Ride the Storm: Navigating Through Unstable Periods / Katerina Rudko (Belka G...
The History of Lehman Brothers
1. The History of Lehman
Brothers
In 1850, Henry Lehman and his brothers, Emanuel and Mayer, founded
Lehman Brothers.
In the 1960s and 1970s, Lehman Brothers increased its global presence as
well, opening offices in Europe and Asia.
In 1984 Lehman was acquired by American Express.
In 2003 and 2004, Lehman acquired five mortgage lenders,
including subprime lender BNC Mortgage and Aurora Loan Services.
In 2008 Lehman collapsed in the wake of the fall of the sub-prime
mortgage market.
2. Reasons for the fall
Lehman invested heavily in property, both commercial and residential.
Lehman acquired mortgage lenders which specialized in Alt-a loans (made to
borrowers without full documentation).The lenders packaged up $millions
worth of these mortgages at a time and they were bought up by Lehman.
Lehman had them rated and then sold them again overseas to banks globally.
Lehman had the extremely high level of leverage (asset-to-equity ratio)
leverage of more than 30 to 1 and the strong reliance on short-term debt
financing.
3. Features Fall
Lehman Stock prices started to decrease; February 2007 the Stock price is
$85.80, on 4th December the stock price dropped to $59.61. During the 2nd
and 3rd Quarter of 2008 the stock price keeps down.
On June 9, Lehman announced a second-quarter loss of $2.8 billion. On
September 10, Lehman announced a third-quarter results loss of $3.9 billion,
including a write-down of $5.6 billion.
On September 15, 2008 Lehman Brothers filed for bankruptcy. With $639
billion in assets and $619 billion in debt, Lehman's bankruptcy filing was the
largest in history.
4. Results fall
25,000 staff of Lehman collapse certainly out of a job.
Lehman’s North American investment banking and trading businesses and
New York City headquarters were sold to British bank Barclays.
Lehman's U.S. businesses, as wealth management firm Neuberger-Berman,
continue to operate as stand-alone entities under new ownership.
Because of Lehman global reach, its bankruptcy proceedings are complex,
and have resulted in the closing of 80 of the bank's smaller subsidiaries.
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