Lehman Brothers
Former American global investment bank whose 2008 bankruptcy became a defining event of the global financial crisis.
Last updated October 7, 2026
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Overview
Lehman Brothers was an American financial-services firm that evolved from a nineteenth-century cotton and commodities business into one of the world's largest investment banks. The enterprise began in Montgomery, Alabama, in 1850, when Henry Lehman was joined by his brothers Emanuel and Mayer. Its early commercial activity included selling goods to cotton producers and accepting raw cotton in payment, a business tied to the antebellum Southern economy and the forced labor system on which cotton production depended. After the Civil War, the firm expanded its cotton operations and moved its center of gravity to New York, where it became involved in securities, railroad finance, commodities exchanges, and corporate underwriting. During the twentieth century, Lehman increasingly operated as a house of issue and financial adviser. It helped bring a wide range of industrial, retail, transportation, communications, technology, and energy companies to public markets. Its underwriting history included companies such as General Cigar, Sears, Roebuck, F. W. Woolworth, Macy's, Studebaker, RCA, Halliburton, and Digital Equipment Corporation. The firm weathered the Great Depression in part by emphasizing venture-capital and corporate-finance activity while public-equity markets recovered. After Robert Lehman's death in 1969, no Lehman family member remained actively involved in management. The firm experienced financial and organizational strain in the early 1970s, leading to the recruitment of Peter G. Peterson. Under Peterson, it acquired Abraham & Co. and merged with Kuhn, Loeb & Co. in 1977. A subsequent internal struggle between investment bankers and traders helped produce a leadership change in the early 1980s. Shearson/American Express acquired Lehman in 1984, combining it with its securities businesses. American Express later divested its banking and brokerage activities, and Lehman was spun off as a public company in 1994. Richard S. Fuld Jr. became its chief executive and led the firm until its collapse. As an independent company, Lehman operated across investment banking, equity and fixed-income sales and trading, derivatives, research, investment management, private equity, private-client services, and private banking. It rebuilt its asset-management platform in the early 2000s through acquisitions including the Crossroads Group, Lincoln Capital Management's fixed-income business, and Neuberger Berman. At the same time, the firm expanded aggressively into mortgage origination and securitization. Its purchases of Aurora Loan Services and BNC Mortgage gave it substantial exposure to Alt-A and subprime lending. Mortgage-related assets, illiquid securities, commercial real estate, and high leverage left the balance sheet vulnerable when United States housing prices declined and credit markets froze. Lehman's difficulties intensified in 2007 and 2008 as mortgage losses undermined confidence, clients withdrew business, rating agencies downgraded or questioned its assets, and its share price fell sharply. On September 15, 2008, Lehman Brothers Holdings filed for Chapter 11 bankruptcy protection. The filing was the largest in United States history at that time and became a major accelerant of the worldwide financial crisis. Barclays acquired significant North American investment-banking and trading operations, while Nomura acquired important businesses in Asia-Pacific and later parts of Europe and the Middle East. The Lehman brand ceased to operate as an independent global investment bank, although bankruptcy estates, legal entities, and successor businesses continued to deal with its remaining obligations and assets.
