The Fall of Lehman Brothers
The fall of Lehman Brothers
Lehman Brothers Inc (Lehman Brothers) once the 4th largest Investment bank in the world filed for chapter 11 of bankruptcy on September 15th 2008.
It started its journey as a small dry goods store to one of the leading investment banks in the US. Refer Annexure 1 for the history of Lehman Brothers.
Lehman had a particularly strong history in fixed-income products, later it diversified into other areas of finance such as investment banking and investment and asset management. Refer Annexure 2 for the business overview.
Until the 2007, Lehman generated a significant portion of its revenue through the issuance of mortgage-backed and asset-backed securities. When the collapse of the U.S. subprime mortgage industry started resulting credit crisis & the mortgage default rates began to rise and the demand for these securities began to disappear, Lehman was left with billions of dollars of rapidly depreciating securities on its balance sheet, forcing it to take large write downs and write-offs. Eventually, the company's efforts to shed risky assets proved unsuccessful, and investors sold off shares of Lehman in the fear that it wouldn't have enough capital to continue business as usual. Refer Annexure 3 for Lehman’s failure.
On September 2nd 2008, the state-owned Korean Development Bank confirmed that it was in talks to buy up to a 25% stake in Lehman, though the deal eventually fell through. The following weekend, Lehman put itself up for sale, and the U.S. Federal Reserve called an emergency meeting of Wall Street executives to aide in the sale. The two main bidders, Bank of America (BAC) and Barclays (BCS), dropped out on Sunday after the federal government refused to absorb Lehman's future losses with taxpayer dollars. Left with no potential buyers, Lehman's board of directors decided to file for Chapter 11 bankruptcy protection on the morning of Monday, September 15, ending the firm's 158-year history and claiming the title of
Lehman Brothers Inc (Lehman Brothers) once the 4th largest Investment bank in the world filed for chapter 11 of bankruptcy on September 15th 2008.
It started its journey as a small dry goods store to one of the leading investment banks in the US. Refer Annexure 1 for the history of Lehman Brothers.
Lehman had a particularly strong history in fixed-income products, later it diversified into other areas of finance such as investment banking and investment and asset management. Refer Annexure 2 for the business overview.
Until the 2007, Lehman generated a significant portion of its revenue through the issuance of mortgage-backed and asset-backed securities. When the collapse of the U.S. subprime mortgage industry started resulting credit crisis & the mortgage default rates began to rise and the demand for these securities began to disappear, Lehman was left with billions of dollars of rapidly depreciating securities on its balance sheet, forcing it to take large write downs and write-offs. Eventually, the company's efforts to shed risky assets proved unsuccessful, and investors sold off shares of Lehman in the fear that it wouldn't have enough capital to continue business as usual. Refer Annexure 3 for Lehman’s failure.
On September 2nd 2008, the state-owned Korean Development Bank confirmed that it was in talks to buy up to a 25% stake in Lehman, though the deal eventually fell through. The following weekend, Lehman put itself up for sale, and the U.S. Federal Reserve called an emergency meeting of Wall Street executives to aide in the sale. The two main bidders, Bank of America (BAC) and Barclays (BCS), dropped out on Sunday after the federal government refused to absorb Lehman's future losses with taxpayer dollars. Left with no potential buyers, Lehman's board of directors decided to file for Chapter 11 bankruptcy protection on the morning of Monday, September 15, ending the firm's 158-year history and claiming the title of