11. Prime Brokers and Derivatives Dealers
- Publication Date:
- 04-2010
- Content Type:
- Working Paper
- Institution:
- Council on Foreign Relations
- Abstract:
- Runs by prime-brokerage clients and derivatives counterparties were a central cause of the World Financial Crisis. Worried about potential losses, many hedge funds withdrew their assets from brokerage accounts at Bear Stearns and Lehman Brothers in the weeks before these banks failed. Although Morgan Stanley did not fail, it also suffered from the withdrawal of prime brokerage assets. These runs, together with runs by short-term creditors, precipitated Bear Stearns' and Lehman's demise. Even if these firms would have failed anyway, the runs made their failures much more sudden and chaotic, and made coherent policy responses much harder.
- Topic:
- Economics, Markets, and Financial Crisis
- Political Geography:
- United States