论文部分内容阅读
【Abstract】Too Big To Fail was proved by the financial crisis， which swept the globe in 2008. But actually， this phenomenon is a more reflection of the significance of the financial stability and regulation. This passage will try to prove it from the case of Lehman Brothers. I will try to explain what role the government played in it， too.
【Key words】Too Big Too Fail； financial stability and regulation； Lehman Brothers
1. Definition
a） Too Big To Fail
Too big to fail， this phrase describes a phenomenon that some companies， especially for the financial companies， are so essential that the local government have to deliver a hand for avoiding their failure. If the local government just look at them and have never done anything， they will fail and be a catastrophe for all over world. So， the awkward situation was appeared—Too Big To Fail.
Above mentioned is the situation as the economy is depressed. It seems a very big problem in the financial word. But when the economy is booming， these companies can get more competitive advantages than the small firms. Finally they will get bigger than bigger. See？ It seems so unfair. However， the bigger ones usually burden more. They are always the backbone of one country. This phenomenon also proves that the financial regulation by government is invalid， especially when the economy is depressing.
b）Financial Stability
Financial stability is a global issue. This industry has been growing so rapidly in recent years that it is surprising to note that the term itself is a relatively recent coin. Bank of England made the first use of the term in 1994. And the Bank of England was the first institution to launch a financial stability review in 1996.Since then， the term has become one in general and pervasive use.
Now， people is generally believed that financial stability is the main component of the financial system and its determinants to good operation， and can withstand the impact of the external and internal system， so as to promote the economic development of a dynamic process. But normally， it is hard to say the finance is stable in reality. Opposite， people always propose the concept on financial instability to trace back the financial stability. It is a vivid phrase to describe a property of finance. The financial system is inherently unstable. This property was proved by many theory and facts.
c）Financial regulation
Narrow sense of financial regulation refers to the financial regulatory authorities finish the regulation of the whole finance management. Generalized financial regulation also includes the internal control and audit of financial institutions， trade self-discipline organization regulation， and social intermediary organizations regulation and so on. As we seen from the meaning of financial regulation， financial regulation need to solve the problem well of 5W （Why， Who， Whom， What， How）. I mean 5W is the cause， subject， object， content and means of the financial regulation.
There is no doubt that financial regulation is so important. But， it is so powerful， too.
2. Case Background – Lehman Brothers
a）Lehman Brothers
The Lehman Brothers Ltd is an investment banking to provide all-round and diversified services to meet the financial needs of the global corporations， governments， institutions， and investors.
Because of Lehman Brothers’ business ability has been widely recognized， so the company has included many world famous company customers， such as Alcatel， Time Warner Inc.， Dell， Fuji， Intel， IBM etc. This one-and-a-half-century history investment banking is a Big Mac of Wall Street. However， this company did go bankruptcy in the financial crisis in 2008.
b）The process of bankruptcy
The financial report， released by the Lehman Brothers on June 16th of 2008， shows that the quarter （to 31st， May） the company’s loss of $2.87 billion. And this is the first time since the company listed in 1994. Lehman Brothers’ net income was negative $668 million， while in the same period in the same period last year was $5.51 billion. Chief Executive Officer （CEO） of Lehman Richard Fuld takes some effective actions immediately. Through the issuance of new shares， the company rises up to $6 billion of funds. On June 16th， Lehman Brothers share index rebound， but the stock has fallen by 60%. On September 9th， the acquisition negotiation between the Korea Development Bank （KDB） and Lehman Brothers was stopped. Lehman’s share index fell 45%. On September 10th， Lehman Brothers announced third quarter performance report and several strategic restructuring plans. And then， Lehman’s share index fell 7% immediately. At the beginning of this year， Lehman’s share index is more than $60. And after this report announced， Lehman’s share index fell to $7.79. Just for nine months， Lehman’s share index had plummeted nearly 90% and its remaining market value is just about 60 billion U.S. dollars. On September 14th， the U.S. government refused to provide a guarantee for the acquisition. Bank of America， Barclays Bank， and other potential acquirers have quit the negotiations one by one. The company with 158-year history has to face to be bankrupt.
c）Summary
It is consistent with the description of Too Big To Fail. What happened next just proved the lethality of it nakedly. For the United States and the whole world economy， its influence is very big. Its range is very wide spread. Its influence spread to a long time. Many researches have analyzed from Lehman’s internal and external causes. So next， I will focus on a little bit different aspect to analyze the cause of Lehman Brothers bankruptcy – the market and government reason.
