Lehman Brothers’ September 2008 bankruptcy became a defining trigger of the global financial crisis and stock-market plunge.
Lehman Brothers filed for Chapter 11 bankruptcy protection on September 15, 2008. At the time, it was the largest bankruptcy filing in U.S. history. The firm had accumulated heavy exposure to mortgage-related assets and was unable to restore confidence or secure a rescue transaction.
Its failure intensified fear throughout global financial markets. Banks became reluctant to lend to one another, credit markets froze, and stock indexes dropped sharply. The collapse followed the earlier rescue of Bear Stearns and preceded the emergency rescue of American International Group.
Lehman was an investment bank, not a commercial bank like Washington Mutual. Its failure also differed from the government-supported sale of Merrill Lynch to Bank of America. The bankruptcy did not single-handedly cause the entire crisis; years of housing-market excess, complex securities, leverage, and weak risk controls had already created severe vulnerabilities.