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tv   Business - News  Deutsche Welle  September 14, 2018 3:15pm-3:30pm CEST

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or the latest news from around the world as well as push notifications or any breaking news you can also use a c. use it's to send some photos i'm very. confident cause your business updates in just about all the back up the top of the hour it was little cool news out of the. frankfurt. international gateway to the best connections road and rail. located in the heart of europe connected to the who will. experience outstanding shopping and dining offers triallists services. biala and asked at frankfurt airport city managed by from.
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me take it personally. with all the wonderful people in stories that make the game so special. for all true friends my. more than football on line. this weekend marks the tenth anniversary of the collapse of lehman brothers it was the largest bankruptcy filing in u.s. history and sent shock waves around the globe. and been physical and let's do business on september fifteenth two thousand and eight u.s. investment bank lehman brothers fava bankruptcy the event sent everyone from american investors to spanish property owners running for cover twenty five thousand live in brothers bank is found themselves out of work over night. a lend
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of was a giant but not too big to fail him and have become so involved in the mortgage origination that it was basically a real estate hedge fund disguised as an investment bank washington wasn't willing to save the financial institution although it did save others. is a look back at the events that led to the worst financial crisis since the second world war. mortgages seemingly for anybody who wanted one. many u.s. banks seemed willing to lend to anyone regardless of whether they had the means to repay those loans things came to a head in the spring of two thousand and seven when record numbers of people defaulted on those loans. at the beginning of april new century a real estate investment trust filed for bankruptcy it had been a major issue of subprime mortgages. next to face the music was german corporate bank i k b on july twenty seventh after running into funding problems it received
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a bailout from the german state development bank k f w. then on august ninth the mortgage crisis hit financial markets as more people defaulted on their loans banks and investors began losing money banks lost trust in each other worried that they wouldn't get their money back this fear was reflected in a rise in interbank lending rates. on the twenty first of january two thousand and eight germany's stock exchange lost seven percent in value the biggest drop since nine eleven in the days afterwards the u.s. fed lowered interest rates again. two months later on march sixteenth bear stearns was bought by rival j.p. morgan with cash barred from the fed it had been the fifth largest investment bank in the united states. on september sixth the federal takeover of
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us government sponsored mortgage lenders fannie mae and freddie mac. . a little over a week later another low wind u.s. investment bank lehman brothers filed for bankruptcy. the u.s. government chose not to step in. stocks around the world crashed as banks lost even more confidence in each other. the following month german chancellor under macko and then finance minister patched work had this message for savers. telling savers that their deposits are safe. shows and an attempt to avoid a run on the banks because. what began as a us subprime mortgage crisis soon had an effect on the global economy trade slowed down dramatically the result in the year two thousand and nine the us economy contracted by almost three percent and the german economy shrunk by five percent.
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economists young khan joins us from frankfurt now apart from the toxic securities which everyone knows about in which a lot of people actually put their trust in the whole crisis sounds like it was caused by simply a lack of trust. well that's absolutely true and in such a crisis we always have to expect that financial institutions among each other. to trust why because it is so all park what is in their portfolios what about the trust of economists you're an economist and the head of the o.e.c.d. said today that economists for costs needs you better reflect reality do you take that personally. and i think we are very careful in making forecasts about the financial crises matter that is certainly a lesson that we have taken and what we now know is that on financial markets that
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can always be let's say new types of problems that arise and that how contagious to an extent that is hard to predict what we know is that a crisis of the type we have seen in two thousand a ten years ago would most likely not repeat itself because we have built a lot of fortifications what about you ways of focusing these types of events though i mean couldn't they be better predicted in this day and age with all the data we now have access to or whatever is easy to leave predictable i think that's being covered so if you are a supervisor who sees pockets of risk in financial institutions or in markets you would try to cover it with more capital or with other requirements i think the true risk in is in those pockets that we don't imagine at the moment and the financial world is changing all over so all every year you have new products new
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markets that develop and to keep an eye on them to understand them even to see the interconnections that's the hard one and we need an analysis for this but you say that the world is better fortified what what are your lessons learned from the g.s.t. from the global financial crisis. i think the world is better for to fight but it's clearly having the leading towards i would say traditional or classical types of crises the one that we have seen for the new ones we need an open eye an open mind we need to discuss the new products that come around and that's a tussle that also researchers are trying to deal with as well as sot and parts of the supervisory agencies so that's my main lesson we have to be more critical with the functioning of financial markets has no clear stability there's
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no safe equitably on that we can expect to prevail and healthy skepticism is a good thing a caller's young peter khan and thank you very much for joining us thank you and let's take it to our asia correspondent in singapore linda. what is some of the lessons that asia has learned from the lehman brothers crisis. well less is just now actually some issues that come up about trust as well as which banks if i lend money to you at that point in time are you going to fail me you not going to pay me back so after that we actually have a bank adequacy ratio where you know if the fiscal regulators central bankers in asia make sure that you bank have actually enough money in order that they don't use that money to actually invest always best and then they won't be able to pay because of this so this is actually one very important it has been learned and
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actually there's also been a trade crisis in asia because rather than the financial crisis because we are actually low quite a bit from the asian financial crisis and we have actually learned to expand outreach links more with other countries apart from the u.s. and the europe who are very much affected during the lehman brothers global financial crisis briefly lindau economist there was saying that he can't imagine another crisis is just around the corner but could asia withstand another crisis like the lehman brothers crisis well you know asia actually found that pretty quickly and actually we actually have some stress test that went on you know to ensure that banks actually could withstand that shocks and actually one of the singapore monetary authority of singapore which is the central bank actually found that business in asia as was based can actually withstand shocks that were fog in one thousand nine hundred seventy eight a financial crisis as well as the recent global financial crisis linda thank you
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very much the collapse of lehman brothers cost tens of thousands of jobs a decade on w met a former employee to see how they've been doing since luis sanchez still thinks about the collapse of lehman brothers nearly every day he recalls what it felt like when he discovered that the financial institution was about to collapse. the feeling was. where is this going to end. it looks like. like the end of the world financially and the regular people out there doesn't know how bad things are. sanchez still has his old lehman's id card. his cell phone footage shows sun chase in the lehman's office after the bank filed for bankruptcy. just outside stock for
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besieged by camera teams on the eve of the banks collapse they got together for a final drink. their new scheme on a song they. saw. their head over the coals. or emails to get to so barring a word i had to remember exactly the name but we all got together but one thing was sure. what every was his boss called me to warn him but the end of lehman brothers didn't mean the end of sanchez's career instead he went on to found his own consultancy firm kerry is having a working lunch with his business partner. their job involves analyzing data and devising algorithms used to predict things like those defaults their customers include banks and insurance companies. building up a new venture was
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a challenge but sanchez says he's learned from the lehman brothers downfall i think the biggest lesson. the main lesson was not. too big to fail. the u.s. stock market may be surging again or bullish as they say on wall street but luis sanchez knows just how quickly things can change. about is too big to fail lasting business ethics.
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