Lehman Brothers Case Study

Lehman Brothers Case Study

Abstract

As the fourth largest bank in 2007, the Lehman Brothers collapse in 2008 is the largest bankruptcy to date. Affecting consumers, administration and policy across many countries and industries. The greed and deception that lead to the company’s end will be the subject of many papers both legal and ethical for many years to come. A company that started as a hard working store managed by three brothers over 150 years prior ended in one of the worst financial downfalls in history.

This paper will attempt outline their humble beginnings, the irresponsible decisions and strategy that ended in their destruction.

History

Lehman Brothers started as a modest dry goods store in 1850 by three immigrant brothers from Bavaria, Germany. The store was originally started by the first brother that settled in Montgomery, Alabama in 1844. According to (Ryback 2010) “the brothers had ambitions to grow outside the local market and soon opened an office in New York. Lehman Brothers helped form the first commodities futures trading venture in the U.S. by opening the New York Cotton Exchange”. The company expanded into other commodities, this lead to larger markets and then into merchant banking.

The company enjoyed success and growth until 1969 when the last of the Lehman family left the firm. The company then merged and split with numerous Wall Street familiars. After the dust settled a new stock ticker “LEH” was created through public offering and the company became Lehman Brothers Holdings Incorporated, an investment bank holding company. The new CEO was Richard Fuld, which in Ryback’s opinion was very aggressive even by Wall Street standards. In the early 2000’s Fuld was approached by analysts with information indicating that the company could be profitable by investing in the real estate markets.

The following quotes seems to sum up how Lehman got into the real estate market; cited from an article by Horatio Boedihardjo, a...