US Financial Crisis: The Fall of Lehman Brothers



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Code : ECC0019

Year :
2008

Industry : Banking, Insurance and Financial Services

Region : US

Teaching Note: Available

Structured Assignment : Available

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Abstract: Brothers collapse was probably the darkest hour of US financial crisis (2008). Other companies engulfed in the crisis were still allowed to carry on their business with a bailout mask. Many CEOs, analysts, industry experts and observers questioned vehemently why was Lehman Brothers let go? The mighty investment bank, which weathered many storms, surrendered like a lame duck and quit the business in a week's time when it was caught in the financial crisis in mid-2008. After the strenuous efforts, the firm put through the 158 years from its origin as a small dry-goods store to become the fourth-largest investment bank in US, Lehman Brothers was choked to death by losses on financial derivatives. The case study focuses on the involvement of Lehman Brothers in the subprime mortgage business. It exposes the mistakes committed by the investment bank and following repercussions that led the firm to its final demise. The case also explores various reasons behind the fall of Lehman Brothers and helps understand strategies that might sometime produce negative effects.

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Pedagogical Objectives:

  • To analyse the factors that enticed Lehman Brothers to enter into the subprime mortgage business and ultimately into the US financial crisis
  • To understand strategies adopted by Lehman Brothers during deteriorating mortgage market conditions
  • To analyse the factors that led to the bankruptcy of the Lehman Brothers
  • To debate on whether Lehman Brothers should have been bailed out rather than allowing it to collapse.

    Keywords : Financial Crisis, Subprime Mortgage Busines, Investment Banking, Mortgage Backed Securities (MBS), Lehman Brothers, Credit Default Swaps (CDS), Collateral Debt Obligations (CDOs), Aurora Loan Services, Asset Management, Capital Management, Home loans, Risk Management, Alternative-A Loans, BNC Mortgage, Subprime Mortgage Crisis

    Contents :
    Company Background
    Lehman's Involvement in Subprime Mortgage Lending Business
    Deteriorating Market Conditions
    Final Struggle for Existence


    Case Introduction >>


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