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==Bankruptcy==
On Saturday September 13, 2008, Timothy F. Geithner, called a meeting on the future of Lehman, which included the possibility of an emergency liquidation of its assets.[19] Lehman reported that it had been in talks with Bank of America and Barclays for the company's possible sale. However, both Barclays and Bank of America ultimately declined to purchase the entire company.[20]
At its New York headquarters, shortly before 1 a.m. Lehman Brothers Holdings announced it would file for Chapter 11 bankruptcy protection citing bank debt of $613 billion, $155 billion in bond debt, and assets worth $639 billion.[21] It further announced that its subsidiaries would continue to operate as normal. A group of Wall Street firms agreed to provide capital and financial assistance for the bank's orderly liquidation and the Federal Reserve, in turn, agreed to a swap of lower-quality assets in exchange for loans and other assistance from the government.[22]
The morning of Monday, September 15 witnessed scenes of Lehman employees removing files, items with the company logo, and other belongings from the world headquarters at 745 Seventh Avenue. The spectacle continued throughout the day and into the following day.
Lehman Brothers Holdings Inc. declared bankruptcy September 15, 2008. The filing marked the largest bankruptcy in U.S. history with $613 billion dollars of debt.<ref>[http://www.marketwatch.com/news/story/story.aspx?guid=%7b2FE5AC05-597A-4E71-A2D5-9B9FCC290520%7d&siteid=rss "Lehman folds with record $613 billion debt"], Marketwatch. 09-15-2005. Retrieved 09-10-2009.</ref> Prior to its collapse, Lehman Brothers was the fourth largest and the oldest of the five major global financial-services firms. Their services included investment banking, equity and fixed-income sales, research and trading, investment management, private equity, and private banking. It was a primary dealer in the U.S. Treasury securities market. Its main subsidiaries included Lehman Brothers Inc., Neuberger Berman Inc., Aurora Loan Services, Inc., SIB Mortgage Corporation, Lehman Brothers Bank, FSB, Eagle Energy Partners, and the Crossroads Group. The firm's worldwide headquarters were in New York City, with regional headquarters in London and Tokyo, as well as offices located throughout the world.
Risk-taking has an important role in our economy. But federal regulators are supposed to ensure that these risks don’t become so large they can imperil our entire economy. They failed miserably. The regulators had a blind faith in the market and a belief that what was good for Mr. Fuld and other executives on Wall Street was good for America. We are now all paying a terrible price.
==Financial crisis and bank bailout==
Documents obtained by the Oversight and Government Reform Committee undermine Mr. Fuld’s contention that Lehman was overwhelmed by forces outside its control. One internal Lehman analysis reveals that Lehman “saw warning signs” but “did not move early/fast enough” and lacked “discipline about capital allocation.” [23]
Housing prices peaked in May 2006. After experiencing a staggering 96 nominal percent price increase during the six years before then (72 percent in real dollars), prices started a slow decline. By September 2008, when Lehman Brother declared bankruptcy, prices had already dropped 22 percent from the peak. Prices fell another 12 percent in the six months after Lehman collapsed. [9]
In addition to engaging in risky derivates trading, Lehman experienced unprecedented losses in the mortgage crisis. Lehman held on to large positions in subprime and other lower-rated mortgage tranches while securitizing the underlying mortgages leading to huge losses accrued in lower-rated mortgage-backed securities throughout 2008. In the second fiscal quarter, Lehman reported losses of $2.8 billion and was forced to sell off $6 billion in assets.[14] In the first half of 2008 alone, Lehman stock lost 73% of its value as the credit market continued to tighten.[14] In August 2008, Lehman reported that it intended to release 6% of its work force, 1,500 people, just ahead of its third-quarter-reporting deadline in September.[14]
