Lehman Brothers
Lehman Brothers Inc. (/ˈliːmən/ LEE-mən) was an American global financial services firm founded in 1850.[2] Before filing for bankruptcy in 2008, Lehman was the fourth-largest investment bank in the United States (behind Goldman Sachs, Morgan Stanley, and Merrill Lynch), with about 25,000 employees worldwide.[3][4] It was doing business in investment banking, equity, fixed-income and derivatives sales and trading (especially U.S. Treasury securities), research, investment management, private equity, and private banking. Lehman was operational for 158 years from its founding in 1850 until 2008.[5]
Lehman Brothers
Public company
NYSE: LEH
H. Lehman and Bro.
1850
Montgomery, Alabama, U.S.[1]
Henry, Emanuel and Mayer Lehman
September 15, 2008
Worldwide
26,200 (2008)
Lehman Brothers Inc., Neuberger Berman Inc., Aurora Loan Services, LLC, SIB Mortgage Corporation, Lehman Brothers Bank, FSB, Eagle Energy Partners, and the Crossroads Group
On September 15, 2008, Lehman Brothers filed for Chapter 11 bankruptcy protection following the exodus of most of its clients, drastic declines in its stock price, and the devaluation of assets by credit rating agencies. The collapse was largely due to Lehman's involvement in the subprime mortgage crisis and its exposure to less liquid assets.[6][7][8] Lehman's bankruptcy filing was the largest in US history,[9] and is thought to have played a major role in the unfolding of the 2007–2008 financial crisis. The market collapse also gave support to the "too big to fail" doctrine.[10]
After Lehman Brothers filed for bankruptcy, global markets immediately plummeted. The following day, major British bank Barclays announced its agreement to purchase, subject to regulatory approval, a significant and controlling interest in Lehman's North American investment-banking and trading divisions, along with its New York headquarters building.[11][12] On September 20, 2008, a revised version of that agreement was approved by U.S. Bankruptcy Court Judge James M. Peck.[13] The next week, Nomura Holdings announced that it would acquire Lehman Brothers' franchise in the Asia-Pacific region, including Japan, Hong Kong and Australia,[14] as well as Lehman Brothers' investment banking and equities businesses in Europe and the Middle East. The deal became effective on October 13, 2008.[15]
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Rise of mortgage origination (1997–2006)[edit]
Lehman was one of the first Wall Street firms to move into the business of mortgage origination. In 1997, Lehman bought Colorado-based lender, Aurora Loan Services(not a bank), an Alt-A lender. In 2000, to expand their mortgage origination pipeline, Lehman purchased West Coast subprime mortgage lender BNC Mortgage LLC. Lehman quickly became a force in the subprime market. By 2003 Lehman made $18.2 billion in loans and ranked third in lending. By 2004, this number topped $40 billion. By 2006, Aurora and BNC were lending almost $50 billion per month.[83] By 2008, Lehman had assets of $680 billion supported by only $22.5 billion of firm capital. From an equity position, its risky commercial real estate holdings were thirty times greater than capital. In such a highly leveraged structure, a 3 to 5 percent decline in real estate values would wipe out all capital.[84]
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* Henry Lehman established his first store location on Commerce Street, in Montgomery, in 1845. In 1848, one year after Emanuel's arrival, the brothers moved "H. Lehman & Bro." to 17 Court Square, where it remained when Mayer arrived in 1850, forming "Lehman Brothers".
** Designated as a landmark by the New York City Landmarks Preservation Committee in 1996.
*** Sales and trading personnel had been in this location since 1977; they were joined by the firm's investment bankers and brokers in 1980.
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