Lehman

Lehman Brothers was established in 1850 by two cotton brokers in Montgomery, Ala. The firm moved to New York City after the Civil War and grew into one of Wall Street’s investment giants. On Sept. 14, 2008, the investment bank declared that it would file for liquidation after huge losses in the mortgage market and a loss of investor confidence crippled it and it was unable to find a buyer. Its collapse brought global financial markets into a panic and brought credit markets worldwide to the edge of a meltdown. Within days, the Treasury Department and Federal Reserve as well as governments around the world embarked on what became multi-trillion dollar efforts to keep the financial system from collapsing. Wall Street’s remaining investment banks sold themselves to bigger entities or converted into bank holding companies to secure federal protection. Job losses soared as the recession that had begun in late 2007 turned into the steepest downturn since the Great Depression.

In the years that followed, the term a “Lehman moment’' entered the vocabulary of governments and investors as a shorthand for a financial event with explosive and unpredictable consequences, and the ghost of Lehman hovered over discussions of topics from regulatory reform in the United States to the handling of the Greek government’s debt.  Lehman’s leaders argued after its collapse that it could have survived if the firm had been given the kind of support used later to keep its competitors alive. But as more detail emerged about Lehman’s road to ruin, it became a symbol for the way debt, deception and self-delusion had created the biggest boom and bust cycle in nearly a century.

Lehman’s slow collapse began as the mortgage market crisis unfolded in the summer of 2007, when its stock began a steady fall from a peak of $82 a share. The doubts were based on the fact that the firm was a major player in the market for subprime and prime mortgages, and that as the smallest of the major Wall...