How are credit crunch and investment banks crashing out related?
January 16th, 2010 | by admin |jaja asked:
Can someone tell me in as simple terms as possible as to why the investment banks are crashing out like the lehman brothers recently? what economic phenomenon is causing this? How is it related to the credit crunch?
Can someone tell me in as simple terms as possible as to why the investment banks are crashing out like the lehman brothers recently? what economic phenomenon is causing this? How is it related to the credit crunch?
One Response to “How are credit crunch and investment banks crashing out related?”
By soundman_jaybee on Jan 18, 2010 | Reply
oooohhh this one’s easy!
It’s the sub-prime mortgages that were taken out in circumstances where it was only going to lead to a bad debt.
The big lenders bought all this bad debt without realising just how bad it was (made bad by the fact that property prices slumped, otherwise they would have been able to liquidate the property to get the investment back)
This has depleted the reserves of some really big investors.
Read more about it here:
Hope this makes sense…frankly I am astonished that more checks were not made on these investments, this was sloppy work by someone!