Essay: The Effects of Lehman Brothers Bankruptcy on U.S.

Sample Essay

The bankruptcy of Lehman Brothers and acquisition of Merrill Lynch had a domino effect on the US and world economies causing the stock markets around the globe to crash. The failure of financial giants not only affected the US financial sector but also the global financial sector as the US Federal Reserves, European Central Banks and Bank of England had to intervene in the money markets and provide billions of dollars of liquidity to ease the money markets.

Even though the central banks intervened in the money markets, stock markets of Asia and Europe fell by 5 percent, the oil prices went over $93 per barrel and the dollar lost significant value. The European and British central banks introduced $43 and $9 billion respectively in money markets in the aftermath of the Lehman Brothers failure. The German finance ministry was optimistic that the affects of Lehman Brothers on German banks could be handled. The Japanese regulatory authority ordered the Lehman Brothers Japanese operations to keep certain assets in Japan. A group of 10 big banks showed the intention of providing $70 billion to ease the global credit crunch (Agence France Presse).

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