History
Lehman Brothers was founded in 1850 in Montgomery, Alabama, by the Lehman brothers. Henry Lehman arrived in the United States from Bavaria and initially operated a dry-goods store. Emanuel and Mayer later joined him, and the partnership became Lehman Brothers. The firm accepted cotton from producers as payment for merchandise and developed a cotton-trading operation. This early business was inseparable from the Southern plantation economy and the widespread use of enslaved labor in cotton production. After Henry Lehman's death in 1855, Emanuel and Mayer continued the business. As cotton commerce shifted toward New York, Lehman opened a branch there in 1858. The firm survived the Civil War period, participated in postwar Southern reconstruction finance, and became involved in the creation of the New York Cotton Exchange. It also entered railroad-bond finance and financial advisory work. Membership in the Coffee Exchange and New York Stock Exchange followed, and the firm underwrote its first recorded public offering in 1899. The decisive transformation from commodities house to investment bank took place in the early twentieth century. Under Philip Lehman, the firm partnered with Goldman Sachs to take General Cigar public and subsequently helped finance or underwrite companies in retail, manufacturing, transport, communications, oil, and technology. During Robert Lehman's long leadership, the company continued its corporate-finance role and used venture-capital activity to navigate the market disruption of the Great Depression. Its transactions helped finance DuMont Laboratories, RCA, Halliburton, Kerr-McGee, and Digital Equipment Corporation, among others. Robert Lehman's death in 1969 ended direct family leadership. Economic pressure and internal difficulties led to the appointment of Peter Peterson in 1973. Peterson acquired Abraham & Co. and merged Lehman with Kuhn, Loeb & Co. in 1977. The resulting firm became a major United States investment bank, but tensions between investment bankers and securities traders intensified. Lewis Glucksman's rise to co-chief executive and then sole chief executive contributed to a management conflict that encouraged the sale of the firm. Shearson/American Express acquired Lehman in 1984. The combined businesses operated under the Shearson Lehman name and later incorporated E. F. Hutton. American Express began divesting its financial-services businesses in the early 1990s. In 1994, Lehman was spun off through a public offering as Lehman Brothers Holdings Inc., with Richard Fuld as chief executive. Under Fuld, the company expanded its global investment-banking, trading, private-client, investment-management, and private-equity operations. It navigated the Asian financial crisis and the 1998 collapse of Long-Term Capital Management, then rebuilt asset management through acquisitions. The firm's later strategy placed increasing weight on mortgage origination, securitization, and structured finance. Aurora Loan Services and BNC Mortgage gave Lehman access to Alt-A and subprime lending markets. Mortgage activity grew rapidly, and the company accumulated large positions in mortgage-backed and other less-liquid securities. Its balance sheet also carried significant commercial-real-estate exposure and was highly leveraged relative to its equity capital. When United States housing prices declined and mortgage defaults increased, the value and liquidity of Lehman's assets became difficult to establish. The company attempted to raise capital and reduce exposure, but market confidence continued to deteriorate. Clients and counterparties withdrew, the share price collapsed, and credit-rating concerns intensified. On September 15, 2008, Lehman Brothers Holdings filed for Chapter 11. The event caused immediate stress across global markets and is widely regarded as a pivotal escalation of the 2008 financial crisis. A court-appointed examiner later reported that executives had used accounting practices known as Repo 105 transactions to make quarter-end leverage appear lower, allegations that became central to criticism of Lehman's disclosures and governance. The operating franchise was subsequently divided. Barclays acquired substantial North American investment-banking and trading operations, while Nomura acquired major Asia-Pacific activities and later European and Middle Eastern businesses. Lehman therefore ceased to exist as an independent international investment bank, although its bankruptcy estate and related entities continued to manage claims, litigation, and asset distributions.
- 2008
Bankruptcy filing
[1]Lehman files for Chapter 11 protection on September 15, ending its independent operation as a global investment bank.
- 2003
Global research settlement
[1]Lehman agrees to regulatory penalties and structural reforms concerning analyst independence.
- 2000
BNC Mortgage acquisition
[1]The acquisition expands Lehman's exposure to subprime mortgage lending.
- 1997
Aurora Loan Services acquisition
[1]Lehman purchases Aurora, expanding into mortgage origination.
- 1994
Spin-off as a public company
[1]Lehman is separated from American Express and becomes Lehman Brothers Holdings Inc.
- 1984
Acquisition by Shearson/American Express
[1]Shearson/American Express acquires Lehman for $360 million.
- 1977
Merger with Kuhn, Loeb & Co.
[1]The merger creates Lehman Brothers, Kuhn, Loeb Inc., a leading United States investment bank.
- 1899
First recorded public offering
[1]Lehman underwrites the preferred and common stock offering of International Steam Pump Company.
- 1870
Involvement in the New York Cotton Exchange
[1]Lehman helps found the exchange, reinforcing its role in organized commodities markets.
