TIPPING POINT OF THE WORLD FINANCIAL CRISIS – Despite the amount of information surround the financial crisis, many are not truly aware of what actually tipped the banks over the edge.
In the video about you’ll discover what really happened and how on the September 15, 2008 Lehman Brothers were forced to file Chapter 11 bankruptcy protection following a mass exodus of clients, vast loses resulting in the plummeting price of its stock, a devaluation of its assets by credit rating agencies and finally negotiations collapsing with Barclays and other interest bankers on a possible acquisition.
Before the downfall of Lehman Brothers, it was listed as the fourth largest investment bank in the United State; but at 1:45am on September 15, 2008 the financial colossus came spectacularly crashing down and with it set off a chain of events that would see the world’s financial centres toppling like a house of cards.
Greed, greed and more greed was the word on the street and the banks, including Lehman Brothers had simply leveraged their position to such an extent that even the slightest variation in markets would ultimately drive it and others into bankruptcy.
We now know that the U.S housing market, under the direction of policies initiated by George W. Bush was not only magnanimously ignorant it was also the start of the end.
The idea was that you could simply boost home ownership and the economy by allowing anyone to own their own home without any type of down payment.
Once the bankers ran out of clients that could afford their mortgage payments they then turned their attention to the poor and with some clever marketing, millions of ‘sub-prime’ mortgages were sold; of course it was only a matter of time before people discovered they could no longer keep up with their mortgage payment after the ‘introductory’ interest rate period expired.
Sub-prime mortgages were simply packaged up with triple A ratings and then sold onto investment houses and banks.
As people began to default on their mortgages the banks moved in to foreclose; this wouldn’t have had much of an impact if it wasn’t for the vast numbers of foreclosures taking place.
When the housing market finally collapsed under the weight of its own debt the banks then realised they sat on assets that were effectively worthless and within days the financial institutions quickly realised that their leverage position was far beyond any boundaries that were either controllable or affordable.
The video really is an insight as to what went on and how the U.S Government refused to bail out Lehman Brothers but rather took the decision to let the free market forces of capitalism determine its fate. It was, as we now know a decision that was to bring the world into a financial meltdown to which none had ever seen the likes of in modern times.