Lehman Brothers’ September 2008 bankruptcy became the most prominent trigger of the global financial crisis.
Lehman Brothers filed for Chapter 11 bankruptcy protection on September 15, 2008, after suffering enormous losses tied to mortgage-related securities and a collapse in confidence. With more than $600 billion in assets listed in the filing, it became the largest bankruptcy in U.S. history at that time. The failure shocked markets because Lehman was a major global investment bank with extensive connections to other institutions.
The bankruptcy did not single-handedly cause the financial crisis. Earlier failures and rescues, including the collapse of Bear Stearns and the government takeover of Fannie Mae and Freddie Mac, had already revealed severe stress. However, Lehman’s failure sharply increased fears about counterparty risk and credit markets. Merrill Lynch was acquired by Bank of America, while Washington Mutual failed later in September; these separate events are often incorrectly blended with Lehman’s bankruptcy.