Aftermath of the credit crisis- Lehman Brothers

The credit  crunch has not only occurred once but twice. The first being in 1929 followed by the Wall Street crash in 1928. The second occurrence on the 'credit crunch' was said to have begun in August 2007 although there are still some arguments to suggest otherwise. Nontheless the credit crunch began as a result of money shortages where banks were not willing to lend to any other banks. This then led to a high on the amount of Mergers & Aquisitions (M&A) considering some companies were no longer able to survive alone and needed another to depend on hence the mergers and takeovers.

One of the first major US bank that was allowed to collapse without any assistance from the US Federal Reserve was the 'Lehman Brothers'. Being a huge financial provider/lender it was a huge and yet negative news when they announced of their of approximately $3.9bn in early September and just a couple of days after the that announment, they decided to file for 'chapter 11' bankruptcy protection in September 2008. After this event, the banking industry began going downhill as the banking system was being demolished, this definately had an adverse effect on the banking industry globally as a whole.

Looking at the effects of the credit crunch today (four years later) especially in the case of the Lehman Brothers the financial economy is still upon the verge of a rival from the recession, and the famous Lehman Brothers just before their announcement of bankruptcy they deposited an amount of $2bn with Citibank in June 2008 which they are trying to recover from current legal proceedings. One of the current issues on the business news lately was that the Lehman Brothers have appointed their trustee (James Giddens) to carry on the legal proceedings against Citibank for not returning the $1bn deposit given to them for foreign exchange settlement services. So now the trustee is sueing them and seeking $1.3bn for the Lehman Brothers' creditors. Citi group on the other hand are stating their refusal towards this matter and classifying the matter as an 'unjustified claim'.

I think that the decision Lehman Brothers did so secure their $2bn deposit with Citibank was a wise idea considering they later filed for chapter 11 bankruptcy as the US Federal Reserve refused to bail them out financial. So really even though they owed a few millions to Citibank that did not mean it was within the right of Citibank to keep hold of that deposited money and say they used it to cover up the debts and costs they were owed by the Lehman Brothers. Surely even in the court this idea would have to be considered as am sure a contract of some kind was signed prior to the filing of bankruptcy. So what will the future hold for other companies that were affected by the 'credit crunch'.