By September 2008, the federal government had used hundreds of billions in taxpayer funds to try to blunt the impact of outsize financial blunders on Wall Street and at Fannie Mae, Freddie Mac and the American International Group (AIG). Lehman had pleaded with regulators for months to rescue it by purchasing hundreds of billions of dollars in distressed assets, but regulators refused. [16]
President of the Federal Reserve Bank of New York, Tim Geithner suggested the Federal Reserve did not step in because it did not have the legal authority to do so, because it was important to maintain “the line between the responsibilities and authorities of the fiscal authority, and those of the monetary authority.”[17]
Just before the collapse of Lehman Brothers, executives at Neuberger Berman sent e-mail memos suggesting, among other things, that the Lehman Brothers' top people forgo multi-million dollar bonuses to "send a strong message to both employees and investors that management is not shirking accountability for recent performance."<ref NAME="eighteen">[http://oversight.house.gov/story.asp?ID=2210 “Committee Holds Hearing on Causes and Effects of the Lehman Brothers Bankruptcy”], 10-06-2008. Retrieved 09-10-2009. </ref>
Lehman Brothers Investment Management Director, George H. Walker, President Bush’s cousin was responsible for overseeing Neuberger Berman. Here’s what he wrote to the executive committee: “Sorry team. I’m not sure what’s in the water at 605 Third Avenue today. .. I’m embarrassed and I apologize.” <ref NAME="eighteen" />
As Mr. Fuld was pleading with Secretary Paulson for a federal rescue, a request submitted to the compensation committee of the board on September 11, four days before Lehman filed for bankruptcy. It recommends that the board give three departing executives over $20 million in “special payments.” <ref>[http://www.speaker.gov/blog/?p=1537 “Oversight Hearing on Causes and Effects of the Lehman Brothers Bankruptcy”], The Gavel. 10-06-2008. Retrieved 09-10-2009. </ref>
==Allegations of short-selling tactics==
During hearings on the bankruptcy filing by Lehman Brothers and bailout of AIG before the House Committee on Oversight and Government Reform, former Lehman Brothers CEO Richard Fuld said a host of factors including a crisis of confidence and naked short selling attacks followed by false rumors contributed to both the collapse of Bear Stearns and Lehman Brothers. House committee Chairman Henry Waxman said the committee received thousands of pages of internal documents from Lehman and these documents portray a company in which there was “no accountability for failure".<ref>[http://oversight.house.gov/story.asp?ID=2210 “Committee Holds Hearing on Causes and Effects of the Lehman Brothers Bankruptcy”], 10-06-2008. Retrieved 09-10-2009. </ref>
==Fallout==
Immediately following the bankruptcy filing, an already distressed financial market began a period of extreme volatility, during which the Dow experienced its largest one day point loss, largest intra-day range (more than 1,000 points) and largest daily point gain.[25] What followed was what many have called the “perfect storm” of economic distress factors and eventually a $700 billion bailout package (Troubled Asset Relief Program) prepared by Henry Paulson, Secretary of the Treasury, and approved by Congress.
==Campaign Contributions==
As a Presidential candidate Barack Obama accepted campaign contributions totaling $395,600 from dozens of Lehman Brothers Executives, such as CEO Richard Fuld ($2,300), President Joseph Gregory ($4,600) and dozens of other top Lehman Executives. [15]
* Theodore Janulis – Bundler (over $50,000) & Lehman Brothers Head of Global Mortgages
* Francisco Borges – Bundler (over $50,000) and Chairman of Landmark Partners a private equity real estate firm.
* Nadja Fidelia – Bundler (over $50,000) & Managing Director of Lehman brothers
* John Rhea – Bundler & Co-head of Lehman Brothers Global Investment Banking
==Lobbying==
Since 2004, Lehman Brothers had consistently spent over $600K on lobbying efforts.
