It seems like yesterday, but it was ten years ago. I was in the US for a conference and, on 15th September 2008, was visiting the Wall Street to check out the heart (maybe, the dark underbelly) of the global financial system.
I had just reached there after a visiting the site of the World Trade Center, which was tragically brought down on 11th September seven years ago.
Now, another tragedy was about to happen just five miles from where I was. This time it wasn’t about loss of lives but of livelihood.
Lehman Brothers declared bankruptcy and the world financial system was on the verge of collapsing. It was, and remains, the largest bankruptcy filing in the US history, with Lehman holding over US$ 600 billion in assets, supported by less than US$ 25 billion of own capital. That’s around 23-times debt to equity. In such a highly leveraged structure, a 4-5% percent decline in asset values would wipe out all capital, which it did.
[Read more…] about Remembering the 2008 Crisis, and A Few Lessons Learned