Document Type
Case Study
Case Series
The Lehman Brothers Bankruptcy
JEL Codes
G01, G28
Abstract
When Lehman Brothers filed for bankruptcy on September 15, 2008, it was the largest such filing in U.S. history and a huge shock to the world’s financial markets, which were already stressed from the deflated housing bubble and questions about subprime mortgages. Lehman was the fourth-largest U.S. investment bank with assets of $639 billion and its operations spread across the globe. Lehman’s clients and counterparties began to disclose millions of dollars of potential losses as they accounted for their exposures. But the impact of Lehman’s demise was felt well beyond its counterparties. Concern regarding its real estate assets, its large derivative book, and its significant involvement with collateralized debt obligations (CDOs)—a new type of security that incorporated subprime mortgages—soon “infected” the shadow banking system, contributing to a retraction of wholesale funding and a severe liquidity crisis for many firms, including many with no direct links to Lehman. In this case, we explore the concept of “financial contagion” and how a sudden shock to one firm, such as Lehman, can lead to other firms and markets experiencing similar impacts that are not totally explained by direct linkages.
Recommended Citation
Wiggins, Rosalind Z. and Metrick, Andrew
(2019)
"The Lehman Brothers Bankruptcy H: The Global Contagion,"
Journal of Financial Crises: Vol. 1
:
Iss. 1, 172-199.
Available at:
https://elischolar.library.yale.edu/journal-of-financial-crises/vol1/iss1/9
Date Revised
2019-03-20
Included in
Banking and Finance Law Commons, Corporate Finance Commons, Economic History Commons, Economic Policy Commons, Policy Design, Analysis, and Evaluation Commons, Policy History, Theory, and Methods Commons