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Write 7 pages thesis on the topic subprime mortgage crisis. On 10 March 2008, it’s share was quoted around $62. The main reason for this down was due to rumors that Bear Sterns was facing liquidity is
Write 7 pages thesis on the topic subprime mortgage crisis. On 10 March 2008, it’s share was quoted around $62. The main reason for this down was due to rumors that Bear Sterns was facing liquidity issues and again this made the price fall to $30 at the end of the second week. Big investment bank namely Bear Stearns had pumped over $ 3 million mainly to save one of its hedge funds that witnessed heavy losses on mortgage investments.
On March 17, J.P.Morgan Chase extended an offer to purchase the majority stake in Bear Sterns for $2 per share as Federal Reserve was guaranteeing $30 billion’s of Bear Stearns of its assets. However, on May 30, 2008, the deal was completed at $10 per share. (Brownell 2008:25).
It is a 158 –year old company with 23,000 employees, which witnessed two world wars, the Great Depression and the dot.com bubble. It is one of Wall Street’s greatest investment banking houses. Lehman Bros went for an IPO in 1994. Lehman steadily posted higher revenues. Lehman burnt its finger due to the subprime mortgage crisis as it had to close its subsidiary namely BNC Mortgage during August 2007, which is the subprime mortgage arm of Lehman Bros. The year 2008 was not all good for Lehman as it posted unprecedented losses. During the second quarter of 2008, Lehman posted $ 2.8 billion losses and was compelled to dispose of its assets worth about $6 billion. During the third quarter of 2008, Lehman posted a whopping loss of $3.9 billion. On September 15, 2008, Lehman Bros made it public that it would file a Chapter 11 petition. (Drum 2008).
It is a 196-year-old bank. The ever increasing defaults in home loans compelled it to write off by $18 billion in their subprime –mortgage investments. Citigroup's net profit and EPS had dwindled to an unprecedentedly low level in 2007. This is mainly due to loan defaults by major clients and general slow down in the housing market. To restructure its liquidity, Citigroup sold its $7.5 billion shares to Abu Dhabi Investment Authority in 2008.
