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下面为大家整理的一篇优秀assignment范文- The reflection of Bear Stearns failure，供大家参考学习，这篇论文讨论了贝尔斯登倒闭的反思。与美国许多巨头一样，贝尔斯登是金融衰退期间的一个失败案例，它的总亏损高达15亿美元，让投资者蒙受了巨大损失。当贝尔斯登投资的大量资金流入了巨大的泡沫和高风险的证券时，该公司的风险管理没有发挥出它的作用，这是它最大的失败之处。另一方面，美联储作为财政部，应该要注意到风险，并采取行动，提前降低影响。

Like many giants in the United State, Bear Stearns is another failure case during the financial recession. It used to be a global investment bank and securities trading and brokerage firm. But its failure in capital investment and mortgage security had led to its failure in 2008.

The total loss is up to 1.5 billion dollars and the investors have suffered great loss. On March 14 2008, in order to alleviate the shortage of liquidity crisis of the Company and stabilize the emotions of the investors, the Federal Reserve made the decision to provide emergency funds to Bar Sterns. And this is the first time the Federal Reserve provides emergency funds to a non-commercial bank since the great depression in 1929. On March 16, JP Morgan acquired the Bear Sterns with total 36 million dollar or 2 dollars per share. With the acquisition, the history of Bear Stearns has come to an end.

The failure of Bear Stearns has a profound influence in the United States and the global financial market. Two main reflections can be concluded from the case.

On the one hand, the Company invested a large amount of money into the securities with huge bubble and high risk. The breakdown of the Company doesn’t happen in one day and the failure is an accumulation from a long time. At this point, the risk management has not played a key role in investment for such a giant company. The failure of the Company is due to the subprime mortgage crisis, but the root is the overconfidence and ignorance towards the risk.

On the other hand, for the Federal Reserve as a Treasury Department, it was a rescue in the case. However, the Federal Reserve should notice the risk and take actions to mitigate the influence in advance. For this perspective, the Federal Reserve should take the related responsibilities because the supervision is neglected and the laws and regulations are not effective. When the bubble of sub-mortgage securities burst, it was late to take actions and the investors had suffered great loss.

The reflection of the subprime mortgage crisis

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The subprime mortgage crisis was a nationwide banking emergency in the United States from 2007 to 2009. It was a result of bubble burst in the subprime mortgage securities. Home price declined by a large percentage. The mortgage to house owners cannot be repaid. The value of housing-related securities has devaluated.

One reflection is that these financial institutions and commercial banks have neglected the systematic risk. Systemic risk refers that the financial institutions engaged in financial activities involve volatility and crisis due to the impact of external factors and internal factors, like policy risk, interest rate risk, purchasing power risk, exchange rate risk and market risk. Systemic risk cannot be eliminated by diversification. For the subprime mortgage crisis, these financial institutions neglect market risk. When the value of securities is overestimated, the market risk is very high. The value of the subprime mortgage is overestimated. When the value is reduced to a low level, the investment will suffer a great loss.

Another factor is the credit risk. Banks lend a large amount to those with low credit. Once the bubble burst in the economic development, they cannot repay the money to banks resulting in default. From this aspect, banks lack the check on the borrowers’ credit.

Conclusion

In a word, the reflection of the Company has alarmed other financial institutions and the supervisory authority. Financial institutions should enhance the risk management in investment and the supervisory authority should formulate stricter laws and regulations to regulate the financial market.

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