Lehmancase

_______ProfessodevelopeffectiveCopyrigwriteHaphotocoTOMNDAVIDLehFophenommaintafaithinfromgInhadaburstiforeclamonofthemajortheenMorgfinanccrisisItprobleS.Ful2008.trytoFuldeasierPresidFuldtforvaInthatidown_______________orTomNicholasanpedsolelyasthebaeorineffectivemanght©2010PresidenarvardBusinessScopied,orotherwiseNICHOLASCHENhmanBronehundremenalgrowthainsthestandanthefutureofgenerationtog2008,theU.Sallowedforaingofthebublosure.InaccungthefactorseimpendingirinvestmentsndforthealmganChaseat$cialsystem,crwouldbeperwasinthisems.Withtheld,thebanksPriortothispoconvincethalsoconsiderrforLehmandentoftheFtriedtoengagariousreasonstheearlyhoitwasseekinnfromitshig_______________ndResearchAssociasisforclassdiscunagement.ntandFellowsofHchoolPublishing,Boreproduced,posteBrotheredyears,LehmoftheUnitedardssetbythefAmericathatgeneration.—WritS.financialsyaninfluxofnbblesawashuratecreditrathatledtothimplosioninsinmortgagemost90-yearo$10pershare,reateduncertrmanentandcontextthaeprospectofsCEO,initiatpoint,LehmahemtopurcharedrefashionintoborrowederalReservgetheBankos.oursofSeptemngbankruptcyghofover$60_______________iateDavidChenprssion.CasesarenoHarvardCollege.Toston,MA02163,oed,ortransmitted,wrs1manBrothersdStates.Theefoundersandmarkedthepattenin1950aystemwasinanewmortgagharpincreaseatingsandahhemostseverfinancialmae-backedsecuoldfirm,and,afractionoftaintyandcomwide-reachinatinvestmentbankruptcyltedvariousaanexecutivesasesmallstaingLehmanmoneyfromveBankofNofAmericanamber15,2008yprotection.0earlierthat________________reparedthiscase.TotintendedtoservToordercopiesororgoto:ACentennis.WhileanaedrecordprodefaultratesceonriskymtheGreatDeedwhentwosedinsumme08,BearStearewyearsbefoheviewpointtmanBrothersresultofitsotaveofffailurmetwithrepompany,butoldingcompanReserve)bumothyF.Geibutbothcomrotherssentomorning,Lehnthespaceof_______________lopedfrompublishs,sourcesofprimantoreproducematcators.ThispublicausinessSchool.etoparticipaesmallfamilycondcenturybndthatdeterminial.LehmanBationwideriseofitsforWallasmillionsomortgage-backepression.OnBearStearnser2007.Itwarnssoldtoinvore.Thisdevethattheeffectsbeganexpeownfailedinvrethroughsupresentativesatheeffortswny(whichwottheideawithner.Inthempaniesescheoutapressrehman’sstockfafewdays,9-810-FEBRUARY16________________hedsources.HBScarydata,orillustraterials,call1-800-5ationmaynotbedatemodestlyienterpriseofbeginswiththeineditsdevelopBrothers,1850-einhousingplStreetbankofhomeswenkedsecuritiesneofthefirsthedgefundsasthebeginnivestmentbanelopmentjoltetsofthesub-periencingitsvestments,Riummerandfatforeignbanwereunsuccesouldhavemwasrejectedbefirm’sfinalewedarescueeleaseannoudroppedto,LehmanBro-1066,2010______casesareationsof45-7685,igitized,inthe1850,esamepment-1950.pricesks,thentintosweresignsswithingofnkJ.P.edtheprimeownchardfallofnkstossful.2adeitbythedays,edealuncing$0.21,othersFortheexclusiveuseofT.MACIASThisdocumentisauthorizedforuseonlybyTriptiMaciasinFinancialMarkets&Strategy-2010taughtbyWayneMarrfromOctober2010toDecember2010.810-106LehmanBrothers2wentfromamajorWallStreetinvestmentbanktoaninsolventinstitution.Itwasaswiftendforafirmthathaditsbeginningsover150yearsprior.Whatwouldbethefirm’slegacy?Andhow,ifatall,haditsactivitieschangedthecourseofAmericanhistory?BackgroundHenryLehmancametotheUnitedStatesin1844,theoldestsonofaGermanfamilyfromRimpar,Bavaria.LehmanarrivedinMontgomery,Alabama,atownwithscarcelymorethan6,000inhabitants,wherehestartedhisownbusinessintheformofahumblegrocerystore.In1847,Henry’sbrother,Emanuel,joinedhim,andtogetherthetwoofthemmovedtoanewerbuilding,renamingtheirbusiness“H.Lehman&Bro.”WhenthethirdandlastLehmanbrother,Mayer,joinedthem,thebusiness’nameagainchangedto“LehmanBrothers.”WhiletheLehmanbrotherswerelistedasgrocersintheCityDirectory,theytraffickedinconsumergoodsofallkinds,buttheyfocusedparticularlyoncotton,whichplayedacentralroleintheU.S.economyduringthistimeperiod.In1855,HenrypassedawayfromYellowFeverwhileonabusinesstriptoNewOrleans,leavingthebusinesstohisbrothers.TheLehmanBrotherscontinuedworkingandexpandingtheirbusinessandasNewYorkbecameacentrallocationforAmericanfinanceandcommerce,Emanuelestablishedaheadquarterstherein1858.In1862,theLehmanBrotherspartneredwithJohnWesleyDurr,anexperiencedcottonmerchant.Together,theyformedLehman,Durr&Co.,andby1863,ithadbecomeoneofthetopfivecottonfirmsinMontgomery.AlthoughtheAmericanCivilWarforcedtheLehmanBrotherstohaltoperationsforseveralyears,theyresumedoperationsinlate1865inAlabamaandNewYork,whilesettingupanewheadquartersinNewOrleans.In1870,LehmanBrotherswasoneofthe100fo