Lehman Brothers.
You've heard the name, although you may not know exactly what Lehman Brothers is.
Founded in 1850, Lehman brothers, an investment bank, quickly grew into a reputable firm. It survived the economic turmoil of the 20th century (i.e. The Great Depression) and eventually grew to become the fourth largest investment bank in the United States.
Surely nothing could ruin such a large investment bank, right?
Wrong.
The beginning of the demise of Lehman Brothers occurred during the housing boom of the early 2000s. Lehman Brothers, always willing to increase business, made the decision to receive mortgages from a number of new mortgage lenders - some of these lenders were dealing subprime mortgages, which if you'll recall, are quite risky due to the fact they belong to people who may not follow through on their housing payments.
This tactic was successful at first, as the firm generated record revenues for a few years after obtaining its new mortgage lenders, however once the trend of homeowners not following through on their mortgage payments began, things started to look pretty bad for Lehman Brothers, who, being an investment bank, used these tainted mortgages as securities - they gave out more of these securities to companies than any other investment bank.
Oops.
By the time the economic crisis was in full swing, it was too late for Lehman Brothers.
Their debt had reached $619 billion dollars; their bankruptcy was the largest in U.S. history.
How can we learn from the mistakes of Lehman Brothers?
www.flickr.com
Source:
www.investopedia.com "Case Study: The Collapse of Lehman Brothers"
- This recent article is featured on a reputable database for topics related to investing.
You've heard the name, although you may not know exactly what Lehman Brothers is.
Founded in 1850, Lehman brothers, an investment bank, quickly grew into a reputable firm. It survived the economic turmoil of the 20th century (i.e. The Great Depression) and eventually grew to become the fourth largest investment bank in the United States.
Surely nothing could ruin such a large investment bank, right?
Wrong.
The beginning of the demise of Lehman Brothers occurred during the housing boom of the early 2000s. Lehman Brothers, always willing to increase business, made the decision to receive mortgages from a number of new mortgage lenders - some of these lenders were dealing subprime mortgages, which if you'll recall, are quite risky due to the fact they belong to people who may not follow through on their housing payments.
This tactic was successful at first, as the firm generated record revenues for a few years after obtaining its new mortgage lenders, however once the trend of homeowners not following through on their mortgage payments began, things started to look pretty bad for Lehman Brothers, who, being an investment bank, used these tainted mortgages as securities - they gave out more of these securities to companies than any other investment bank.
Oops.
By the time the economic crisis was in full swing, it was too late for Lehman Brothers.
Their debt had reached $619 billion dollars; their bankruptcy was the largest in U.S. history.
How can we learn from the mistakes of Lehman Brothers?
www.flickr.com
Source:
www.investopedia.com "Case Study: The Collapse of Lehman Brothers"
- This recent article is featured on a reputable database for topics related to investing.
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