The day of the bankruptcy of Lehman Brothers – level 2
Lehman Brothers was one of the biggest banks in the United States. It invested a lot of money into mortgages. The bank invested 680 billion dollars, but its available money was only 22 billion dollars. It was a very risky situation because if the value of houses went down by only four percent, the bank would lose all its capital.
In 2008, the value of houses fell and the bank started to have big financial problems. The management asked the government for help but the government didn’t help.
On September 15, 2008, Lehman Brothers went bankrupt. It was the biggest bankruptcy in the history of the United States.
Difficult words: mortgage (a contract in which a bank gives you money to buy a house), capital (money or houses which a company has), go bankrupt (to be in a situation when you lose your business because you don’t have enough money), bankruptcy (a situation when you are bankrupt).
What measures could the government have taken to help Lehman Brothers before it went bankrupt?
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