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{{#badges:CoalSwarm}}'''Lehman Brothers Holdings Inc.''' was one of the financial institutions involved in the U.S. financial crisis and bank bailout. In 2003, it was fined more than $80 million by the SEC as part of an investigation of the major investment firms.
==Background==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.<ref>[http://money.cnn.com/2008/09/29/markets/markets_newyork/index.htm “Approximately $1.2 trillion in market value is gone after the House rejects the $700 billion bank bailout plan.”], CNNMoney.com. 09-29-2008. Retrieved 09-10-2009. </ref> 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.
*In 1977, Lehman Brothers merged with [[Kuhn Loeb & Co.]]*In 1984, Lehman Brothers was acquired by [[American Express]] and merged with their retail brokerage Shearson, to form Shearson Lehman Brothers.*In 1993, the company was spun off by American Express and was once again called Lehman Brothers.*In 2001, the company's offices were destroyed when the World Trade Center in New York City came down, after which it moved its offices elsewhere in the city.==Financial crisis==
On Saturday September 13, 2008, Timothy F. Geithner, called During the housing bubble home prices rose a meeting on the future of Lehman, which included the possibility of an emergency liquidation of its assetsstaggering 96 nominal percent price increase over six years (72 percent in real dollars.[19] Lehman reported that it had been Prices peaked in talks with Bank of America May 2006 and Barclays for the company's possible salestarted a slow decline. HoweverMuch of this boom was funded with mortgages, both Barclays and Bank of America ultimately declined to purchase the entire company.[20]At its New York headquartersincluding subprime mortgages, shortly before 1 a.m. Lehman Brothers Holdings announced it would file for Chapter 11 bankruptcy protection citing bank debt of $613 billionquestionable quality that were financialized, $155 billion in bond aggregated into complicated financial instruments like collateralized debt, obligations (CDOs) and assets worth $639 billionsold as high-rated securities. The risk of these securities were supposedly balanced by the purchase of Credit Default Swaps (CDS) from companies like [[21AIG]] 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 However, many companies took unbalanced positions in turnthese securities and derivatives, agreed to a swap of lower-quality assets in exchange for loans and other assistance from the governmentbelieving that housing prices could not fall.[22]
The morning In addition to engaging in risky derivativee trading including CDSs, Lehman Brothers 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.<ref name="fourteen">[http://www.nytimes.com/2008/08/29/business/29wall.html?em "Struggling Lehman Plans to Lay Off 1,500"], NY Times. 08-28-2008. Retrieved 09-10-2009. </ref> In the first half of 2008 alone, Lehman stock lost 73% of its value as the credit market continued to tighten.<ref name="fourteen" /> In August 2008, Lehman reported that it intended to release 6% of Mondayits work force, 1, 500 people, just ahead of its third-quarter-reporting deadline in September.<ref name="fourteen" /> By September 15 witnessed scenes 2008, when Lehman Brothers declared bankruptcy, housing prices had already dropped 22 percent from the peak. Prices fell another 12 percent in the six months after Lehman collapsed. <ref>[http://economix.blogs.nytimes.com/2009/09/08/what-weve-learned-ugly-truths-about-housing/#more-29781 “What We’ve Learned: Ugly Truths About Housing”], NY Times. 09-08-2009. Retrieved 09-10-2009. </ref> The bankruptcy of Lehman employees removing filesBrothers, without a rescue from the government, created fear that the government would allow the financial sector to collapse. The stock market fell dramatically the next day. <blockquote>“First, our financial system has become dangerous on a gigantic scale. We knew that the banks were playing games — e.g., items 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 company logofact 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 other belongings 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.