Lehman Brothers Holdings Inc. succumbs to the largest bankruptcy filing in history
Lehman Brothers Holdings Inc. was forced to file a Chapter 11 petition with U.S. Bankruptcy Court on Monday. The New York-based firm, once the fourth-largest investment bank in the United States, joins Merrill Lynch & Co., Bear Stearns Cos., and more than ten other banks that couldn't survive this year's mortgage crisis.
The firm listed more than $613 billion of debt and lost 94% of its market value this year. Lehman owes its 10 largest unsecured creditors more than $157-billion, including debts to bondholders totaling $155-billion. The filing is by Lehman's holding company and won't include any of its subsidiaries.
Historical Events survived by Lehman Brothers Holdings
Lehman Brothers is a 158-year-old firm that has survived many difficult times.
• survived railroad bankruptcies of the 1800s
• the Great Depression in the 1930s and
• the collapse of Long-Term Capital Management a decade ago
Do you think there will be a domino effect? Possibly from individuals or firms that relied on their financing?
Talks of Takeover
There was talk of a takeover but those ideas were discarded. For three days leading up to the filing, the Federal Reserve and Treasury negotiated with Wall Street execs, trying to strike an agreement that would prevent Lehman Brothers Holdings from going down before markets opened on Monday. Treasury Secretary Henry Paulson indicated that he did not want to use taxpayer funds to simplify the sale of the company. Treasury and the Fed have determined that markets have adjusted to the Bear Stearns situation.
If every time a big institution goes under and the markets expect the government to step in, would anyone ever adapt? Give us your thoughts!
In hindsight, Lehmans needed capital to survive and it might have gained a lifeline by selling itself or stripping its fund management. The direct effect of the bankruptcy has been immediate falls in global stock markets, especially in bank stocks and a shift towards safer assets such as gold. The long term effects are unclear. Feel free to call or email me at email@example.com
Michele “MAC” Cole