【Key words】Too Big Too Fail； financial stability and regulation； Lehman Brothers
1. Definition
a） Too Big To Fail
Too big to fail， this phrase describes a phenomenon that some companies， especially for the financial companies， are so essential that the local government have to deliver a hand for avoiding their failure. If the local government just look at them and have never done anything， they will fail and be a catastrophe for all over world. So， the awkward situation was appeared—Too Big To Fail.
Above mentioned is the situation as the economy is depressed. It seems a very big problem in the financial word. But when the economy is booming， these companies can get more competitive advantages than the small firms. Finally they will get bigger than bigger. See？ It seems so unfair. However， the bigger ones usually burden more. They are always the backbone of one country. This phenomenon also proves that the financial regulation by government is invalid， especially when the economy is depressing.
b）Financial Stability
Financial stability is a global issue. This industry has been growing so rapidly in recent years that it is surprising to note that the term itself is a relatively recent coin. Bank of England made the first use of the term in 1994. And the Bank of England was the first institution to launch a financial stability review in 1996.Since then， the term has become one in general and pervasive use.
Now， people is generally believed that financial stability is the main component of the financial system and its determinants to good operation， and can withstand the impact of the external and internal system， so as to promote the economic development of a dynamic process. But normally， it is hard to say the finance is stable in reality. Opposite， people always propose the concept on financial instability to trace back the financial stability. It is a vivid phrase to describe a property of finance. The financial system is inherently unstable. This property was proved by many theory and facts.
c）Financial regulation
Narrow sense of financial regulation refers to the financial regulatory authorities finish the regulation of the whole finance management. Generalized financial regulation also includes the internal control and audit of financial institutions， trade self-discipline organization regulation， and social intermediary organizations regulation and so on. As we seen from the meaning of financial regulation， financial regulation need to solve the problem well of 5W （Why， Who， Whom， What， How）. I mean 5W is the cause， subject， object， content and means of the financial regulation.
There is no doubt that financial regulation is so important. But， it is so powerful， too.
2. Case Background – Lehman Brothers
a）Lehman Brothers
The Lehman Brothers Ltd is an investment banking to provide all-round and diversified services to meet the financial needs of the global corporations， governments， institutions， and investors.
Because of Lehman Brothers’ business ability has been widely recognized， so the company has included many world famous company customers， such as Alcatel， Time Warner Inc.， Dell， Fuji， Intel， IBM etc. This one-and-a-half-century history investment banking is a Big Mac of Wall Street. However， this company did go bankruptcy in the financial crisis in 2008.
b）The process of bankruptcy
The financial report， released by the Lehman Brothers on June 16th of 2008， shows that the quarter （to 31st， May） the company’s loss of $2.87 billion. And this is the first time since the company listed in 1994. Lehman Brothers’ net income was negative $668 million， while in the same period in the same period last year was $5.51 billion. Chief Executive Officer （CEO） of Lehman Richard Fuld takes some effective actions immediately. Through the issuance of new shares， the company rises up to $6 billion of funds. On June 16th， Lehman Brothers share index rebound， but the stock has fallen by 60%. On September 9th， the acquisition negotiation between the Korea Development Bank （KDB） and Lehman Brothers was stopped. Lehman’s share index fell 45%. On September 10th， Lehman Brothers announced third quarter performance report and several strategic restructuring plans. And then， Lehman’s share index fell 7% immediately. At the beginning of this year， Lehman’s share index is more than $60. And after this report announced， Lehman’s share index fell to $7.79. Just for nine months， Lehman’s share index had plummeted nearly 90% and its remaining market value is just about 60 billion U.S. dollars. On September 14th， the U.S. government refused to provide a guarantee for the acquisition. Bank of America， Barclays Bank， and other potential acquirers have quit the negotiations one by one. The company with 158-year history has to face to be bankrupt.
c）Summary
It is consistent with the description of Too Big To Fail. What happened next just proved the lethality of it nakedly. For the United States and the whole world economy， its influence is very big. Its range is very wide spread. Its influence spread to a long time. Many researches have analyzed from Lehman’s internal and external causes. So next， I will focus on a little bit different aspect to analyze the cause of Lehman Brothers bankruptcy – the market and government reason.