</blockquote>- 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<ref>[http://economix.blogs.nytimes.com/2009/09/10/what-weve-learned-the-beast-still-lives/ "What We’ve Learned: The Beast Still Lives”], NY Times. 09-10-2009. Retrieved 09-10-2009. </ref> <blockquote>"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 world headquarters 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?"</blockquote> - Joseph Stiglitz, Nobel prize-winning economist and professor at 745 Seventh AvenueColumbia University<ref>[http://www.independent. co.uk/news/business/analysis-and-features/crash-of-a-titan-the-inside-story-of-the-fall-of-lehman-brothers-1782714.html “Crash of a titan: The spectacle continued throughout inside story of the fall of Lehman Brothers”], The Independent. 09-07-2009. Retrieved 09-10-2009. </ref> ====Bailout refusal==== 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. <ref>[http://www.nytimes.com/2008/09/21/business/21exec.html?_r=1 “Death and Near-Death Experiences on Wall St.”], NY Times. 08-28-2008. Retrieved 09-10-2009. </ref> 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.”<ref>[http://www.newyorker.com/online/blogs/jamessurowiecki/2009/01/explaining-the.html “Explaining the decision to let Lehman fail”], New Yorker Magazine. 01-22-09. Retrieved 09-10-2009. </ref> Just before the collapse of Lehman Brothers, executives at Neuberger Berman sent e-mail memos suggesting, among other things, that the day 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 into Effects of the following dayLehman Brothers Bankruptcy”], 10-06-2008. Retrieved 09-10-2009.</ref>
The day after Lehman declared bankruptcyAs Mr. Fuld was pleading with Secretary Paulson for a federal rescue, a request submitted to the compensation committee of the British global financial services firm, Barclays plc, announced its agreement to purchase, subject to regulatory approvalboard on September 11, four days before Lehman's North American investment-banking and trading divisions along with its New York headquarters buildingfiled for bankruptcy. It recommends that the board give three departing executives over $20 million in “special payments.” <ref>[http://www.allbusinessspeaker.comgov/company-activities-managementblog/company-structures-ownership/12077973-1.html "Barclays acquires ?p=1537 “Oversight Hearing on Causes and Effects of the Lehman Brothers North American investment banking and capital market..."Bankruptcy”], LexisNexisThe Gavel. 0910-2606-2008. Retrieved 09-10-2009. </ref><ref>[http://news.bbc.co.uk/1/hi/business/7620306.stm "Barclays buys core Lehman assets"], BBC News. 09-17-2008. Retrieved 09-09-2009. </ref> On September 20, 2008, a revised version of that agreement was approved by Judge James Peck.<ref>[http://news.bbc.co.uk/1/hi/business/7626624.stm "Judge approves $1.3bn Lehman deal"], 09-20-2008. Retrieved 09-08-2009.</ref>
On September 22, 2008, Nomura Holdings announced that it had agreed to acquire Lehman Brothers' franchise in the Asia Pacific region, including Japan, Hong Kong and Australia.<ref>[http://www.nomuraholdings.com/news/nr/holdings/20080922/20080922.html "Nomura to acquire Lehman Brothers' Asia Pacific franchise"], Nomura Holdings, Inc. Press Release. 09-22-2008. Retrieved 09-09-2009</ref> The following day, Nomura announced its intention to acquire Lehman Brothers' investment banking and equities businesses in Europe and the Middle East. The deal became effective on Monday, 13 October.<ref>[http://www.nomuraholdings.com/news/nr/europe/20081006/20081006_a.html "Nomura to close acquisition of Lehman Brothers' Europe and Middle East investment banking and equities businesses on October 13"], 10-06-2008. Retrieved 09-09-2009. </ref> In 2007, non-U.S. subsidiaries of Lehman Brothers were responsible for over 50% of global revenue produced.<ref>[http://en.wikipedia.org/wiki/Lehman_Brothers "Lehman Brothers 2007 Annual Report"], Lehman Brothers Wikipedia. Retrieved 09-08-2009. </ref>====High leverage====
