Corporate Obituaries: Lehman Brothers

Lehman Brothers, the venerable Wall Street investment bank, died in its home in New York on September 15, 2008. It was 158.

The direct cause of death was severe injury sustained during the subprime-mortgage crisis, though many believe the firm had a long history of illness, of which subprime was merely the fatal stage.

The firm specialized in investment banking, equity and fixed-income sales, trading, investment management, and private equity. It also specialized in embracing large positions in faulty mortgages, hemorrhaging money and laying off workers.

Lehman Brothers was born when Henry, Emanuel and Mayer Lehman opened a small dry-goods store in Montgomery, Alabama in 1850. It quickly became a leading cotton trader, and opened its first branch in New York City in 1858. After the Civil War, Lehman Brothers helped finance Alabama’s reconstruction, entered the emerging railroad business and began providing financial advice to clients.

Lehman Brothers officially became a member of the prestigious New York Stock Exchange  in 1887.

The firm helped bring to market some of America’s most reputable brands, including Sears(SHLD), Woolworth, Macy’s (M) and Endicott Johnson Corporation.

After the death of Robbie Lehman (the last Lehman to run the firm), economic turbulence plagued the firm; in 1973, Pete Peterson was brought on to save it. Under Peterson’s leadership, Lehman Brothers became the fourth largest investment bank in America.

In the 1990s, Lehman fell victim to a painful subprime-mortgage addiction. It wasn’t long before subprime’s fatal side effects began to eat away at Lehman Brothers, and in 2008 the firm recorded record losses. Lehman’s stock lost 73% of its value, and it was forced to write down billions of dollars.

Sensing that its demise was imminent, Lehman Brothers sought aid from the US government - and was roundly rejected. On September 15, 2008, Lehman Brothers finally succumbed: Citing a debt load of $768 billion, the firm filed for Chapter 11 bankruptcy protection.

The firm is survived by Barclays(BCS), which agreed to purchase Lehman’s North American investment-banking divisions, and Nomura Holdings, which agreed to purchase Lehman’s Asia Pacific operations.

The death of Lehman Brothers sent shockwaves worldwide, causing widespread panic. Its demise marked the single largest bankruptcy filing in the history of the United States, and global markets plunged accordingly.

Judge James Peck, who presided over the bankruptcy hearing, offered these words in epitaph:

"Lehman Brothers became a victim, in effect the only true icon to fall in a tsunami that has befallen the credit markets. This is the most momentous bankruptcy hearing I've ever sat through. It can never be deemed precedent for future cases. It's hard for me to [even] imagine a similar emergency."