Investment banks had leverage ratios (debt to equity ratio) of 30x or even higher. On the other hand, a homeowner who has no equity is a serious default risk. After the events at Bear Stearns, the credit markets started to dry up and Northern Rock could not meet its obligations and had to be bailed out.In October 2007 two of the largest banks in the world, both lost their CEOs. Morgan Stanley eventually sold a 21% equity stake to Mitsubishi UFJ for $9 billion, which was paid as the largest check ever written.Throughout September 2008, the US government and Federal Reserve had been searching for a way to stabilize the financial markets.

Too many consumers attempting to save or pay down debt simultaneously is called the Once this massive credit crunch hit, it didn't take long before we were in a recession. There was nothing like the postwar turmoil of the 1920s, the struggles over gold convertibility and reparations, or the Lower interest rates encouraged borrowing.

Businesses are cancelling planned investments and laying off workers to preserve cash.

AIG's failure was possible because of the sweeping deregulation of over-the-counter (OTC) derivatives, including credit default swaps, which effectively eliminated federal and state regulation of these products, including capital and margin requirements that would have lessened the likelihood of AIG's failure.The limitations of a widely used financial model also were not properly understood.Then the model fell apart. (Spring 2003), p. 13

investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.

Summary and Definition: The 2008 Financial Crisis or Banking crash led the modern Great Depression, also known as the Credit Crunch.

Although Merrill was not widely publicized in the media as being in trouble, it too was losing money and if Lehman failed, Merrill would be next. It occurred despite the efforts of the Federal Reserve and U.S. Department of the Treasury. Barclays, despite not being the preferred bank, was definitely interested in the deal and was about to buy the bank when the UK government and regulators blocked the deal on the grounds that it would make the UK bank less stable.After performing due diligence of Lehman Brothers, none of the other banks were interested without government support except for Bank of America. For example, an article in Karim Abadir, based on his work with Gabriel Talmain,There were other economists that did warn of a pending crisis.The first visible institution to run into trouble in the United States was the Southern California–based IndyMac Bank was founded as Countrywide Mortgage Investment in 1985 by The primary causes of its failure were largely associated with its business strategy of originating and securitizing IndyMac's aggressive growth strategy, use of Alt-A and other nontraditional loan products, insufficient underwriting, credit concentrations in residential real estate in the IndyMac often made loans without verification of the borrower's income or assets, and to borrowers with poor credit histories.

Get instant access to lessons taught by experienced private equity pros and bulge bracket Assets financed overnight in tri-party repo grew to $2.5 trillion. The Federal Reserve surveyed 4,000 households between 2007 and 2009, and found that the total wealth of 63% of all Americans declined in that period and 77% of the richest families had a decrease in total wealth, while only 50% of those on the bottom of the pyramid suffered a decrease.Following is a timeline of major events during the financial crisis, including government responses, and the subsequent economic recovery:There is a really good reason for tighter credit. In the 1980s financial institutions and traders realized that US mortgages were a previously untapped asset. The recession, in turn, deepened the credit crunch as demand and employment fell, and credit losses of financial institutions surged. In comparison, the total assets of the top five bank holding companies in the United States at that point were just over $6 trillion, and total assets of the entire banking system were about $10 trillion.

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