Lehman Brothers

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Definition: Lehman Brothers

Lehman Brothers

Full Definition of Lehman Brothers

Lehman Brothers Holdings Inc. was an international financial services firm headquartered in New York City that had blockbuster earnings, little to no debt and had the strength to gobble up several weak companies. The company mainly dealt in private equity, private banking, investment banking, investment management, equity and fixed-income sales, and trading and research. Lehman Brothers was a main dealer in the securities market of the US Treasury. Lehman Brothers Holdings Inc., an esteemed investment bank, which was counted among most successful firms and was considered influential in mergers and acquisition guidance, debt and equity support, and global finance.

Major Subsidiaries Of Lehman Brothers

Lehman Brothers Holdings Inc, an esteemed investment bank, which was counted among most successful firms and was considered influential in mergers and acquisition guidance, debt and equity support, and global finance. Here’s, a list of its subsidiary holdings-

  • Lehman Brothers Inc.
  • Lehman Brothers Bank
  • Aurora Loan Services, Inc.
  • SIB Mortgage Corporation
  • FSB
  • Crossroads Group
  • Neuberger Berman Inc.
  • Eagle Energy Partners

Failure Of Lehman Brothers

What went wrong with Lehman Brothers? Once a leader in financial services, Lehman Brothers Holdings Inc. filed for Chapter 11 bankruptcy on September 15, 2008. This was the biggest bankruptcy ever in the US and an indication of the dark future of the banking system. On September 16, Barclays plc agreed to buy the firm’s North American trading and investment banking arms as well as its building in New York City. The crumbling of one of Wall Street’s investment giants was an indication of great financial risk for the entire U.S. economy. The process of collapsing of the institution started as early as in the year 2007 when its stock value had a steady fall from $ 82 per share. The intensity of crisis increased during early 2008 as there was a worldwide currency crisis and so it defied expectations for the second time.

Lehman possessed relatively smaller balance sheets and was over depended on the mortgage market. They earned more from the “repo” or repurchase market, which are recognized as a short-term financing tool. In summer 2008, ups and downs were more frequent and the intensity of the fluctuations was also high. Losses were high and there was already news in the market that Lehman’s have incurred huge losses, which made recovery impossible for Lehman. Investors pressurized Lehman to come clean with the amount of loss, so on June 9, 2008, Lehman announced a second-quarter loss, which was $ 2.8 billion. Efforts to rise from this financial condition simply faltered and the situation grew worse. On September 8, the government took over Fannie Mae and Freddie Mac, still, stocks of Lehman dipped. On Sept 10, this financial giant decided on amalgamating remaining of its commercial real estate holdings into a new public company, so that an expected return of $3 billion can be generated. Sept 14th was the day when Lehman decided either to do or die as Treasury and Federal Reserve laid off their hands from providing any kind of financial support and Barclay’s and Bank of America had also shown clear intentions of not providing any help. Thus, it was the end of Lehman.

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Definition Sources

Definitions for Lehman Brothers are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 15th April, 2020 | 0 Views.