Bank failures and Mergers
As they say, “The Bigger you are, the Harder you Fall” and you will damage your surroundings on the way down. Banks are getting bigger and bigger. With all the mergers and bank failures, the ones still standing is getting bigger and the competition is getting smaller. This is transforming into or already is a monopolistic competition. If one of them were to be a failure, it would create havoc in the economic system. This is exactly like what happen to the Lehman Brothers holding inc. They were getting a ton of profits and growing more and more everyday, especially during the housing boom, if the houses goes up in price, then everyone makes profit. To start, they would give Sub Mortgages to anyone. As the Housing bubble burst, it cause Lehman Brothers to go bankrupt and that led to events that would cause the whole nation to go into a financial crisis. My thesis is that the main Impact and the cause of all of the terrible financial crisis of 2007-08 was that Lehman brother being so big and as it collapsed, that it would impact the world greatly.
You can say the starting point of this Financial crisis started on august 2007,the credit crisis erupted and Bear stearns had 2 hedge funds that failed, which led to Lehman’s stocks to …show more content…
A simplified definition of what toxic mortgage is when a person makes a mortgage loan but fails to pay. Usually, the house would just be sold, but if the house decreases in value, then, the owner of the mortgage can only get a proportion of the money back. For a normal mortgage loan, the owner of the mortgage of the loan can sell it to other banks. But if the value of the house goes down, the mortgage becomes unsellable because no other banks wants to buy a mortgage that is guaranteed to lose
As they say, “The Bigger you are, the Harder you Fall” and you will damage your surroundings on the way down. Banks are getting bigger and bigger. With all the mergers and bank failures, the ones still standing is getting bigger and the competition is getting smaller. This is transforming into or already is a monopolistic competition. If one of them were to be a failure, it would create havoc in the economic system. This is exactly like what happen to the Lehman Brothers holding inc. They were getting a ton of profits and growing more and more everyday, especially during the housing boom, if the houses goes up in price, then everyone makes profit. To start, they would give Sub Mortgages to anyone. As the Housing bubble burst, it cause Lehman Brothers to go bankrupt and that led to events that would cause the whole nation to go into a financial crisis. My thesis is that the main Impact and the cause of all of the terrible financial crisis of 2007-08 was that Lehman brother being so big and as it collapsed, that it would impact the world greatly.
You can say the starting point of this Financial crisis started on august 2007,the credit crisis erupted and Bear stearns had 2 hedge funds that failed, which led to Lehman’s stocks to …show more content…
A simplified definition of what toxic mortgage is when a person makes a mortgage loan but fails to pay. Usually, the house would just be sold, but if the house decreases in value, then, the owner of the mortgage can only get a proportion of the money back. For a normal mortgage loan, the owner of the mortgage of the loan can sell it to other banks. But if the value of the house goes down, the mortgage becomes unsellable because no other banks wants to buy a mortgage that is guaranteed to lose