Lehman Brothers' Investment Management business, including Neuberger BermanLee A. Pickard, who had been Director of the SEC’s Division of Market Regulation when the 1975 12-1 rule was sold to its management on December 3ordered, 2008. Creditors said of Lehman Brothers Holdings Inc. retain a 49% common equity interest the change, "The SEC modification in 2004 is the primary reason for all of the firm, now known as Neuberger Investment Managementlosses that have occurred."<ref>Julie Satow, [http://www.nytimesnysun.com/2008business/12ex-sec-official-blames-agency-for-blow-up/0486130/business/04lehman.html “Managers Win Auction Ex-SEC Official Blames Agency for a Part Blow-Up of Lehman”Broker-Dealers], 12-03-NY Sun, September 18, 2008. Retrieved 09-10-October 9, 2009. </ref>
==Contribution Lehman Brothers was leveraged at 44-1 in 2007 when housing prices started to collapse.<ref>Alistair Osborne, Philip Aldrick and James Quinn, [http://www.telegraph.co.uk/finance/financetopics/financialcrisis/6179138/Lehman-collapse-the financial crisis==-drama-of-a-mad-48-hours-that-will-never-fade.html Lehman collapse: the drama of a mad 48 hours that will never fade], Telegraph UK, September 13, 2009. Retrieved October 16, 2009</ref>
In one document, a senior executive tells Mr. Fuld . . Risk-taking has an important role in our economy. But federal regulators are supposed to ensure that if the company these risks don’t become so large they can secure $5 billion imperil our entire economy. They failed miserably. The regulators had a blind faith in financing from Korea, “I like the idea of aggressively going into the market and spending 2 of the 5 in buying back lots of stock (a belief that what was good for Mr. Fuld and hurting Einhorn bad!!).” This action might have inflicted short-term losses other executives on a short seller Lehman despised, but it would have burned through even more capital. MrWall Street was good for America. Fuld’s response: “I agree with We are now all of itpaying a terrible price.”"</blockquote>
What’s fundamentally unfair about the collapse of ====Lehman is its impact on the economy and taxpayers. Mr. Fuld will do fine. He can walk away from Lehman a wealthy man who earned over $500 million. But taxpayers are left with a $700 billion bill to rescue Wall Street and an economy in crisis.bankruptcy====
Risk-taking has On Saturday September 13, 2008, Timothy F. Geithner, called a meeting on the future of Lehman, which included the possibility of an important role in our economyemergency liquidation of its assets.<ref>[http://www.nytimes.com/2008/09/13/business/13rescue.html “U.S. But federal regulators are supposed Gives Banks Urgent Warning to ensure that these risks don’t become so large they can imperil our entire economySolve Crisis”], 09-12-2008. They failed miserablyRetrieved 09-10-2009. The regulators </ref> Lehman reported that it had a blind faith been in the market talks with Bank of America and a belief that what was good Barclays for Mrthe company's possible sale. Fuld However, both Barclays and other executives on Wall Street was good for Bank of Americaultimately declined to purchase the entire company.<ref>[http://www.nytimes.com/2008/09/15/business/15lehman.html "Lehman Heads Toward Brink as Barclays Ends Talks"], NY Times. 09-15-2008. We are now all paying a terrible price Retrieved 09-10-2009.</ref>
==Financial crisis The morning of Monday, September 15 witnessed scenes of Lehman employees removing files, items with the company logo, and bank bailout==other belongings from the world headquarters at 745 Seventh Avenue. The spectacle continued throughout the day and into the following day.
Documents obtained by the Oversight and Government Reform Committee undermine Mr. Fuld’s contention that Lehman was overwhelmed by forces outside its control[[Image:LehmanFuld. One internal jpg|Richard Fuld of Lehman analysis reveals that Lehman “saw warning signs” but “did not move early/fast enough” and lacked “discipline about capital allocation.” [23|frame]]
