Lehman Brothers was the bank whose September 15, 2008 bankruptcy became the largest bankruptcy filing in U.S. history and intensified the global stock-market crash.
Lehman had built a huge business around mortgage securities and other complex financial products. When U.S. house prices fell and subprime mortgage defaults rose, the firm’s assets lost value. Investors became increasingly doubtful that Lehman could meet its obligations or raise enough capital to survive.
The U.S. government and other institutions had helped arrange the sale of Bear Stearns earlier in 2008, but no buyer or rescue agreement was found for Lehman. Its collapse caused severe stress in credit markets and helped turn a housing and banking crisis into a worldwide financial crisis.
A common mix-up is that Lehman was not the only major institution affected. Merrill Lynch was acquired by Bank of America, while the insurance company American International Group received government assistance. Lehman’s bankruptcy is nevertheless widely regarded as the pivotal failure of the 2008 crash.