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The Lehman Brothers Collapse. Who, Why, How and Its Long- Effects on Securities Markets - Term Paper Example
The Lehman Brothers Collapse is considered to be one of the most disastrous failures in the history of the financial world. The primary reason being the fact that Lehman Brothers demolished greatest quantity of capital in the shortest span of time. …
There are a few terms which need to be defined before proceeding further. Security markets are the markets where securities of different types are bought and sold with reference to demand and supply. Mortgage markets involve dealings of loans on housing, business and industrial real estates. The markets in which corporations raise new capital by issuing common stock are referred to as primary markets. Secondary markets on the other hand are the ones where formerly issued securities are bought and sold among the investors, with no direct involvement of the corporations. Leverage is usually referred to borrowing. Stockholders are those who buy shares of a company, thereby gaining the rights of votes, earning dividends and profits.
In a dramatic manner, Lehman Brothers underwent the largest bankruptcy in the history of United States, with its stocks plummeting drastically, customers opting their way out and assets being heavily undervalued by the official credit rating groups of that time. Lehman Brothers was mutually established by the three brothers, Henry Lehman, Emanuel Lehman and Mayer Lehman. Since its foundation, it was considered to be a very reputable institution in which people used to place immense amount of trust.
With the passage of time, the popularity of the firm increased tremendously and it became one of the most reliable financial service companies in the United States, with the launch of its various subsidiaries such as Aurora Loan Services, Crossroad Groups, etc. ...