Housing prices peaked in May 2006. After experiencing ==Coal investments==Lehman Brothers is a staggering 96 nominal percent price increase during the six years before then (72 percent in real dollars), prices started a slow declinemajor financier of new coal plant construction. By September 2008, when Lehman Brother declared bankruptcy, prices had already dropped 22 percent from New coal-fired power plants being funded by the peak. Prices fell another 12 percent in the six months after Lehman collapsed. [9] company include:
In addition to engaging in risky derivates trading*[[Stanton Energy Center]] (FL)*[[Ely Energy Center, 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 quarterPhase I]] (NV)*[[Ely Energy Center, Lehman reported losses of $Phase II]] (NV)*[[Great Bend IGCC]] (OH)*[[Red Rock Generating Facility]] (OK)*[[Marion City Project]] (SC)*[[Spruce Unit 2.8 billion and was forced to sell off $6 billion in assets.]] (TX)*[14[Big Brown 3]] (TX)*[[Lake Creek 3]] (TX)*[[Martin Lake 4]] In the first half of 2008 alone, Lehman stock lost 73% of its value as the credit market continued to tighten.(TX)*[[Monticello 4]] (TX)*[[Valley 4]] (TX)*[[14Wise County Plant] 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.] (VA)*[[14Mountaineer]](WV)
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] ==Political influence==
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] ===Campaign contributions===
Just before the collapse of Lehman Brothers, executives at Neuberger Berman sent eDecade-long campaign contribution total (1998-mail memos suggesting2008): $6, among other things704, 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."574<ref NAMEname="eighteenSold Out">[http://oversightwww.housewallstreetwatch.govorg/story.asp?ID=2210 “Committee Holds Hearing on Causes "Sold Out: How Wall Street and Effects of the Lehman Brothers Bankruptcy”Washington Betrayed America"], 10-06-2008. Retrieved 09-10-accessed October 2009. </ref>
Lehman Brothers Investment Management Director2008 Campaign contribution Total (Top 19 Recipients): $2, George H. Walker211, 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.” 761 <ref NAMEname="eighteenSold Out" />
As Mr2008 Top Recipients:<ref name="Sold Out"/><br>1. Fuld was pleading with Secretary Paulson for a federal rescueBarack Obama (D) $288, a request submitted to the compensation committee of the board on September 11538<br>2. Hillary Clinton (D) $227, four days before Lehman filed for bankruptcy150<br>3. It recommends that the board give three departing executives over Rudy Giuliani (R) $20 million in “special payments140,000<br>4.” John McCain (R) $116,907<refbr>[http://www5.speaker.gov/blog/?p=1537 “Oversight Hearing on Causes and Effects of the Lehman Brothers Bankruptcy”]Mitt Romney (R) $96, The Gavel. 10-06-2008. Retrieved 09-10-2009. 200</refbr>
==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[[Stephen M. Lessing]], former Lehman Brothers CEO Richard Fuld said a host of factors including a crisis of confidence Managing Director and naked short selling attacks followed by false rumors contributed to both the collapse now Head of Bear Stearns and Client Relationship Management at Lehman Brothers. House committee Chairman Henry Waxman said the committee received thousands of pages of internal documents from Lehman and these documents portray , is a company [[Bush's Rangers|Bush Ranger]] having raised at least $200,000 for [[George Walker Bush|Bush]] in which there was “no accountability for failure"the [[U.S. presidential election, 2004|2004 presidential election]].<ref>[http://oversightwww.housetpj.govorg/docs/pioneers/storypioneers_view.aspjsp?IDid=2210 “Committee Holds Hearing on Causes and Effects of the Lehman Brothers Bankruptcy”847 Bush Ranger Stephen M. Lessing], 10-06-2008. Retrieved 09-10-2009''Texans for Public Justice'', accessed August 2007. </ref>
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. ===Lobbying===
As a Presidential candidate Barack Obama accepted campaign contributions totaling 2008 Top Lobbying Expenditure Recipients:<ref name="Sold Out"/><br>1. Lehman Brothers $395590,600 from dozens of Lehman Brothers Executives000<br>2. O'Neill, such as CEO Richard Fuld (Athy & Casey $260,300)000<br>3. DLA Piper $70, President Joseph Gregory (000<br>Total: $4720,600) and dozens of other top Lehman Executives. [15]000<br>
