Analysis on ”Lehman brothers crisis 2008”

The 2008 bankruptcy of Lehman Brothers was a defining moment of the global financial
crisis, and the company's massive investment in mortgage-backed securities (MBS) was a
significant factor in its demise. Over the years, the company expanded and diversified,
becoming a prominent player in the investment banking industry. However, its fast
expansion, made possible by the repeal of the Glass-Steagall Act, which formerly prohibited
banks from simultaneously pursuing investment and commercial banking activity, resulted
in a deeply leveraged balance sheet.

The company's investment in MBS was motivated by the belief that house prices would
continue to climb and that the securities would continue to be profitable. However, as the
housing market began to fall, the value of these securities decreased, resulting in the default
of many of the mortgages they backed, resulting in enormous losses for Lehman Brothers.

The financial crisis was precipitated by the bankruptcy's domino impact on the global
banking system. The fall of Lehman Brothers resulted in a loss of faith in the financial
system, which precipitated a credit crunch and a liquidity crisis. This resulted in a worldwide
recession that lasted several years.

There were a number of ethical concerns about Lehman Brothers' behaviour leading up to
its bankruptcy. First, the company had engaged in dangerous financial practises, such as
stretching its balance sheet and investing extensively in mortgage-backed securities (MBS),
without having proper risk management mechanisms in place. Second, the business had
deceived investors and the public about the true health of its finances by utilising
accounting gimmicks such as Repo 105, which temporarily removed assets from the balance
sheet to make the company appear financially stronger than it actually was. This is deemed
a breach of the companies' fiduciary and trust obligations to its shareholders and
stakeholders.

Lehman Brothers' bankruptcy in 2008 was a significant event in the global financial crisis,
which was triggered by the company's massive investment in mortgage-backed securities,
hazardous financial practises, and deceptive reporting. The company's failure led to a loss of
faith in the financial system and a domino effect on the global economy, resulting in a multi-
year recession. This event's ethical difficulties serve as a reminder of the significance of
openness, accountability, and striking a balance between short-term profits and long-term
viability for businesses.
In conclusion, the bankruptcy of Lehman Brothers was a terrible example of how a
company's pursuit of short-term profits may lead to disastrous results. The company's large
investment in mortgage-backed securities, combined with its dangerous financial practises
and deceptive reporting, contributed to its demise and the worldwide financial crisis. This
event's ethical difficulties serve as a reminder of the significance of openness,
accountability, and striking a balance between short-term profits and long-term
sustainability.