Commercial Law and the Market

Extract

[...] Old loans had to be re-examined and often they were very poorly documented. Inter-creditor agreements scrutinized. The deals stopped and the banks went bust or were nationalized. Lehman brothers had still 7 billion dollars of debt. The long-term effects are the increased regulation, a lower risk tolerance in theory and clawback provisions in bonus awards, discourages short-term strategies. The market in 2016 dropped 7.1% of the value of shares in 31 companies. Chinese price of oil has dropped 18%. Goldman Sachs fined $5.1 billion for miss-selling mortgage-backed securities. [...]

[...] Commercial Law and the Market The History of the Credit Crunch Before 2006/2007, it was a period of complete boom. It's called the boom time, following to the .com bust in 2000, fixed interest rates at so there were lots of cheap credit. The bank made lots of money. But the bank increased leverage (it's a way of measuring the amount you lend compared to how much you own), the bank does that all the time. But at that period, it went a bit crazy. [...]

[...] There was a surge in use collateralized debt obligations as a financial product (CDOs) with mortgages. The other problem is that the lender sells the lend to another person who has rights on the borrower. The model relied on the majority to repay mortgages and immediate on selling of risk. However, a lot of homeowners started defaulting on payments. Banks had to sell houses. And as more houses flooded the market, real-estate prices went down. Legitimate homeowners who could afford repayments stopped because value of the house was now so low. CDOs became worthless. [...]

[...] The economic recovery is that if you have an increase demand, the price goes up. The role of the lawyer The role of the lawyer is to help corporates and financial institutions get their job done so is to give good advice: advise on transactions help corporates raise finance assists with investment product creation assist with restructurings/insolvencies protect/pursue if necessary. They have specific roles: Banking lawyers → facilitating loans corporates → structuring acquisitions/takeovers/asset/business sales structured product lawyers → creating and documenting financial products that led to the crises and also solving it competition. [...]