THE FALLOUT external image economic_collapse.jpg

It was not pretty...

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Bear Stearns was a global investment bank that eventually collapsed and was bought out by J.P. Morgan Chase. The company was dealing heavily in the sub prime mortgage business and that is what brought it down. Bear Stearns is the canary in the coal mine of sorts. This was first company to fall, but certainly not the last.

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When more and more borrowers began to default on their mortgages the house of cards began to collapse. While watching the news and seeing the pundits talk on television it was obvious to see the shock that was reverberating throughout the financial world. But the financial services industry had another disaster coming it's way. Considering the interconnectedness of the different economies of the world, it is a delicate balance that keeps it all together. But when something happens that shakes the foundation of that balance, and has the power to start things going into a downward spiral. This would be cataclysmic. This would be Lehman Brothers.

Lehman Brothers was a global financial services firm that did business all over the world. They were a very big player in the financial services industry. When the subprime mortgage crisis started, Lehman was critically exposed. They held vast sums of subprime mortgages and were unable to sell or get rid of them. The exposure to the subprime mortgage crisis proved to be the undoing of Lehman. On September 15th 2008 Lehman filed for bankruptcy. The bankruptcy of Lehman was the cataclysm that sent the credit markets into a downward spiral. And the world economy into a tailspin.

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With all money changing hands it would seem that no insurance company would be crazy enough to insure these sub prime mortgages. But money makes people do crazy things. AIG, an insurance GIANT was heavily exposed to the subprime mortgage mess.

In 2008, mayhem swept through global financial markets. Right after Lehman Brothers had just failed panicky credit markets were seizing up. The share price of AIG fell off a cliff and American International Group, largest insurance company in the world, rapidly sinking toward bankruptcy.

Eventually the Government bailed AIG out and took it over. It is still a crap company that is costing the taxpayer obscene amounts of money.