In American history, there have been many financial crises and collapses of large financial corporations that have affected the economy of this country. One of the most recent and significant among them is the bankruptcy of Lehman Brothers - a bank that until then was considered one of the world leaders in the investment business and ranked fourth in the United States in this area. More details about the history of his success and bankruptcy will be discussed later.
Base
In 1844, Heinrich Lehmann emigrated from Germany to the United States. Here, in a small town in Alabama, he opened a grocery store. His clients were mainly local cotton traders. Things were going very well, so in the near future the young businessman accumulated enough funds to help his two younger brothers get to him. They helped him in business, and their company was then called Lehman Brothers. Often it was advantageous for customers to pay with them finished products. At the same time, when receiving cotton, the brothers underestimated its value, and later sold at market prices, earning twice on the same product. In 1855, Heinrich Lehman died, after which his brother Emanuel, who opened a branch in New York three years later, began to manage the enterprise. During the Civil War, the firm actively helped the southern states. After its completion, the established business ties helped the brothers organize the issue of Alabama bonds.
Commodity Exchange
In 1870, the New York Cotton Exchange was established. Lehman Brothers took a direct part in its foundation. The story of an investment bank earning fabulous profits began around this time. At that time, the sphere of interests of the enterprise included not only cotton, but also other profitable products, for example, oil and coffee. The company also invested in securities of companies that were just starting out. It should be noted that many of them exist today.
Success
In 1906, the company was headed by Philippe Lehman, in which more than one issue was organized for the largest corporations that traded in consumer goods. His son Robert in 1925 became the last representative of the dynasty at the head of the institution. The education received at Yale University along with the correctly prioritized activities helped him not only save Lehman Brothers from the crisis during the Depression, but also made him one of the largest financial institutions in the country. At the beginning of the twenties of the last century, the bank invested in the aviation industry, radio, film industry and retail chains. Under the control of Robert Lehman, the company reached the highest level of its development and became one of the most influential in the United States.
Background to the crisis
In 1969, Robert Lehman died. From that moment on, a power struggle erupted in Lehman Brothers. In 1975, the bank became the fourth investment financial institution in the country. Despite this, in the early eighties of the twentieth century, many bankers quit. The fact is that they could not do anything with exchange players who increased their premiums unilaterally. In 1984, American Express took advantage of the situation inside the bank, making Lehman Brothers a part of one of its subsidiaries. Ten years later, the company changed its policy and launched the process of public sale of shares. Thus, the bank again became independent, and its capitalization grew up to bankruptcy.
Crash
In early 2007, rumors began to circulate about the problems of the institution. His brokers began to issue arbitrary OTC contracts, offering to redeem interest on future mortgage bonds to everyone. It was a very risky game. She fully paid off while the mortgage market was booming. However, as soon as the situation changed, the owners of the contracts began to present their requirements to Lehman Brothers . The bank had neither funds nor securities to fulfill its obligations. As a result, in the first half of 2008, the company announced a loss of $ 2.8 billion. Moreover, lenders filed claims for compensation, the total amount of which amounted to 830 billion dollars. Proposals to resolve the situation through nationalization did not find support in the government. Thus, officials showed that the state does not intend to pay for the mistakes of top managers.
On September 15, 2008, the bank's management sent a petition to the court to declare it bankrupt. The liquid assets of a financial institution in the United States, Europe and the East were acquired by Barclays and Nomura Holdings.