Lehman Brothers

From Recessipedia

Lehman Brothers was the 4th largest Investment Bank until filing for Chapter 11 bankruptcy on September 15, 2008 ^[1]. Throughout 2008, Lehman suffered unprecedented losses because of the subprime mortgage crisis. Lehman's losses were primarily caused by large positions it held in subprime mortgages it kept when securitizing the underlying mortgage securities. Lehman reported losses of $2.8 billion in Q2 2008 and had to sell $6 billion in assets to cover losses and enhance the liquidity of their portfolio positions. ^[2] On Saturday September 13, 2008, Tim Geithner, the president of the Federal Reserve Bank of New York, called a meeting to discuss the future of Lehman, and considered the possibility of an emergency liquidation of its assets. Throughout September, Lehman was in talks with Bank of America and Barclay's Bank to sell itself and avoid bankruptcy. However, both Barclay's Bank and Bank of America declined to purchase the entire company. ^{[3] [4]} Barclay's Bank eventually purchased Lehman's North American investment-banking and trading divisions along with its New York headquarters building shortly after the firm's bankruptcy.

The government response surrounding Lehman's failure prompted discussion of the "Too Big To Fail" doctrine and helped navigate future government intervention with other major Investment and Commercial Banks.

Notes

1. ↑ Mamudi, Sam "Lehman folds with record $613 billion debt" CBS Marketwatch(September 13 2008): http://www.marketwatch.com/story/lehman-folds-with-record-613-billion-debt?siteid=rss
2. ↑ Anderson, Jenny "Wall Street’s Fears on Lehman Bros. Batter Markets" New York Times (September 9 2008): http://www.nytimes.com/2008/09/10/business/10place.html?_r=1&hp&oref=slogin
3. ↑ Anderson, Jenny & Sorkin, Andrew Ross "Lehman Said to Be Looking for a Buyer as Pressure Builds" New York Times (September 10 2008): http://www.nytimes.com/2008/09/11/business/11lehman.html?_r=1&hp&oref=slogin
4. ↑ Dash, Eric "U.S. Gives Banks Urgent Warning to Solve Crisis" New York Times (September 12 2008): http://www.nytimes.com/2008/09/13/business/13rescue.html?_r=1&hp&oref=slogin