Four years ago, on Sept. 15, 2008 an investment bank brought the world economy to its knees with the biggest bankruptcy filing in U.S. history
Early in the day on Monday Sept. 15, 2008, Lehman Brothers Holdings filed for Chapter 11 bankruptcy protection. With more than $600-billion (U.S.) in assets, Lehman’s was the largest filing in U.S. history. Minutes later, Merrill Lynch, desperate to avoid Lehman's fate, confirmed that it would sell to Bank of America for about $44-billion (U.S.) in stock, or roughly half what the firm was worth in early 2007.
Photo: An employee walks out of the Lehman Brothers building carrying a box of his belongings in New York.
A worker carries a box as she walks away from Lehman Brothers’ office in London’s Canary Wharf financial district on Sept. 15, 2008.
Steve Goldstein, a former Lehman employee who was laid off in 1993 signs a painting with the likeness of the firm's CEO Richard Fuld in front of Lehman Brothers’ New York headquarters, on Sept. 15, 2008.
A journalist reports outside Lehman Brothers’ building in New York on Sept. 15, 2008.
Traders react in the S&P 500 pit at the Chicago Mercantile Exchange where markets plunged on the news.
As oil prices plunged, Toronto’s TSX lost 4 per cent following Lehman’s collapse on Monday.
On Tuesday Sept. 16, stocks in Hong Kong fell 5.4 per cent and 4.5 per cent in Shanghai, even though China's central bank cut interest rates for the first time in six years. In India, the market fell for the eighth day in nine, bringing losses for the year to 33.3 per cent.
A trader reacts as he stands in front of the DAX board at the Frankfurt stock exchange September 16, 2008.
Investor concerns turned next to insurer American International Group, after a plunge in that company's stock and downgrades to its debt by credit ratings agencies who say the slumping housing market could further undermine its finances.
On Tuesday the U.S. government announced an $85-billion emergency loan to rescue AIG, saying a disorderly failure of the company could further disrupt already delicate financial markets and the economy.
Surrounded by protesters, Richard Fuld, Chairman and CEO of Lehman Brothers testified at a House Oversight and Government Reform Committee hearing on the causes and effects of his company’s bankruptcy on Capitol Hill in Washington on Oct. 6, 2008. Mr. Fuld told Congress U.S. banking regulators knew exactly how Lehman was pricing its distressed assets and about its liquidity.
"I take full responsibility for the decisions that I made and for the actions that I took, based on the information that we had at the time," he said. "Nobody, including me, anticipated how the problems that started in the mortgage markets would spread to our credit markets and banking system and now threaten our entire financial system and our country."
He said the firm had lobbied regulators to allow it to convert into a deposit-taking institution, in hopes of staving off a collapse that could ripple through the financial system. That request was denied, yet the government later approved a similar measure to help two other investment banks, Goldman Sachs Group Inc. and Morgan Stanley.
Likewise, Mr. Fuld noted that the Federal Reserve didn't ease lending restrictions until it was too late, and questioned why other troubled financial entities, like Bear Stearns Cos. Inc., insurer American International Group Inc., and the mortgage giants Fannie Mae and Freddie Mac, received assistance from Washington. "Until the day they put me in the ground, I will wonder," he told the committee.