- 1858
New York branch opens
[1]The firm opens a New York office as cotton trading shifts toward the city.
Products and positioning
Global bulge-bracket investment bank serving corporations, institutions, governments, and high-net-worth clients.
Advisory and underwriting
Investment banking
Lehman advised corporations and institutions on public offerings, mergers and acquisitions, capital raising, and other corporate-finance transactions. This business was central to the firm's evolution from a commodities partnership into a major securities house.
Sales and trading
Fixed-income and equity trading
The firm made markets and traded equities, government and corporate bonds, derivatives, and other securities. Fixed-income activity, including United States Treasury securities, was among its best-known institutional offerings.
Mortgage origination and securitization · 1997
Mortgage finance
Through Aurora Loan Services, BNC Mortgage, and related activities, Lehman originated and financed residential mortgages, including Alt-A and subprime loans. The business supplied assets for securitization and became a major source of exposure during the housing downturn.
Asset management · 2003
Investment management
Lehman's investment-management platform served institutional and private clients through fixed-income, equity, and alternative-investment capabilities. It was rebuilt in the early 2000s through acquisitions including Crossroads Group, Lincoln Capital Management's fixed-income unit, and Neuberger Berman.
Wealth management · 2001
Private-client services
The private-client business provided investment and advisory services to wealthy individuals and families. Lehman acquired Cowen & Co.'s private-client services business in 2001.
Alternative investments
Private equity
Lehman sponsored and managed private-equity investments as part of its broader investment-management division, alongside institutional asset-management and private-client activities.
Controversies
2010
Repo 105 accounting allegations
A court-appointed examiner reported that Lehman executives regularly used Repo 105 transactions around reporting dates to reduce the appearance of leverage. The findings became a major part of post-bankruptcy scrutiny of the firm's disclosures and governance.
2003
Research analyst conflicts settlement
Regulators alleged that investment-banking interests improperly influenced securities research. Lehman joined a multi-firm settlement that imposed an $80 million penalty and required reforms separating research from investment banking.
Brand decisions
2008
File for Chapter 11 bankruptcy protectionOtherBackground
Mortgage-related losses, illiquid assets, high leverage, declining confidence, client withdrawals, and falling market value left Lehman unable to secure a viable rescue.
Action taken
Lehman Brothers Holdings filed for Chapter 11 protection on September 15, 2008.
Aftermath
The filing triggered severe global-market stress. Barclays acquired substantial North American operations and Nomura acquired major Asia-Pacific, European, and Middle Eastern businesses.
Total assets before bankruptcy. Approximately $639 billion (May 2008)
- Barclays — Agreed to acquire significant North American investment-banking and trading operations.
- Nomura Holdings — Announced acquisitions of Lehman's Asia-Pacific franchise and later European and Middle Eastern operations.
2003
Rebuild the asset-management businessStrategyBackground
After having exited much of asset management in 1989, Lehman sought a broader and more diversified revenue base.
Action taken
The firm acquired Crossroads Group, Lincoln Capital Management's fixed-income division, and Neuberger Berman, alongside its private-client and private-equity activities.
Aftermath
The resulting Investment Management Division generated approximately $3.1 billion in net revenue according to the referenced account, although the broader firm remained heavily exposed to capital markets and mortgages.
Investment Management Division net revenue. Approximately $3.1 billion (After the 2003 expansion; exact reporting period not specified)
1994
Return to independent public ownershipStrategyBackground
American Express was divesting its banking and brokerage operations.
Action taken
Lehman was spun off through an initial public offering as Lehman Brothers Holdings Inc.
Aftermath
Richard Fuld led the independent company through global expansion, acquisitions, and ultimately the 2008 bankruptcy.
1984
Accept acquisition by Shearson/American ExpressM&ABackground
Internal conflict and difficult market conditions left Lehman under pressure to find a strategic solution.
Action taken
Lehman agreed to be acquired by Shearson/American Express for $360 million.
Aftermath
The firm operated within American Express until its eventual spin-off as an independent public company in 1994.
Acquisition consideration. $360 million (1984)
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