Lehman Brothers’ September 2008 bankruptcy intensified the global financial crisis.
Lehman Brothers filed for Chapter 11 bankruptcy protection on September 15, 2008. It was the largest bankruptcy filing in U.S. history at that time. The firm had accumulated extensive exposure to mortgages and other complex securities as the U.S. housing market deteriorated. When confidence in its assets and ability to raise funding collapsed, it could not secure a rescue or buyer.
The failure shocked financial markets because Lehman was deeply connected to banks, funds, insurers, and trading partners worldwide. Interbank lending tightened, credit markets seized up, and stock markets fell sharply. The bankruptcy followed the rescue of Bear Stearns in March 2008 and came shortly before the U.S. government’s rescue of insurer AIG.
Lehman was not the sole cause of the crisis. Excessive leverage, weak mortgage underwriting, opaque derivatives, and inadequate risk management had built vulnerabilities throughout the financial system. Its collapse became the most recognizable symbol of the crisis’s transition from housing trouble to global financial panic.