Lehmen Brothers Financial Turmoil

Lehman Brothers was founded in 1850 by two cotton brokers in Montgomery, Ala. The firm moved to New York City after the Civil War and grew into one of Wall Street's investment giants, despite period brushes with death. On Sept. 14, 2008, the investment bank announced that it would file for liquidation after huge losses in the mortgage market and a loss of investor confidence crippled it and it was unable to find a buyer.

Lehman's slow collapse began as the mortgage market crisis unfolded in the summer of 2007, when its stock began a steady fall from a peak of $82 a share. The fears were based on the fact that the firm was a major player in the market for subprime and prime mortgages, and that as the smallest of the major Wall Street firms, it faced a larger risk that large losses could be fatal.
As the crisis deepened in 2007 and early 2008, the storied investment bank defied expectations more than once, just it had many times before, as in 1998, when it seemed to teeter after a worldwide currency crisis, only to rebound strongly.

Lehman managed to avoid the fate of Bear Stearns, the other of Wall Street's small fry, which was bought by JP Morgan Chase at a bargain basement price under the threat of bankruptcy. Lehman and Bear Stearns had a number of similarities. Both had relatively small balance sheets, they were heavily dependent on the mortgage market, and they relied heavily on the “repo” or repurchase market, most often used as a short-term financing tool.

But by the summer of 2008 the rollercoaster ride started to have more downs than ups. A series of writeoffs was accompanied by new offerings to seek capital to bolster its finances.

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A man walks out of Lehman Brothers building carrying a box of his belongings in New York. Lehman Brothers filed for bankruptcy after trying to finance too many risky assets with too little capital.

Trading specialists work at the New York Stock Exchange. Wall Street had its worst day since markets reopened after the September 11 attacks.

Pedestrians walk past the Lehman Brothers building in New York. Lehman Brothers filed for bankruptcy after trying to finance too many risky assets with too little capital.

Traders react in the S&P 500 pit at the Chicago Mercantile Exchange. Global markets plummeted after investment bank Lehman Brothers filed for bankruptcy protection.

The sign for Lehman Brothers headquarters is seen in New York. Treasury Secretary Henry Paulson said that the US banking system is 'safe and sound' despite growing financial turmoil (AFP)

Tony Lomas (C) and his colleagues Dan Schwarzmann (R), and Steve Pearson of Price Waterhouse Coopers, auditors for Lehman Brothers pose during a news conference at Lehman Brothers in London.

Lehman Brothers Holdings Inc employee Jennifer Roeder writes a message on a portrait of Lehman Brothers Chief Executive Dick Fuld's in New York.

Robin Radaetz holds a sign in front of the Lehman Brothers headquarters in New York. Lehman Brothers, a 158-year-old investment bank choked by the credit crisis, filed for bankruptcy protection.