The Failure and Collapse of the Lehman Brothers
30 Pages Posted: 16 May 2012
Date Written: May 16, 2012
The year 2008 was marked by massive failures and collapse of investment institutions in the USA- revealing flaws in the banking system that required a complete overhaul. In the same year, one of the largest investment firms in the world, the Lehman Brothers, filed for Section 11 bankruptcy henceforth throwing both the US and the global financial systems into turmoil. The collapse of Lehman Brothers Holdings Inc. (LEH) had a crippling effect on the global economy with the financial crisis escalating to other parts of the world. In the aftermath of this event, financial institutions froze lending activities thereby creating liquidity problems in the shadow banking financial system. The collapse of this institution could have been avoided were it not for reckless and questionable financial decisions made by management- characterized by failure to properly evaluate the creditworthiness of borrowers. This paper shall thus analyze what caused the failure and collapse of the Lehman Brothers, whether the failure could have been prevented and how this could have been achieved, lessons learnt from the whole experience and finally recommendations to avoid future financial crisis of the same nature.
Keywords: non bank financial institutions, subprime mortgages, bankruptcy, fraud
Suggested Citation: Suggested Citation