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Lehman: Four years later, a look back at the collapse of a banking giant Add to ...

Before Lehman Brothers Holdings Inc. collapsed in September of 2008, cracks in the U.S. economy were beginning to form, first in the housing market and then in the financial sector. As early as April, 2007, mortgage companies started to fail, raising fears of widespread defaults on subprime mortgages. Just months later, in August, more companies were failing and credit markets were freezing. Federal Reserve chairman Ben Bernanke admitted the crisis had "potential consequences for the performance of the overall economy," but warned that it was not the Fed's responsibility to bail out banks affected by the crisis. By March, 2008, the Fed was riding to the rescue of Bear Stearns Cos. Inc. with an emergency funding deal to keep Wall Street's fifth-largest investment bank from collapsing. Two days later, rival JPMorgan Chase & Co. absorbed the bank for $2 a share.

 

In early September, the U.S. government took control of Fannie Mae and Freddie Mac, lenders that owned or guaranteed more than $5-trillion in mortgages. It was a move aimed at stabilizing the housing market and calming stock markets. One week later, with two of Wall Street's biggest banks on the line, the situation was about to become a full-blown crisis.

 

Use this interactive timeline to see how the collapse of Lehman Brothers was the catalyst for a financial crisis from which the global economy is still trying to recover.


With files from AP, Globe and Mail archives

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