Lehman Brothers – Largest Bankruptcy in U. S. History

Henry, Emanuel, and Mayer Lehman founded Lehman Brothers in New York in 1847. The three brothers initially focused on trading cotton. Prior to their collapse in 2008, they were the fourth largest investment bank in the United States.

In the years following its founding, Lehman Brothers began providing investment banking, trading, and other financial services. They attracted a wide range of clients, including corporations, governments, and wealthy individuals.

Diversification

During the 20th century, Lehman Brothers underwent several transformations. In the 1920s, the company moved away from its traditional focus on commodities.

Lehman Brothers traded a wide range of financial products on behalf of its clients, including stocks, bonds, derivatives, and commodities. The company was particularly active in investment banking and trading. It provided services such as mergers and acquisitions advice, underwriting, and market-making. Lehman Brothers also had a significant presence in the mortgage-backed securities market, which ultimately contributed to its downfall during the 2008 financial crisis.

Changing Control

In 1969, Lehman Brothers went public and began trading on the New York Stock Exchange. This allowed the company to raise significant amounts of capital and expand its operations.

Throughout the 1970s and 1980s, Lehman Brothers underwent a series of mergers and acquisitions that transformed it into a global financial services firm. In 1984, the company was acquired by Shearson/American Express, a large financial services conglomerate. However, Shearson / American Express struggled to integrate Lehman Brothers into its operations, and the two companies were eventually separated in 1993.

The Financial Crisis

In the early 2000s, Lehman Brothers began to face serious financial difficulties. The company had invested heavily in the subprime mortgage market, which was experiencing a significant downturn.

Bankruptcy and Fallout

In 2008, Lehman Brothers was forced to file for bankruptcy, making it the largest bankruptcy in U.S. history at the time. Lehman’s assets were eventually sold off to a variety of buyers. Barclays, a British bank, acquired Lehman Brothers’ North American investment banking and capital markets operations, while Nomura Holdings, a Japanese financial services company, acquired Lehman Brothers’ Asian operations. Other assets were sold off to a variety of buyers, including private equity firms and other financial institutions.

In 2010, the U.S. Securities and Exchange Commission (SEC) filed civil charges against Lehman Brothers’ former CEO, Richard Fuld, alleging that he misled investors about the company’s financial health in the months leading up to its bankruptcy. However, Fuld denied any wrongdoing, and the case was settled without any admission of guilt or liability.

In addition to Fuld, other executives from Lehman Brothers were investigated by the SEC and other agencies, including the company’s former CFO, Erin Callan, and former COO, Joseph Gregory. However, no criminal charges have been filed against any of these individuals.

Legacy

The bankruptcy of Lehman Brothers had significant repercussions for the global financial system. It sparked a worldwide financial crisis and led to a major recession that lasted for several years.