Amanda BockProfessor LakeAccounting 26009 October 2017The Collapse of Lehman BrothersCase StudyIntroductionLehman Brothers Holdings, Incorporated filed for Chapter 11 Bankruptcy on September 15, 2008. This would be the largest filing for Chapter 11 Bankruptcy protection in the history of the United States. Lehman Brothers was a hugely successful investment bank that had been in business for 164 years. This catastrophic event foreshadowed the events to come with the global financial crisis. With some questionable accounting techniques and even more so questionable investments in real-estate, Lehman Brothers knew their demise was close. Their history and image of being one of the most successful investments banks was one they wanted to protect, and to do so Lehman had to bury their moral compass and employ tactics that ultimately helped dig their own grave. This case study will go over a brief history of Lehman Brothers, the road to collapse, ethical questions and an overview of Lehman’s contribution to the collapse of the global market as a result of their actions.History of Lehman BrothersLehman Brothers Holdings, Incorporated had very humble beginning that started in 1844. HenryLehman who came from Germany started a general store in Montgomery, Alabama to sell goodsto the cotton farmers. In 1850, Henry Lehman’s brother, Emanuel and Mayer, joined the business and this is when and where the name Lehman Brothers originated. This small shop became a commodities broker, buying and selling cotton. An office in New York was opened in the late 1850’s and about a decade later Lehman formed the New York Cotton Exchange. In 1887, a pivotal moment in the history of the company occurred- they became a member of the New York Stock Exchange. “In the early 1900s, Lehman Brothers developed its banking practice by helping to intermediate funding for the emerging group of retail, industrial, and transportation giants that were foundedduring the period”[ CITATION Wig14 \l 1033 ]. Robert Lehman, who was the last of the Lehman family to work at the firm, helped build Lehman Brothers to what it became in our time- a huge investment bank that assisted in underwriting securities for local and national entities. Peter G. Peterson, the former chief executive officer of Bell and Howell, became the new leader of Lehman Brothers for a period of time. Investment banking and the financial service industry in general suffered as businesses began to not rely not so much on the long-term relationships they had created with an investment firm, but rather a reliance on their own internal financial employees. In 1983, Lewis L. Glucksman was hired on as a co-CEO but quickly pushed Peterson out and very quickly decided to retire. After this, the firm was sold to American Express after
weakening profits and the continuing loss of clients/partners. This was short lived though as American Express decided Lehman Brothers was not for them and Lehman Brothers became a new firm again under the direction of Richard Fuld in 1994.
- Fall '14
- Lehman Brothers, Lehman Brothers Holdings