The U.S. Financial Crisis Essay - 1814 Words

It is difficult to quantify exactly how much revenue a bank generates from proprietary trading, one brokerage analyst estimated that 5%-10% of trading done by large banks is a result of trading not done on behalf of the client.32 These investments are the reason Lehman Brothers Holdings Inc., a global financial services firm, failed. The firm participated in investment banking, equity, fixed-income sales, research, trading, investment management, private equity, and private banking. At one time, Lehman Brothers Holdings Inc., was a primary dealer in the United States Treasury securities’ market. In 1998, 25% of Lehman’s revenue was generated from proprietary trades.33 The company, at this time, held $28 billion in securities and other†¦show more content†¦The current financial crisis of the United States, began in 2007. The numerous issues, giving rise to the crisis, brought focus on the subject of proprietary trading. A history of the events contributing t o the financial crisis illustrates the role proprietary trading played, and the reasons Congress and regulators have proposed limits on such activity. In 2006, Lehman Brothers Holdings Inc., was allowing employees to trade derivatives. Derivatives, are an agreement or contract that represents a determined value of something. These derivatives can be put in any security, a document that represents a share in a company or a debt owed by a company. Employees of the firm were trading significant sums of money. An intern, only a junior in college, was given $150 million to trade.39 A junior trader in the firm was given $450 million. The firm invested primarily in real estate, derivatives, and bonds. Bonds are a promise to repay a principal amount plus interest, raising the firm’s capital by borrowing. When the financial crisis reached a peak in 2008, and the market crashed, the credit markets seized up, and people were no longer borrowing money. The reported loss for Lehman w as $32 billion from proprietary trading and principal transactions that had taken place a year and a halfShow MoreRelatedU.s. Dollar Financial Crisis1028 Words   |  5 Pagesthere has been speculation of whether the U.S. will raise interest rates by the end of 2015. With all indications pointing to a rate increase, concerns have arisen about the potential ripple effects on the rest of the world. Fundamentally, raising interest rates come hand in hand with an appreciating U.S. dollar. In many parts of the world the U.S. Dollar is used as a major benchmark of current and future economic growth. For developed countries, a strong U.S. dollar can be viewed as positive, howeverRead MoreThe Financial Crisis Of The U.s. Auto Industry1295 Words   |  6 PagesThe Problem The year was 2008 and the daily news for Americans could make us choke on our morning coffee. The financial crisis was something out of a movie that could be titled The Horrors from Wall Street. The nasty mortgage mess was having a negative impact on other areas of the economy. The U.S. auto industry was taking a sizeable hit. It became hard to conceive that a legacy industry like 100 year old General Motors could be in deep trouble. But indeed they were and by June, 2009, General MotorsRead MoreTheu.s. Housing Market And The U.s. Financial Crisis1448 Words   |  6 Pagesoccurred in the U.S. housing market between 2007 and 2009, led to the biggest global financial crisis. The impact of this crisis extended over the world, and the economies of many countries were damaged. Kawai stated that: ‘The ongoing global crisis has had a profound impact on the Asia and Pacific region, particularly on its exports.’ (2009:1) There were a lot of factors which brought about the crisis. Due to limited space, this essay will look at the U.S. housing market and the U.S. financial system, andRead MoreGlobal Financial Crisis: U.S, Greek, Pigs2140 Words   |  9 PagesBanking in Financial Services Assignment on Global Financial Crisis By Lavina B Israni, Roll No. 15, SYBFM, Jai Hind College Index ïÆ'Ëœ Introduction 1 ïÆ'Ëœ The U.S. Economic Crisis 1 ïÆ'Ëœ The Greek Economic Crisis 5 ïÆ'Ëœ The PIGS Economic Crisis 7 ïÆ'Ëœ Conclusion 8 ïÆ'Ëœ The Structure of the Indian Banking Industry 9 Introduction The turmoil in the international financial marketsRead MoreU.s. Trade Pattern Is Affected By The 2008 Financial Crisis883 Words   |  4 PagesThe proceeding discussion elaborates how Sino-The U.S. trade pattern is affected by the 2008 financial crisis. There are few macro factors which are the driven forces behind financial crisis. From above sections, we conclude that the U.S. is more flexible to promulgate new country specific trade policy due to its imports centralization from few countries, and China is more sensitive to the protective trade policy due to its economic growth is more relying on the exports. The consumers’ purchasingRead MoreFinancial Crisis Related On The Subprime Mortgage Market And The U.s. Housing Market1713 Words   |  7 Pages b. RELIANCE Another component of fraud crimes is reliance. For the government to prevail on fraud charges, it has to establish reasonable reliance on the alleged misrepresentations or omissions. Most financial crisis related investigations focused on mortgage backed securities that banks sold consisted of subprime mortgages that are doomed to be defaulted. The misrepresentation argument goes that banks failed to disclose the low quality of the mortgages and substantial risks of default thatRead MoreThe Global Financial Crisis Of Broward College920 Words   |  4 PagesResearch Paper: The Global Financial Crisis Michelle Beira Broward College There have been few financial crises in the United States. The Global Financial Crisis of 2008 to 2009 was the most recent and before that was The Great Depression of the 1930s. The Global Financial Crisis actually began in 2007 when prices of homes tanked. It not only affected the U.S. but it also affected economies overseas. The entire investment banking industry, some of the biggest insurance companies, enterprisesRead MoreThe World Experienced A Tremendous Financial Crisis Essay1131 Words   |  5 Pagestremendous financial crisis which rooted from the U.S housing market; moreover, it is considered by many economists as one of the worst recession since the Great Depression in 1930s. After posing a huge effect on the U.S economy, the financial crisis expanded to Europe and the rest of the world. It brought governments down, ruined economies, crumble financial corporations and impoverish individual lives. For example, the financial crisis has resulted in the collapse of massive f inancial institutionsRead MoreRecession Turmoil Caused By U.s. Subprime Mortgage Crisis874 Words   |  4 PagesWall Street turmoil caused by U.S. Subprime Mortgage Crisis had eventually evolved to global financial crisis. The financial crisis that has engulfed the world is really a disaster, leading to precipitous shrinkage of human wealth and instantaneous evaporation of long-time efforts by financial institutions. But why did such financial crisis take place? Who should be blamed? As far as I concern, Federal Reserve deserves the greatest blame, as its ultra-loose monetary policy created housing bubbleRead MoreThe Global Financial Crisis During The Great Depression Of The 1930s1103 Words   |  5 PagesGLOBAL FINANCIAL CRISIS† A financial crisis is a situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated with a panic or a run on the banks, in which investors sell off assets or withdraw money from savings accounts with the expectation that the value of those assets will drop if they remain at a financial institution. Contents: ïÆ' ¼ Introduction ïÆ' ¼ Causes of the Crisis ïÆ' ¼ Impact of financial crisis ïÆ' ¼ Solution of financial crisis