The Lehman Brothers Collapse And The Great Depression Essay

1485 Words May 20th, 2015 null Page
The Lehman Brothers company had a long history of perseverance from the railroad bankruptcies of the 1800s, to the Great Depression of the 1930s, two world wars, and the Russian debt default in 1998 (Investopedia, 2015). Their century long history of endurance started to erode during the U.S. housing market collapse of 2008 with Lehman’s extensive investment in the subprime mortgage market. With $619 billion in debt and $639 billion in assets, Lehman Brothers filed for bankruptcy on September 15, 2008, making it the largest in history (USLegal, 2010). The Lehman Brothers collapse contributed to the October 2008 erosion of $10 trillion from the global equity markets. American International Group, Inc. (AIG) had substantial investments in credit default swaps which covered the assets that supported corporate mortgages and debt. On September 16, 2008, a two-year loan of $85 billion was provided by the Federal Reserve and in return the government owned 80% of the equity of AIG (Amadeo, 2015). The decision to save AIG came one day after Lehman Brothers filed for bankruptcy and was followed by government takeovers of Fannie Mae and Freddie Mac (Amadeo, 2015).
The purpose of this essay is to present a case study of the United States government’s choice to not intervention with Lehman Brothers who filed for bankruptcy while choosing to intervene with AIG to keep them from failure. The essay will also address the impact of government intervention on companies, the…

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