Lehman Brothers

Geschichteab 9 J.

The investment bank whose collapse on 15 September 2008 triggered the global financial crisis. 158 years old, more than $600 billion in assets – worthless overnight. The biggest corporate bankruptcy in history.

The collapse of Lehman Brothers on 15 September 2008 was the trigger for the worst financial crisis since 1929.

What happened:

• Founded in 1850: a 158-year-old investment bank, one of the most prestigious on Wall Street
• The problem: Lehman had invested billions in "toxic" mortgage securities (subprime loans)
• When the housing bubble burst: these securities became worthless
• 15 September 2008: Lehman files for bankruptcy – 639 billion dollars of debt (the largest corporate bankruptcy in history)

The consequences:

• Worldwide financial panic – banks no longer trusted each other
• Credit markets froze ("credit crunch")
• Stock markets worldwide plunged (−40% to −55%)
• Governments rescued banks with trillions in taxpayers' money
• Germany: GDP fell by 5.7% in 2009, short-time work for millions

The lesson: "too big to fail" became a catchphrase. Since then, systemically important banks have been regulated more strictly (Basel III).

Did you know? The US government deliberately decided NOT to rescue Lehman – as a signal that not every bank would be saved. The consequences were more devastating than expected. Since then the rule has been: no big bank may collapse uncontrolled again.

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