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Financial Institutions and Risk
I will prefer to consider the example of JP Morgan chase and Bear Stearns. JP Morgan Chase has maximum acquire the organization in a deal broken federally. The main issues behind this were market having subprime mortgage. . The main issue with Bear Stearns is that they were out of cash and wouldn’t be capable to carry on their business. Bear Stearns was affected by heavy amount of asset-backed securities. This caused to increase in financial harm over the upcoming period of 2 years, instead of backing out; Bear Stearns carries its disclosure in market with subprime mortgage. In year 2007, the collateralized loan of organization raise up-to $3.2 billion to manage credit fund. In the July end, it reveals that two funds of subprime hedge had mislaid all its value which results in year 2008 bailout.
The problems were that the organizations doesn’t revealed its real financial position because their distress that it will harm their status. In certain cases, some organizations even delivered false or altered documentation to maximize the presence of their financial postion.
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