Lehman Bros, the fourth largest investment bank in the US, went into liquidation after failing to raise investments to ease its liquidity. The bank incurred billions of dollars of loss as a result of the failing US mortgage market.
Barclays, a British bank, is in talks with Lehman Bros to take over its broker-dealer and mergers-acquisitions operations, but not the toxic investments of Lehman into US commercial and residential property markets. Barclays issued a statement that it would do so on terms attractive to Barclays shareholders.
The collapse of Lehman Bros sent a shock wave around the global financial markets. All major stock markets dropped significantly. The UK FTSE index was down by 2.44%, France’s Cac dropped 1% and Germany’s Dax fell by 1.58%. The Japanese, South Korean and Hong Kong stock exchanges closed trading with a minimum of 5% fall in the stock market index.
Central banks were prompt to provide more liquidity to the financial markets. The Bank of England pumped an additional £20bn into the short-term money markets, the Frankfurt-based European Central Bank provided an extra 70bn euros and the Bank of Japan injected £13bn into the market.
Banks, homeowners, investors and policy makers are among the losers of the credit crunch. Bank share prices dropped greatly, homeowners are facing negative equity and policy makers have become scapegoats for lax lending and regulatory failure.
The winners include sovereign wealth funds, value providers and the super-rich. State-controlled investment funds, such as the Government of Singapore Investment Fund, the Abu Dhabi Investment Authority or the Qatar Investment Authority; have acquired stakes in financial institutions, such as Citigroup, UBS and Merrill Lynch. ‘Discount’ supermarkets Aldi and Lidl increased their sales by 19% and 14% respectively. The number of the super-rich, owning more than $30m excluding their homes, increased by 8%.
Alan Greenspan, former Federal Reserve chairman, says that it is the worst financial crisis in a century.
Vocabulary
- financial turmoil – pénzügyi káosz
- to file for bankruptcy protection – fizetésképtelenségi- / csődeljárást kezdeményez
- to go into liquidation – csődbe megy
- broker-dealer – B/D vagy bróker-dealer
- mergers & acquisitions – fúziók és felvásárlások
- commercial and residential propert markets – üzleti- és lakossági ingatlan piacok
- shareholder – részvényes
- stock exchange – tőzsde
- short-term money market – rövidlejáratú pénzügyi piac
- to close trading – kereskedést befejez (tőzsdei kereskedési nap vége)
- scapegoat – bűnbak
- sovereign wealth fund (SWF) – intézményes állami befektetők
