Question

What was the impact of the near failure of Bear Stearns and the failure of Lehman...

  • What was the impact of the near failure of Bear Stearns and the failure of Lehman Brothers on Money Markets?
  • What actions did the Federal Reserve and the Treasury Department take? What were the impacts of the decisions, if any?

Homework Answers

Answer #1
  • The fall of failure of Bear Stearns caused the financial crisis that shook the economy at the global level, and it almost brought nations to the recession. For the case of Lehman Brothers, the stock market crashed, causing a big problem on the S&P index. The federal reserve of the US bailed this bank, which lacked 20 billion funds to hedge, and no one was willing to bail it out. The treasury department helped Bear and Stearns bank by pumping more money into the economy. The then-president of US Bush convinced Congress to fund the Lehman Brothers. Even after the bailout, the two banks still fell, and a lot of money was lost.
  • You're probably wondering where some of Lehman's key figures are now. Former chairman and CEO Richard Fuld now runs Matrix Private Capital Group, a firm he founded in 2016 after the collapse of Lehman. The firm is an asset management firm that services high-net worth individuals. Fuld sold an apartment in New York City, as well as a collection of art he owned. He is still fairly critical of the U.S. government for not bailing out Lehman Brothers like it did with the other banks. At the time, officials said the bank was much weaker than its peers and that the government was unable to find a buyer for Lehman. Erin Callan Montella was in her early 40s when she assumed the role of chief financial officer (CFO) of Lehman. She resigned from the bank in June 2008 shortly after it reported its second-quarter loss. She did a short stint at Credit Suisse working with hedge funds. She decided to leave the financial world altogether in 2009. Mantella wrote the book "Full Circle: A Memoir of Leaning in Too Far and the Journey Back" about her experiences before retiring from business.
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