The end of Lehman Brothers

As stage four of the financial crisis (distress) progressed, Lehman’s management realised that the crisis was more severe than they had previously thought.  The counter cyclical strategy pursued had cost Lehman a huge share price decrease (shown in graph 1) and massive losses.

Many rumours circulated about Lehman’s financial health and the interbank market froze, reluctant to lend. This lack of confidence resulted in Lehman not securing the vital funds it needed for daily operations. On the 15^th of September 2008 Lehman Brothers filed for chapter 11 bankruptcy protection. This became the largest corporate bankruptcy in the U.S history with $639 billion in assets, the great ‘Wall Street Titan’ had fallen (Craig et al, 2008).

If you have an hour to spare and want to learn more about the end of Lehman Brothers the film below entitled “The Last Days of Lehman Brothers” provides a good overview of the run up to Lehman’s bankruptcy.

Graph 1 showing Lehman Brothers share price (May 2007 – August 2008)

(FT, 2008)

Bibliography

1.      Craig, S. et al. (2008) AIG, Lehman Shock Hits World Markets. The Wall Street Journal, 16 Sept. Available at: http://online.wsj.com/article/SB122152314746339697.html.