Case 1 Questions: Lehman Brothers Please answer all questions. Be precise and answer to the point. Approximately the answer to all questions should be about 10 typed pages. Professional presentation, extra research and financial analysis are rewarded. The cases are group effort and are judged accordingly. hOJNH 1. Failure Analysis: Identify the major factors that contributed to Lehman Brothers failure? Who stood to benefit from its implosion? How did Lehman Brothers collapse differ from the 'Long Term Capital Management' failure a decade earlier? What could Lehman Brothers have done differently to avoid this fate? 2. Risk Management How did Lehman Brothers manage risk? As an investor, how would you evaluate the riskiness of Lehman Brothers model over 20002008. Lehman Brothers reported Repurchase transactions (Repo 105) as sale transactions. Why? What is the impact of this transaction on its financials? 3. Liquidity Crisis and Business Model of Investment Banks: What is the role of Liquidity for banking and investing banking firms? What could Lehman Brothers have done to address its Liquidity concerns, which initiated the run on the bank? Looking back, what lessons can we infer from Lehman Brothers failure regarding the business model of investment banks? Looking forward is the concept of 'pureplay' investment banks sustainable? 4. Macro: Systemic Banking Crisis and Regulation: What is a \"systemic banking crisis\"? What is 'banking contagion\"? What was the rationale for the creation of 'fire-wall' of separation between investment banking and commercial banking in USA that was institutionalized by the Banking Act of 1933? Why did the regulators weaken and phase out that 'fire-wall of separation' in 19905? Identify the major deregulatory acts and its role in the meltdown of the investment banking industry? In your opinion, based on lessons from past global banking crisis, what steps should regulators institute now to address similar future problems? 5. Macro: Federal Bailout and Public Policy: Why was Lehman Brothers allowed to collapse, while Bear Stearns was not? Is the Fed orchestrated sale of Merrill Lynch to Bank of America the optimal solution? Could Morgan Stanley and Goldman Sachs have survived with out becoming bank holding companies? In your View, what public policy role should the Federal Reserve play in maintaining sustainability in global banking and stability securities markets? Why was there such a public outcry against the bailout of Wall Street investment banks? Based on this recent performance, how would you rate the Federal Reserve's response to the financial crisis