Query by Huge BOB J: a question about the economic crisis?
been trying to realize all this for a course i am doing, but sruggling in a single element. brokers secured mortgage offers, subprime, and received commission for this. lenders actually went by way of with the offers and lent homeowners cash for the mortgage. they then sold these mortgages on to investment banks who turned them into CDO and then sold them on to individual investors. is this proper so far? loads defaulted then on the payments, so homes repossessed by both lenders and by investment banks, depending on who owneed the mortgage each time. provide went up, economics forced rates to go down and then they have been left with worthless assets (identified as toxic or not?) they then had nobody to purchase these off them from then on and transfer the threat of their investment and the resp. also, they couldnt spend back federal reserve where a lot of borrowed million billions and had high leverage. once again, is this right?

if so, how do lehmans brothers match in, are they lenders, brokers, investemnt bankers/banks. is there a case study i can look at to much better understand even? an example of a lender, and an invesment banker?

also, did the banks just not recognise the risk or was it ignored?

cheers please answer all if you can

Ideal answer:

Answer by Caroline
Lehman Brothers (large bank) was run by a man who decided to lend 40 dollars for each and every dollar he owned. That was also high a leverage (other banks had leverage of like 20:1 which is also high but that is why Lehman Brothers was the 1st to fall)

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