Lehman brothers and the securitization of american express charge card receivables

This extensive post will give you a thorough overview of the subprime mortgage crisis as it is outlined and detailed in the website Wikipedia. This overview was imported from Wikipedia on October 2,

Lehman brothers and the securitization of american express charge card receivables

The funds were heavily invested in sub-prime mortgage securities.

Bankruptcy-remote transactions and bankruptcy law—a comparative approach (part 1): changing the focus on vehicle shielding (Lehman Brothers) can be permeated in even more imaginative ways. The case of Bank of New York v FDIC (NextBank I) arose out of the securitization of credit card receivables by NextBank NA, which used a trust. The US and many EU countries also experienced a severe crisis in – after the bankruptcy of Lehman Brothers. This was mainly caused by the excessive securitization of sub-prime mortgage loans and excessive risk taking by some financial institutions. executive offices American Express Company Vesey Street New York, New York information available on the internet Copies of the company’s Form K.

That forced the European Central Bank to inject record volumes of liquidity into the market to keep the banking system liquid. Rhineland Funding asked IKB to provide a credit line.

Lehman brothers and the securitization of american express charge card receivables

It was soon to become evident to the world that a new Marshall Plan, or some financial equivalent, was urgently needed for the United States economy; however, there were no likely donors stepping up to the plate this time.

Asset Backed Commercial Paper was one of the big products of the asset securitization revolution fostered by Greenspan and the US financial establishment. The ABCP was a short-term debt, generally no more than days.

Crucially, they were exempt from the registration requirements of the US Securities Act of ABCPs were typically issued from pools of trade receivables, credit card receivables, auto and equipment loans and leases, and collateralized debt obligations. The main risk faced by ABCP investors was asset deterioration—that the individual loans making up the security default—precisely what began to cascade through the US mortgage markets during the summer of The problem with CDOs was that once issued, they were rarely traded.

Their value, rather than being market-driven, were based on complicated theoretical models. When CDO holders around the world last summer suddenly and urgently needed liquidity to face the market sell-off, they found the market value of their CDOs was far below book value.

Lehman Brothers and the Securitization of American Express Charge-Card Receivables

So, instead of generating liquidity by selling CDOs, they sold high-quality liquid blue chip stocks, government bonds, precious metals. The drop in price of equities triggered contagion to hedge funds.

Major losses by leading hedge funds further fed increasing uncertainty and amplified the crisis. That was the beginning of colossal collateral damage. The models all broke down. Lack of transparency was at the root of the crisis that had finally and inevitably erupted in mid Additionally, credit-rating agencies turned a blind eye to the inherent risks of the products.

The fact that they were rarely traded meant even the approximate value of these structured financial products was not known.

Lehman Brothers and the Securitization of American Express Charge-Card Receivables Case Solution

Ignoring lessons from LTCM With that collapse of confidence among banks in the international inter-bank market, the heart of global banking and which trades in Asset Backed Commercial Paper, the banking system stared a systemic crisis in the face.

A crisis now threatened of a domino collapse of banks akin to that in Europe inwhen the French banks for political reasons pulled the plug on the Austrian Creditanstalt.executive offices American Express Company Vesey Street New York, New York information available on the internet Copies of the company’s Form K.

Buffett's teachings compiled in one place for the first time. By the autumn of , when the securitization market “seized up” and investors would “no longer lend at any price”, securitized lending made up about $10 trillion of the roughly $25 trillion American credit market, (i.e.

what “American homeowners, consumers, and corporations owed”). The US and many EU countries also experienced a severe crisis in – after the bankruptcy of Lehman Brothers. This was mainly caused by the excessive securitization of sub-prime mortgage loans and excessive risk taking by some financial institutions.

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Feb 23,  · Dandelion Salad by F. William Engdahl Global Research, February 23, Financial Tsunami, Part V Colossal Collateral Damage The multi-trillion dollar US-centered securitization debacle began to unravel in June with the liquidity crisis in two hedge funds owned by Bear Stearns, one of the world’s largest and most successful investment banks.

Bankruptcy-remote transactions and bankruptcy law—a comparative approach (part 1): changing the focus on vehicle shielding (Lehman Brothers) can be permeated in even more imaginative ways. The case of Bank of New York v FDIC (NextBank I) arose out of the securitization of credit card receivables by NextBank NA, which used a trust.

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