Lehman Brothers Essay

The Lehman Brothers company had a long history of perseverance from the railroad bankruptcies of the 1800s, to the Great Depression of the 1930s, two world wars, and the Russian debt default in 1998 (Investopedia, 2015). Their century long history of endurance started to erode during the U.S. housing market collapse of 2008 with Lehman’s extensive investment in the subprime mortgage market. With $619 billion in debt and $639 billion in assets, Lehman Brothers filed for bankruptcy on September 15, 2008, making it the largest in history (USLegal, 2010). The Lehman Brothers collapse contributed to the October 2008 erosion of $10 trillion from the global equity markets. American International Group, Inc. (AIG) had substantial investments in credit default swaps which covered the assets that supported corporate mortgages and debt. On September 16, 2008, a two-year
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Their real estate business enabled revenues to soar up 56% from 2004 to 2006 with secured mortgages of $146 billion. The firm reported record earnings every year from 2005 to 2007 and reported a record net income of $4.2 billion on $19.3 billion in revenue in 2007 (Robison & Onaran, 2008). Lehman Brothers had a market capitalization of $60 billion in February 2007 when their stock hit a record $86.18 per share. At the same time, defaults on subprime mortgages had reached a seven-year high signaling the beginning of the fall of the U.S. housing market. Then in August 2007, Lehman stock fell sharply with the failure of two Bear Stearns hedge funds (Onaran, 2007). Lehman began to eliminate mortgage related jobs, shutdown mortgage units, and closed some Alt-A lender offices. During the fourth quarter of 2007, the firm’s stock rebounded but leadership did not decide to trim their immense mortgage

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