Which crisis is worse, Lehman Brothers in 2008 or covid19?

Which crisis is worse, Lehman Brothers in 2008 or covid19?

Lehman Brothers was a financial crisis started in US, but had a domino effect as those MBS were bought by pension funds and those CDS were sold by big Investment Banks and hence was a catastrophic event in the financial world, however Covid is a universal health hazard, a pandemic as declared by WHO.The effects of Covid will be felt across all sectors, as the entire global economy comes to standstill with the lockdown, so all the sectors get hit. In a way, I would say this Virus is much more worse than the 2008 event. The uncertainty as to when the lockdown ends, when there will be a antidote or when this exponential multiplication will come to an end is a question.

I would be digressing a bit from your actual question and would like to share something interesting

But here is an interesting take from my end. So yes history repeats itself; few things that I can draw parallel to:

1. Bailout of ILFS : equivalent to saving of Freddie Mae and Fannie Mac
2. Bailout of PMC bank: equivalent to bailout of Bear Sterns
3. Fallout of Karvy: so far I cant think of any parallel here
4. Bailout of 4th largest Pvt Bank, Yes Bank: Hands down ditto as Lehman Bank but then turned out to AIG like situation (just that our govt realized it was too big to fail and the consequences would be catastrophic and will have a domino effect with credit spreads increasing and overnight repo rate shooting up)

One more interesting thing, is when the government ‘made’ other bankers to invest in Yes Bank the list of bankers were:

SBI, ICICI Bank, HDFC Bank, Kotak Bank, Axis Bank, Bandhan Bank & Federal Bank.

Two important things, that is pretty interesting, why these banks were made to invest in Yes Bank, reason being there should not be run on the Yes Bank, i.e. depositors should not run to withdraw their deposits, , so if depositors withdraw their deposits from yes Bank, they would obviously deposit that sum either in SBI, ICICI Bank, HDFC Bank, Kotak Bank, Axis Bank, Bandhan Bank & Federal Bank and hence these banks were ‘made’ to invest in Yes Bank, so that the investors feel protected that these huge banks are backing Yes Bank

Another important thing to notice, a small finance bank Bandhan Bank was a investor but no mention of Indusind Bank or RBL; I hope you get the message loud and clear. (Definitely the next banks in line, the share prices already got hammered )

Few of the Banks/NBFC’s that have Toxic assets:

• Yes Bank
• Indusind Bank
• RBL Bank
• PEL
• IBULHSG
• PNB Housing Finance
• Indostar Capital (though a very small book)
• Lot many PSBs

Teaser rate loans for subprime mortgages, reminds me of loans from bajaj finance, though too early as of now .

Although out there in US (in 2008), the crisis came from subprime mortgage; here there is a combination of governance issues, clear fraud cases and Real Estate exposures, in fact as per my knowledge few NBFC’s who generally have a large Real Estate (RE) book have purely lent on 2nd charge or cash flows that too projected on inflated psqft rates, with more delays in selling of those unsold inventory its only a matter of time as to who blinks first i.e. either the builder has to get the rates down to sell their unsold inventory or the takeover of those properties by the lenders, post default in either case, those cash flow backed and or 2nd charge lenders wont be left with much.

P.S. I have studied 2008 collapse, and that is an interesting subject for me, so maybe I could be biased by relating this events with the current happenings.