* Theodore Janulis – Bundler (over The company spent $50920,000) for [[lobbying]] in 2006. In-house lobbyists were used along with the [[lobbying firms]] [[American Continental Group]], [[O'Neill, Athy & Lehman Brothers Head of Global Mortgages* Francisco Borges – Bundler (over $50Casey]],000) and Chairman of Landmark Partners a private equity real estate firm[[DLA Piper]].<ref>[http://www.opensecrets.org/lobbyists/clientsum.* Nadja Fidelia – Bundler (over $50,000) & Managing Director of asp?txtname=Lehman brothers* John Rhea – Bundler +Brothers& Co-head of year=2006 Lehman Brothers Global Investment Bankinglobbying expenses], ''Open Secrets'', accessed October 2007.</ref>
Since 2004, Lehman Brothers had consistently spent over $600K on lobbying efforts.* Winchester, Judith A===Revolving door influence===
==Personnel and political appointees==* Chad Fulgham, CIO at the FBI under President Obama, former Senior Vice President at Lehman Brothers<ref>[7http://news.idg.no/cw/art.cfm?id=A47CA017-1A64-67EA-E4E640E24D819A9B "Lehman Brothers, one year on”], IDG News Service. Retrieved 09-10-2009. </ref>
*[[Stanton Energy Center]] (FL)*[[Ely Energy Center, Phase I]] (NV)*[[Ely Energy Center, Phase II]] (NV)*[[Great Bend IGCC]] (OH)*[[Red Rock Generating Facility]] (OK)*[[Marion City Project]] (SC)*[[Spruce Unit 2]] (TX)*[[Big Brown 3]] (TX)*[[Lake Creek 3]] (TX)*[[Martin Lake 4]] (TX)*[[Monticello 4]] (TX)*[[Valley 4]] (TX)*[[Wise County Plant]] (VA)*[[Mountaineer]] (WV) ==Political contributionsBackground information==[[Stephen M. Lessing]], former Managing Director and now Head of Client Relationship Management at Lehman Brothers, is a [[Bush's Rangers|Bush Ranger]] having raised at least $200,000 for [[George Walker Bush|Bush]] in the [[U.S. presidential election, 2004|2004 presidential election]].<ref>[http://www.tpj.org/docs/pioneers/pioneers_view.jsp?id=847 Bush Ranger Stephen M. Lessing], ''Texans for Public Justice'', accessed August 2007.</ref>
*[[Stephen M. Lessing]], Head of Client Relationship Management<ref>[http://www.lehman.com/who/bios/#SML Senior Management], Lehman Brothers, accessed August 2007.</ref>==Articles and resources==
Selected board members:<ref>[http://www.lehman.com/who/bios/board_directors.htm Board of Directors], Lehman Brothers, accessed August 2007.</ref>*[[John F. Akers]], Former Chairman of [[IBM]]*[[Thomas H. Cruikshank]], Former Chairman and Chief Executive Officer of [[Halliburton Company]]*[[Christopher Gent]], Chairman of [[GlaxoSmithKline]] ===Related SourceWatch articles===
==Related SourceWatch articles==
==External articles==
==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* [http://www. They didn't do their homeworkcommondreams. People were talking about the failure of org/headline/2009/09/14-4 Lehman Brothers from the moment of Collapse: 12 Months on and the failure of Bear Stearns in March, or before, and they didnFinancial System Isn't do a thing. If they knew there was systemic riskFixed, why didn't they do anything about it?" - Joseph Warns Stiglitz], The Telegraph/UK, Sept. 14, Nobel prize-winning economist and professor at Columbia University[24]2009
tidy
Lehman Brothers Holdings Inc. provided financial services to corporations, governments, institutions, and wealthy individuals worldwide. It was based in New York City with regional headquarters in London and Tokyo.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.
==Bankruptcy=Role in the financial crisis===
Lehman Brothers Holdings IncInvestment Management Director, George H. declared bankruptcy September 15Walker, 2008President Bush’s cousin was responsible for overseeing Neuberger Berman. The filing marked Here’s what he wrote to the largest bankruptcy executive committee: “Sorry team. I’m not sure what’s in Uthe water at 605 Third Avenue today.S. history with $613 billion dollars of debt.I’m embarrassed and I apologize.” <ref>[http://www.marketwatch.com/news/story/story.aspx?guidNAME=%7b2FE5AC05-597A-4E71-A2D5-9B9FCC290520%7d&siteid=rss "Lehman folds with record $613 billion debteighteen"], 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.
