On Sept. 15, 2008, Lehman Brothers, a venerable international financial firm, went bankrupt. Its collapse set off a chain of events that triggered a global financial crisis that is estimated to have caused more than $1.6 trillion in losses and cost millions of jobs. A year later, we are still assessing the lessons of the Lehman debacle. Incredibly, one year later, little if anything has been done to prevent another such collapse in the future.
Lehman Brothers was one of the oldest financial firms in the United States. Founded in 1850, during the 1980s it became the fourth-largest investment bank in the U.S. with the highest return on equity in the industry. From 1994 — when it went public — until 2007, the firm increased net revenues over 600 percent from $2.73 billion to $19.2 billion, and the number of employees increased from 8,500 to over 28,000. That history and track record were not enough to stave off disaster last year, when losses from its holdings of subprime mortgage loans forced it to sell assets at fire sale prices and start laying off employees.
Those steps were not enough to restore confidence in the firm. Its stock price plummeted and creditors began calling in loans. Unable to meet those demands, and finding no other party — in particular the U.S. government — willing to lend it a hand, Lehman Brothers filed for bankruptcy Sept. 15, 2008, the largest failure of an investment bank in nearly two decades.