The Lehman Brothers Bankruptcy A: Overview

Yale Program on Financial Stability Case Study 2014-3A-V1

23 Pages Posted: 7 Apr 2015

See all articles by Rosalind Wiggins

Rosalind Wiggins

Yale Program on Financial Stability

Thomas Piontek

Government of the United States of America - Office of Financial Research

Andrew Metrick

Yale School of Management; National Bureau of Economic Research (NBER); Yale University - Yale Program on Financial Stability

Date Written: October 1, 2014

Abstract

On September 15, 2008, Lehman Brothers Holdings, Inc., the fourth-largest U.S. investment bank, sought Chapter 11 protection, initiating the largest bankruptcy proceeding in U.S. history. The demise of the 164-year old firm was a seminal event in the global financial crisis. Under the direction of its long-time Chief Executive Officer Richard Fuld, Lehman had been very successful pursuing a high-leverage, high-risk business model that required it to daily raise billions of dollars to fund its operations. Beginning in 2006, Lehman began to invest aggressively in real-estate-related assets and soon had significant exposures to housing and subprime mortgages, just as these markets began to sour. Lehman employed a cadre of accountants and risk professionals to continually monitor its balance sheet, key ratios, and risks. It undertook desperate and some questionable actions to stay alive. Nevertheless, Lehman ultimately failed because of an inability to finance itself. This overview case provides background information about Lehman’s business and key personnel and also the economic environment during 2006-2008. It may be utilized individually or in connection with any of the other seven YPFS Lehman case studies.  

Keywords: Systemic Risk, Financial Crises, Financial Regulation

JEL Classification: G01, G28

Suggested Citation

Wiggins, Rosalind and Piontek, Thomas and Metrick, Andrew, The Lehman Brothers Bankruptcy A: Overview (October 1, 2014). Yale Program on Financial Stability Case Study 2014-3A-V1. Available at SSRN: https://ssrn.com/abstract=2588531 or http://dx.doi.org/10.2139/ssrn.2588531

Rosalind Wiggins

Yale Program on Financial Stability ( email )

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

Thomas Piontek

Government of the United States of America - Office of Financial Research ( email )

717 14th Street, NW
Washington DC, DC 20005
United States

Andrew Metrick (Contact Author)

Yale School of Management ( email )

165 Whitney Avenue
New Haven, CT 06511
United States
(203)-432-3069 (Phone)

HOME PAGE: http://faculty.som.yale.edu/andrewmetrick/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yale University - Yale Program on Financial Stability

165 Whitney Avenue
P.O. Box 208200
New Haven, CT 06520-8200
United States

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