In 1975, the SEC’s trading and markets division ruled that investment banks must maintain a debt-to-net capital ratio of less than 12 to 1. In 2004, following extensive lobbying by the investment banks, the SEC under chairman Christopher Cox authorized five investment banks to develop their own net capital requirements. This enabled investment banks to push borrowing ratios to as high as 40 to 1.<ref>Stephen Labaton, [http://www.nytimes.com/2008/10/03/business/03sec.html Agency’s ’04 Rule Let Banks Pile Up New Debt], NY Times, October 8, 2008 Japanese financial services company Nomura Holdings stepped in and acquired three Mumbai. Retrieved October 9, 2009</ref> These five investment banks were [[Goldman Sachs]], [[Morgan Stanley]], India based divisions of [[Lehman Brothers that provided back office ]], [[Bear Stearns]], and IT operations[[Merrill Lynch]]. Nomura also acquired This very high debt-to-reserves helped lead to the financial crisis of 2008 by weakening the Asia Pacific division ability of Lehman Brothers as these institutions to recover from losses incurred when the US banking giant was carved up by rivalsrisky CDO and CDS bets failed. <ref>Julie Satow, [http://newswww.idgnysun.nocom/business/ex-sec-official-blames-agency-for-blow-up/cw86130/art.cfm?id=A47CA017Ex-1A64SEC Official Blames Agency for Blow-67EAUp of Broker-E4E640E24D819A9B “Lehman BrothersDealers], NY Sun, one year on”]September 18, IDG News Service2008. Retrieved 09October 9, 2009</ref><ref>Ben Protess, [http://www.propublica.org/article/flawed-sec-program-10failed-to-rein-in-investment-banks-101 ‘Flawed’ SEC Program Failed to Rein in Investment Banks], ProPublica, October 1, 2008. Retrieved October 9, 2009. </ref>
Statement by Chairman Henry Waxman, Oversight and Government Reform Committee Chairman, October 6, 2008:
<blockquote>"In 2004, the Securities and Exchange Commission relaxed a rule limiting the amount of leverage that Lehman and other investment banks could use. As this Lehman chart shows, that proved to be a temptation the firm could not resist.
At first, Lehman’s bets paid out. As Mr. Fuld’s testimony recounts, Lehman achieved “four consecutive years of record-breaking financial results” between 2004 and 2007.
Mr. Fuld’s actions during this crisis were questionable. In a January 2008 presentation, he and the Lehman board were warned that the company’s “liquidity can disappear quite fast.” Yet despite this warning, Mr. Fuld depleted Lehman’s capital reserves by over $10 billion through year-end bonuses, stock buybacks, and dividend payments.
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.<ref>[http://www.ecommerce-journal.com/articles/12188_10_most_memorable_events_of_2008_according_to_the_ecommerce_journal “10 most memorable events of 2008”], Ecommerce Journal. 12-30-2008. Retrieved 09-10-2009. </ref> 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.<ref>[http://www.thestreet.com/story/10436608/lehman-brothers-what-you-need-to-know.html “Lehman Brothers: What You Need to Know”], TheStreet.com. 09-15-2008. Retrieved 09-10-2009. </ref>
Lehman Brothers gave $130,680 to federal candidates in the 2006 election through its [[political action committee]] - 38% to [[Democrats]], 57% to [[Republican Party (USA)|Republicans]], and 5% to other parties.<ref>[http://www.opensecrets.org/pacs/lookup2.asp?strID==Fallout==C00127670 2006 PAC Summary Data], ''Open Secrets'', accessed August 2007.</ref>
Decade-long lobbying expenditure total (1998-2008): $8,660,000<ref name==Campaign Contributions=="Sold Out"/>
====Lobbying on financial reform====
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 NAME="eighteen" /> 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.” <ref>[http://www.speaker.gov/blog/?p=Lobbying==1537 “Oversight Hearing on Causes and Effects of the Lehman Brothers Bankruptcy”], The Gavel. 10-06-2008. Retrieved 09-10-2009. </ref>
==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]Ties to financial regulators====
==Former officersProfits, bonuses and market value==* 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{{RealEconomyProject section stub}}
==Coal investmentsKey officers and personnel==Lehman Brothers is a major financier of new coal plant construction. New coal-fired power plants being funded by the company include:{{RealEconomyProject section stub}}
