Lehman Brothers was a massive investment bank (“Shadow Bankâ€) that failed during the financial crisis of 2008 under CEO Dick Fuld. Bear Sterns went bankrupt in March of 2008, and the financial storm had reached a fever pitch by September 2008. The government injected massive amounts of capital into AIG, Fannie Mae, and Freddie Mac.
Looking at Lehman’s Balance Sheet right before their bankruptcy is important. Assets = Liabilities + Equity...both sides have to balance -- "Balance Sheet." Lehman was a massive player in the secondary mortgage market and was caught holding lots of MBS, CDO, and CLOs in their inventory. Lehman Bros’s balance sheet was also massively leveraged, as you’ll see in this video.
Lehman Brothers was a shadow bank because they lent money and were not under the formal authority of the Federal Reserve, or other banking/finance regulators. Many shadow banks borrowed too much money and got crushed in the credit crisis of 2007-2009.
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