Blog 7- The last days of the Lehman Brothers
The Lehman Brothers founded in 1850 was the fourth largest investment bank in the United States before it collapsed in 2008. 2008 was the financial crisis where companies and banks struggled both in the US and across the globe, the crisis was only intensified by the collapse of Lehman Brothers. In the documentary we see the government and heads of wall street gathered to discuss the crisis the Lehman Brothers were having, the government is seen refusing to bail out the Lehman Brothers. This brings me to the question of can we afford to let banks collapse in a financial crisis?
Around the same time of the Lehman Brothers collapse UK bank Northern Rock was also on the verge of collapse, this caused widespread panic of the public rushing to remove their money before it went bust. The UK government unlike the US government stepped in just in time to save the bank. Having witnessed first hand the panic caused by Northern Rocks near collapse I can only imagine the panic caused by Lehman Brothers collapse. In my opinion we cannot allow banks to just collapse, they are far too important to us as a society and therefore I believe that the US government should have saved Lehman brothers. The US government refusing to bail out the Lehman Brothers meant that centralised banks were forced to lend and help smaller banks in order to prevent a colossal failure of the US banking system and in term preventing a further crash on the stock markets. However, had the central banks not helped out then it would not have been just America who suffered, international stock markets are all linked and therefore had this occurred it would have worsened the worlds financial crisis.
You may be questioning why the banks are important to save? America as a market could not survive without the banks, there would be too much uncertainty and because of their exports and imports this would reflect onto the rest of the worlds financial markets. Many people believe that Lehman Brothers deserved to go bust, the Bank had been using questionable measures to ensure that their accounts looked a lot healthier than they appeared. They were also far too exposed in the markets, the US government even asked Barclays bank to help out the Lehman Brothers, however at this point the bank was too toxic to touch and nobody in their right mind would have helped it out it was far too risky. I agree that by the time the government was asking banks to help it out the Lehman Brothers was far too gone to help, however I believe that the government should have helped out before it got to that point, they helped other banks out and although there were questionable antics within the bank, Americana relied heavily on the bank.
I can only hope that we never reach this point of questioning whether to bail out the banks, but if we do then I believe whole heartedly that the banks need to be saved , the UK and US economies are too reliant on other markets to survive without the banks, unlike Iceland who allowed their banks to collapse their small self serving economy allowed them to survive without the banks.
Around the same time of the Lehman Brothers collapse UK bank Northern Rock was also on the verge of collapse, this caused widespread panic of the public rushing to remove their money before it went bust. The UK government unlike the US government stepped in just in time to save the bank. Having witnessed first hand the panic caused by Northern Rocks near collapse I can only imagine the panic caused by Lehman Brothers collapse. In my opinion we cannot allow banks to just collapse, they are far too important to us as a society and therefore I believe that the US government should have saved Lehman brothers. The US government refusing to bail out the Lehman Brothers meant that centralised banks were forced to lend and help smaller banks in order to prevent a colossal failure of the US banking system and in term preventing a further crash on the stock markets. However, had the central banks not helped out then it would not have been just America who suffered, international stock markets are all linked and therefore had this occurred it would have worsened the worlds financial crisis.
You may be questioning why the banks are important to save? America as a market could not survive without the banks, there would be too much uncertainty and because of their exports and imports this would reflect onto the rest of the worlds financial markets. Many people believe that Lehman Brothers deserved to go bust, the Bank had been using questionable measures to ensure that their accounts looked a lot healthier than they appeared. They were also far too exposed in the markets, the US government even asked Barclays bank to help out the Lehman Brothers, however at this point the bank was too toxic to touch and nobody in their right mind would have helped it out it was far too risky. I agree that by the time the government was asking banks to help it out the Lehman Brothers was far too gone to help, however I believe that the government should have helped out before it got to that point, they helped other banks out and although there were questionable antics within the bank, Americana relied heavily on the bank.
I can only hope that we never reach this point of questioning whether to bail out the banks, but if we do then I believe whole heartedly that the banks need to be saved , the UK and US economies are too reliant on other markets to survive without the banks, unlike Iceland who allowed their banks to collapse their small self serving economy allowed them to survive without the banks.
Comments
Post a Comment