Essay on Lehman Brothers

1466 Words Oct 25th, 2014 6 Pages
Case Study : Lehman Brother’s

Demise of Lehman Brothers
Lehman Brother’s demise was the event that gripped the US financial system into shock. It was the fourth largest investment firm in the US as of 2007 with 25,000 employees worldwide. The Firm had an exponential growth and recognized profits from 2005 to 2006 and in 2007 reported a net income of $4.2 billion dollars on revenues of 19.3 billion. The stock price of the company reached all-time high when it hit $86.18 per share. Lehman increased 56% in its revenues only from the subprime mortgage business alone. While the company kept reaping benefits, the real estate market in the US started to show signs of pending bubble burst. In March 2007 stock market experienced biggest drop
…show more content…
Weak ethical standards and code of conduct at Lehman brothers is considered to another critical factor that led to its collapse.

Brief History of Lehman Brother’s
The history of Lehman brother’s traces back to 1850 in Montgomery, Alabama. Henry Lehman and his brothers, Emanuel and Mayer, founded Lehman brothers. It was first started as a merchandise business but soon they shifted on commodities trading and brokerage operations. The firm started prospering over the decades as the U.S economy grew, Lehman faced several challenges such as the railroad bankruptcies of the 1800’s, the great depression , two world wars and the Russian debt default of 1998. In 1994, Richard fuld became the CEO of the Lehman Brothers. Under his control, Lehman brothers started to prosper in 2007 and generated approximately $3.1 billion in net revenue and almost $800 million in pre-tax income. Before the company went bankrupt they had in excess of $275 billion in assets under management. They had increased net revenues over 600% from $2.73 billion to $19.2 billion and had increased employee from 8500 to almost 28600.

Losses and Subprime mortgage crisis
The fall of Lehman Brother’s started in August 2007 when the firm closed its subprime lender, BNC Mortgage, eliminating 1,200 positions in 23 locations. Furthermore, they took an after-tax charge of $25 million and a $27

Related Documents