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10 years of Lehman crisis: What we know, and the lessons we've learnt

BS Web Team/New Delhi 15 Sep 18 | 05:05 PM

September 15, 2008 was the day when the US banking behemoth, Lehman Brothers, collapsed and sent economic shock waves across the globe. A few smaller banks had filed for bankruptcy prior to the Lehman collapse and others followed soon after. However, despite being affected by the crisis, many hard working Americans and people all over the world were without a clue about how the US banking industry lost track of the market and let the entire system crash. Many still don't know about it. Find out how Banks got greedy and the world economy collapsed.

But who were the people or organisations behind the crisis? Most people date it to the collapse of Lehman Brothers on September 15, 2008. But Europeans believe the crisis started more than a year earlier, in August 2007, when BNP Paribas froze three of its investment funds, setting off ripples that led to the collapse a month later of Northern Rock, Britain’s fourth-biggest bank. If you listen further to the Europeans, they uniformly blame Americans for the crisis. Read the article titled, When Wall Street rules: The real culprits of the global financial crisis, to find out who was responsible for it. 

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After facing a crisis of such magnitude, it was obvious that the banking system needed some major changes. Lehman Brothers has become a watershed in the world of finance. It is significant not only because it turned out to be the only institution that was allowed to fail even as others were merged or provided support by the US Federal Reserve, but also because the way the financial systems governed changed drastically after its fall. How Lehman collapse changed the way financial systems are governed globally tells us what changed after the behemoth fell.

Alright, so we now know what had happened and who was responsible for the mess. So, is there, or is there not, an uncanny similarity  to what was going on then, and the current world economic scenario? Are economies really better off today? Or are we heading for another collapse. The article, Growth, fiscal consolidation yet to return to pre-financial meltdown levels, explains how the Indian economy has fared since the Lehman Brothers collapse. 

While the US economy was heading into disaster mode, India Inc was busy was making headlines by acquiring foreign companies.  Tata Steel bought Corus Steel, and Aditya Birla Group acquired Novelis. This happened in 2006. But the global financial crisis came as a black swan event, changing the mood from exuberance to despair. Despite acquiring Jaguar Land Rover in 2008, just after the crisis hit, and surviving the crisis unscathed, Tata could not make profits from Corus. Here is an article that tells why India Inc's global foray has been a mixed bag

India survived the economic crisis with minor bruises. There were people in our system to keep the economy from falling drastically. So, Meet the decision makers who steered India through the Lehman crisis

In India, the benchmark Sensex shed a staggering 52.48 per cent during the calendar year 2008. Liquidity dried up in the debt market, while the real estate industry was hamstrung by lack of funding. Job losses and salary cuts led to demand contraction. A decade later, investors need to imbibe the lessons from that black swan event, so that if another one of similar magnitude strikes, they are better prepared to handle it. Stay invested in equities even in bleak times. 

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