Lehman Brothers was the first major U.S. investment bank to file for bankruptcy during the 2008 financial crisis.
Lehman Brothers filed for Chapter 11 bankruptcy protection on September 15, 2008. Its filing was the largest bankruptcy in U.S. history at that time, with hundreds of billions of dollars in assets. The bank had become heavily exposed to mortgage-related securities and real estate, and confidence in its balance sheet deteriorated as housing prices fell and credit losses mounted.
The bankruptcy intensified a crisis that had already damaged markets. Bear Stearns had been rescued through a JPMorgan Chase acquisition in March 2008, while the U.S. government had placed Fannie Mae and Freddie Mac into conservatorship shortly before Lehman’s collapse. Merrill Lynch agreed to be acquired by Bank of America on the same day.
Lehman’s failure froze credit markets and contributed to sharp worldwide stock-market declines. It is often called the sole cause of the crisis, but the broader turmoil also reflected risky mortgages, securitization, leverage, weak risk management, and a housing-market collapse.