On September 22, 2008, Nomura Holdings announced that it had agreed to acquire Lehman Brothers gave $130,680 to federal candidates ' franchise in the 2006 election through its Asia Pacific region, including Japan, Hong Kong and Australia.<ref>[[political action committee]http://www.nomuraholdings.com/news/nr/holdings/20080922/20080922.html "Nomura to acquire Lehman Brothers' Asia Pacific franchise"] , Nomura Holdings, Inc. Press Release. 09-22-2008. Retrieved 09-09- 38% 2009</ref> The following day, Nomura announced its intention to acquire Lehman Brothers' investment banking and equities businesses in Europe and the Middle East. The deal became effective on Monday, 13 October.<ref>[[Democrats]http://www.nomuraholdings.com/news/nr/europe/20081006/20081006_a.html "Nomura to close acquisition of Lehman Brothers' Europe and Middle East investment banking and equities businesses on October 13"], 5710-06-2008. Retrieved 09-09-2009. </ref> In 2007, non-U.S. subsidiaries of Lehman Brothers were responsible for over 50% to of global revenue produced.<ref>[[Republican Party (USA)|Republicans]http://en.wikipedia.org/wiki/Lehman_Brothers "Lehman Brothers 2007 Annual Report"], Lehman Brothers Wikipedia. Retrieved 09-08-2009. </ref> In October 2008 Japanese financial services company Nomura Holdings stepped in and acquired three Mumbai, India based divisions of Lehman Brothers that provided back office and 5% to other partiesIT operations. Nomura also acquired the Asia Pacific division of Lehman Brothers as the US banking giant was carved up by rivals.<ref>[http://wwwnews.opensecretsidg.orgno/pacscw/lookup2art.aspcfm?strIDid=C00127670 2006 PAC Summary DataA47CA017-1A64-67EA-E4E640E24D819A9B “Lehman Brothers, one year on”], IDG News Service. Retrieved 09-10-2009. </ref> Lehman Brothers''Open Secrets''Investment Management business, including Neuberger Berman, was sold to its management on December 3, 2008. Creditors of Lehman Brothers Holdings Inc. retain a 49% common equity interest in the firm, now known as Neuberger Investment Management.<ref>[http://www.nytimes.com/2008/12/04/business/04lehman.html “Managers Win Auction for a Part of Lehman”], accessed August 200712-03-2008. Retrieved 09-10-2009.</ref>
==LobbyingContact==The company spent $920,000 for [[lobbying]] in 2006. In-house lobbyists were used along with the [[lobbying firms]] [[American Continental Group]], [[O'Neill, Athy & Casey]], and [[DLA Piper]].<ref>[http://www.opensecrets.org/lobbyists/clientsum.asp?txtname=Lehman+Brothers&year=2006 Lehman Brothers lobbying expenses], ''Open Secrets'', accessed October 2007.</ref>{{RealEconomyProject section stub}}
==PersonnelRelated campaigns==<table border="0"><tr> <td valign="top">Key executives and 2006 pay:<ref>[http://finance.yahoo.com/q/pr?s=LEH Lehman Brothers Key Executives], ''Yahoo Finance'', accessed October 2007.</ref></td> <td> </td> <td> </td> <td> </td> <td align="right">Options<br />exercised</td></tr><tr> <td>[[Richard S. Fuld, Jr.]], Chairman and Chief Executive Officer</td> <td> </td> <td align="right">$19,520,000</td> <td> </td> <td align="right">$31,940,000</td></tr><tr> <td>[[Joseph M. Gregory]], Chief Operating Officer</td> <td> </td> <td align="right">$15,410,000</td> <td> </td> <td align="right">$31,970,000</td></tr><tr> <td>[[Thomas A. Russo]], Chief Legal Officer</td> <td> </td> <td align="right">$9,750,000</td> <td> </td> <td align="right">$9,520,000</td></tr><tr> <td>[[Christopher M. O'Meara]], Chief Financial Officer</td> <td> </td> <td align="right">$2,500,000</td> <td> </td> <td align="right">$0</td></tr><tr> <td>[[David Goldfarb]], Executive Vice President</td> <td> </td> <td align="right">$9,020,000</td> <td> </td> <td align="right">$13,190,000</td></tr></table>
*[[banking]]
*[[Richard Holbrooke]] is a former Managing Director of Lehman Brothers *[[Ali Wambold]]
===References===
<references/>
===External resources=== * [http://www.docstoc.com/docs/4647166/Sold-Out---How-Wall-Street-and-Washington-Betrayed-America Sold Out - How Wall Street and Washington Betrayed America ], Consumer Education Foundation, March, 2009.
===Books===
Auletta, Ken. Greed and Glory on Wall Street: The Fall of the House of Lehman. Random House, 1985
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.
* Niall Ferguson, [http://www.ft.com/cms/s/0/f96f2134-a15b-11de-a88d-00144feabdc0.html Why a Lehman deal would not have saved us], Financial Times, September 14, 2009
[[Category:Banking industry]][[Category:Corporations]][[Category:United States]][[Category:Energy financing]][[Category: Real Economy Project]][[Category:Coal Issues]][[Category:Energy]]
