The Collapse

The Collapse of Lehman Brothers and the Financial Crisis

Linda Torres

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Table of Content

Introduction………………………………………………………………………………… 3-4

Background History on the Lehman Brothers……………………………………………….4

Rationale…………………………………………………………………………………….5

Explanation…………………………………………………………………………………..6-7

Conclusion……………………………………………………………………………………7-8

References……………………………………………………………………………………8-9

Introduction

On September 15, 2015 will be the 7th year anniversary of the Lehman Brother’s bankruptcy. The Lehman Brother’s bankruptcy filing is known to be the largest in history with $639 billion in assets and $619 billion in debt according to the Case study in the Investopedia website. Their crisis was much worse than the previous bankrupt against big companies like WorldCom and Enron. Before its collapse, Lehman was known to be the fourth- largest U.S investment bank which consisted of 25,000 employees globally. The Collapse of the Lehman Brothers bankruptcy also made it the largest victim of the U.S subprime mortgage which was a financial crisis that affected global financial markets back in 2008. In October 2008, the market capitalization from global equity markets reached close to $10 trillion which just added more to the financial crisis during that time.

The Heritage website explains how experts have been arguing about how it was the government’s decision to not help this investment bank that sent the economy into the “great recession”. It is known though, that even though the Lehman Bankruptcy alerted investors of the problem in the market place, it was not the main reason of how this crisis happened. The real reason was the decision that the regulators made in helping Bear Steams a much smaller competing investment bank than the Lealman investment bank. As it is quoted on the Heritage website “The Bear Steams bailout set the expectation that Lehman would also be bailed out, setting up investors and creditors for a fall. At the very least, those...