LEHMAN BROTHERS : The Rise and Fall of Investment Giant

Lehman Brothers, world's topmost investment bank that dates back to 1850 (even prior to the civil war) now dissapeared. It survived two World War , the Great Depression of 1929 and all other financial problems that arises in its 158 year old history, but this ongoing financial crisis break its beakbone. On September 15,2008, it filed for Chapter 11 Bankruptcy Protection. Before talking furthur about its collapse , let us take a look on Lehman's 158 year old history.

• Established in 1850, by Henry Lehman, Emanuel Lehman and Mayer Lehman. They named their business as Lehman Bros.
• They started their business with commodity trading. The main attraction was cotton crop. Cotton had a high market value and seeing a market for this, the 3 brothers started to accept payment in cotton for goods and also created a secondary market for trading in cotton.   Soon, they become the broker for buying and selling of the crop. In 1958, they opened their office in New York City.
• Then in 1862,  period of Civil war came which disrupted its business. Lehman Bros. joined hands with cotton merchant John Durr. From that moment Lehman Bros. became Lehman,Durr Co.
• After Civil War, they start dealing in railroad bonds and also they started the financial Advisory Business. Soon Lehman became a member of NYSE.
• Between 1900-1909, Lehman Bro. acts as a founder financier of emerging retailers including Sears, Roebuck & Company, Gimbel Brothers Inc. and R.H.Macy & Company. Along with these retailers Lehman Help in settling down of many film studios like RKO, Paramount and 20th Century FOX. They were the pioneers in arranging loans between Blue chips borrowers and private Leaders.
• Between 1940-1949, Lehman Bros. became an important financial advisor as unprecedented era of prosperity ignited.
• Between 1950-59, it start-up financing, IPO underwriting.
• Between 1960-79, it started working with leading players such as IBM, DECand Coral.It also acquired Abraham and Co. in 1975.
• In 1984, American Express acquired Lehman Brother and merged the firm with Shearson.
• In 1993, American Exp. divested Shearson and the independent firm once again became known solely as Lehman Brothers.
• In 2000, Lehman Brothers celebrated its 150th year anniversery. It joined the S&P 100 Index and its stock price hit $100 for the first time.
• In 2001, it bring its first IPO.
• In 2002, it moved to its new Global headquarter in Midtown Manhatten.
• In 2005, it opens office in Mumbai ( Financial Capital of India, Asia).

And then America's fourth largest Investment BAnk filed the biggest bankruptcy petition known to mankind. A bank who never reported any quaterly loss even once in its 158 year old history collapsed.The bankruptcy was of the size of $639 billion.

The main reason of this collapse is the Sub-prime mortgage crisis. Lehman Brothers knuckle down to subprime crisis. A huge loss of $60 billion forced Lehman to file for bankruptcy. According to many people this was the outcome of excessive greed and pride of Lehman's CEO Richard Fuld. Seeing this condition of Lehman Brothers other banks start refusing to do any business with Lehman. They didnot feel comfortable with Lehman's complex and opaque way of trading.

Due to rise in ROI ( rate of interest) in America, borrowers were unable to repay loans, it worsened the financial condition of Lehman Brother. Due to this Lehman Brother faced a huge loss which forced them to shut down all its business.

Barclay and Bank of America tried to take over Lehamn Brothers. Now the main question arisis  why Barclay want to buy Lehman when other banks are running away from Lehman. According to barclay they actually want to buy the firm at cheap price and re-run it when the favourable conditions will come. Because Barclay knows that the main cause was the greed of Lehman's CEO and only subprime is not responsible for its fall. According to Wall Street it will make the recession in America more worse.