* Winchester, Judith A
==Personnel and political appointees==
* Chad Fulgham, CIO at the FBI under President Obama, former Senior Vice President at Lehman Brothers[7]
==Board of directors==
* Richard S. Fuld, Jr., Chairman and Chief Executive Officer[5]
* Michael L. Ainslie[5]
* John F. Akers[5]
* Roger S. Berlind[5]
* Thomas Cruikshank[5]
* Marsha Johnson Evans[5]
* Sir Christopher Gent[5]
* Roland A. Hernandez[5]
* Dr. Henry Kaufman[5]
* John D. Macomber[5]
==Former officers==
* Richard S. Fuld, Jr.
* Tom Russo
* Scott J. Freidheim
* Bart McDade
* Joe Gregory
* Ion Lowitt
* Jessie Bhattal
* Jeremy Isaacs
* Skip McGee
* George Walker
* Michael Gelband
==Coal investments==
*[[Thomas H. Cruikshank]], Former Chairman and Chief Executive Officer of [[Halliburton Company]]
*[[Christopher Gent]], Chairman of [[GlaxoSmithKline]]
==Related SourceWatch articles==
==References==
<references/>
==External resources==
===Books===
Auletta, Ken. Greed and Glory on Wall Street: The Fall of the House of Lehman. Random House, 1985
Bernhard, William, L., Birge, June Rossbach Bingham, Loeb, John L., Jr.. Lots of Lehmans - The Family of Mayer Lehman of Lehman Brothers, Remembered by His Descendants. Center For Jewish History, 2007
Birmingham, Stephen. Our Crowd - The Great Jewish Families of New York. Harper and Row, 1967.
Geisst, Charles R. The Last Partnerships. McGraw-Hill, 1997
Shirkhedkar, Jayant. Saving Lehman, One person at a time. McGraw-Hill, 2007
Lehman Brothers. A Centennial - Lehman Brothers 1850 - 1950. Spiral Press, 1950
Schack, Justin. (May 2005). "Restoring the House of Lehman". Institutional Investor, p. 24-32.
Wechsberg, Joseph. The Merchant Bankers. Pocket Books, 1968
==External articles==
*C. Bryson Hull and Andrew Quinn, "[http://corpwatch.org/article.php?id=2248 Enron Suit Targets Wall St. Firms]", ''Reuters/CorpWatch'', April 8, 2002.
*Eric Dash, "[http://www.corpwatch.org/article.php?id=13487 C.E.O. Pay Keeps Rising]", ''The New York Times/CorpWatch'', April 9, 2006.
==Quotes==
QUOTES
“First, our financial system has become dangerous on a gigantic scale. We knew that the banks were playing games — e.g., with their so-called off-balance sheet activities — but we previously had no idea that these huge corporations were so badly run or so close to potential collapse.
Second, we also learned the hard way — after many revelations — that pervasive mismanagement in our financial system was not a series of random accidents.
Rather it was the result of perverse incentives — bank executives felt competitive pressure to behave as they did and they were well-compensated on the basis of short-term performance. No one in the financial sector worries too much, if at all, about risks they create for society as a whole, despite the fact that these now prove to be enormous (i.e., jobs lost, incomes lowered and fiscal subsidies provided).
Third, weak government regulation undoubtedly made financial mismanagement possible. But poorly designed regulations and weak enforcement of even the sensible rules were in turn not a “mistake.” Rather they were the outcome of a political process through which regulators — and their superiors in the legislative and executive branches — were captured intellectually by the financial system.
People with power really believed that what was good for Wall Street was great for the country.
- Simon Johnson, the former chief economist at the International Monetary Fund, describing the three main lessons to be taken from the fall of Lehman Brothers[8]
"It's unconscionable what they did – or more accurately what they didn't do. They didn't do their homework. People were talking about the failure of Lehman Brothers from the moment of the failure of Bear Stearns in March, or before, and they didn't do a thing. If they knew there was systemic risk, why didn't they do anything about it?" - Joseph Stiglitz, Nobel prize-winning economist and professor at Columbia University[24]
[[Category:Banking industry]][[Category:Corporations]][[Category:United States]][[Category:Energy financing]][[Category: Real Economy Project]]
