thesis 经济论文作业代写
Some may say that the events that unfolded after the collapse of Lehman Brothers and those leading up to the event were actually not in the control of anybody. And thus could not have been thwarted. The problem that presided at that time was lack of transparency on part of the bank and the fraudulent activities conducted by other involved parties together with Lehman.
This event helped in identifying the problems with the system and also enabled the government and other legislative bodies to introduce policies and procedures which will prevent this situation in future. The problem was that there was no correlation between the regulation and the arrangements of action management (Chadha P., 2016).
This downfall actually resulted in identifying the deficits in United States regulatory system.
Additionally, it also was something that could not have been avoided because the parties involved at that time were more focused on getting more and more customers on board. As this high risk policy actually yielded amazing results. And the teams were rewarded accordingly. 经济论文作业代写
While yes, it is easy to say that the events could have been foreseen and thus could have been avoided. However, there are times when a person’s view becomes myopic when they are in a situation. And this is exactly what happened with the parties involved. Nobody believed that a bank as big as Lehman Brothers could collapse. Especially with the amount of assets it held.
They also could not have predicted this happening as they expected the bank to bounce back from its slump years. Therefore, the events that unfolded through the years could not have been prevented. However, they did offer a lesson to all those who were affected by it. Additionally, it also created an opportunity which identified the loopholes and drawbacks of the system. Thereby, ensuring that new practices were introduced which were aimed at ensuring that something similar does not occur again.
Rebuttal of the Objection 经济论文作业代写
While some are of the opinion that the bankruptcy of Lehman Brothers could not have been avoided, I beg to differ. There were many indication that something was terribly wrong and the lack of transparency in terms of documentation of the borrowers should have been the biggest cause for alarm.
Additionally, the practices employed by the bank actually gave rise to the notion that it was ok and acceptable to actually take part in such practices and the employees considered that decisions to provide loans was at their own discretion. Such irresponsible lending practices were what created the problems in the first place. And these were identified when Lehman Brothers started incurring losses and the auditing firms got involved.
However, actions were not taken in due time.
Which eventually led to the collapse of the bank and thus a trickle-down effect was created in which millions of lives were affected. Countries whose currency was directly pegged to dollar suffered more than those whose currency was not pegged. However, they too were affected to some extent.
An extensive view of markets. Assuming they could auto correct themselves and an inadequate appreciation of the risks of deregulation. Led to weaker principles and regulatory breach (Chadha P., 2016). Incentives were increased immensely which led to unwarranted actions by the employees, especially where risk taking was concerned.
Therefore, while some say that the event could not have been avoided. I still strongly feel that it could have been avoided had the alarm bells been heard by the parties involved. However, every party was more concerned about their own interests instead of actually preventing the situation from turning sour.
Conclusion 经济论文作业代写
To conclude, it can be said that the actions by Lehman Brothers not only adversely affected the entire economy of not just the United States of America but also the rest of the world, it was also something that could have been avoided. I continue to question why the government did not decide to bail out the bank, as it could have prevented the severity of the situation, if not all of it. While many people are of the opinion that the resulting consequences were something that could not have been avoided, I still feel, that they could have been, had the right actions been taken, and the authorities involved had taken steps to prevent the downfall of one of the greatest investment banks. 经济论文作业代写
Many people believe that the event of such a large scale could not have been avoided, however, it begs the question that why were loans provided to people with low credit ratings or no documentation at all. The entire problem lay in the practices of bringing in business, and the incentive system actually encouraged the use of risky practices. Therefore, it can be concluded that the bank knew what it was doing and thus should be held accountable for its actions, while at the same time, it begs the question why, the involved authorities fail to take the right course of action and highlight the problems the bank was facing?
References
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Case Study: The Collapse of Lehman Brothers, retrieved 2-2-2018 from; 经济论文作业代写
https://www.investopedia.com/articles/economics/09/lehman-brothers-collapse.asp
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Rosalind Z. Wiggins, Thomas Piontek, Andrew Metrick, 2014, The Lehman Brothers Bankruptcy, retrieved 2-2-2018 from;
http://som.yale.edu/sites/default/files/files/001-2014-3A-V1-LehmanBrothers-A-REVA.pdf
Onora O’Neill, Kantean Ethics, Deontological Ethics, retrieved 2-2-2018 from;
http://gbelic.org/courses/intro/lectures/lecture-7-deontology.pdf
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