Summary
Industry:
Investment
Service
Founder:
·
Henry Lehman
·
Emanuel Lehman
Defunct: 2008
Headquarters: New York
City
Product: -
·
Financial
Service
·
Investment
Banking
·
Investment
Management
Employee: 26200 (2008)
Lehman Brother holding
inc. was global financial service firm before declaring bankruptcy in 2008.
Lehman was the fourth largest investment bank in the US.
Lehman
Brother franchise in the Asia-Pacific in the Hong-Kong and Australia as well as
Lehman Brother investment banking and equities businesses in Europe and the
Middle East.
At
1:45AM on September 15, 2008, the firm filed for bankruptcy
protection following the massive exodus of most of its clients, drastic
losses in its stock, and devaluation of its assets by credit rating
agencies. Lehman bankruptcy filing is the largest in US history.
Merger with American Express
(1984–1994)
Shearson/American
Express, an American Express-owned securities company focused on brokerage
rather than investment banking, acquired Lehman in 1984, for $360 million.
On May 11, the combined firms became Shearson Lehman/America Express. In
1988, Shearson Lehman/American Express.
Subprime mortgage crisis
In
2008, Lehman faced an unprecedented loss to the continuing subprime mortgage
crisis. Lehman's loss was a result of having held on to large positions in
subprime and other lower-rated mortgage tranches when securitizing
the underlying mortgages; whether Lehman did this because it was simply unable
to sell the lower-rated bonds, or made a conscious decision to hold them, is
unclear.
In
the second fiscal quarter, Lehman reported losses of $2.8 billion and was
forced to sell off $6 billion in assets. In the first half of 2008 alone,
Lehman stock lost 73% of its value as the credit market continued to tighten.
In
August 2008, Lehman reported that it intended to release 6% of its work force,
1,500 people, just ahead of its third-quarter-reporting deadline in September.
Investor confidence continued to erode
as Lehman's stock lost roughly half its value. The U.S. government did
not announce any plans to assist with any possible financial crisis that
emerged at Lehman.
Lehman announced a loss of
$3.9 billion and its intent to sell off a majority stake in its investment
management business.
Bankruptcy
On
September 13, 2008, Timothy F. Geithner, then the president of
the Federal Reserve Bank of New York, called a meeting on the future of
Lehman, which included the possibility of an emergency liquidation of its
assets. Lehman reported that it had been in talks with Bank of
America and Barclays for the company's possible sale. However,
both Barclays and Bank of America ultimately declined to purchase the entire
company.
Bankruptcy
protection citing bank debt of $613 billion, $155 billion
in bond debt, and assets worth $639 billion. It further announced
that its subsidiaries would continue to operate as normal. A group of Wall
Street firms agreed to provide capital and financial assistance for the bank's
orderly liquidation and the Federal Reserve, in turn, agreed to a
swap of lower-quality assets in exchange for loans and other assistance from
the government.
