The Rise and Fall of Lehman Brothers

With nearly $700 billion in assets, Lehman was the largest U.S. bankruptcy in history. In 2007, Lehman achieved record earnings of over $4 billion on revenues of $60 billion. By September 2008 the fourth largest investment bank in the world was bankrupt. How had a successful investment bank with a long and storied history effectively disappeared overnight? This case reviews the decisions made by Lehman’s management, board and government regulators leading up to September 2008 to understand the factors that contributed to this historic event and the choices that might have led to a different outcome. Lehman had an aggressive CEO in Dick Fuld; a “countercyclical” growth strategy; a firm culture that rewarded risk; questionable accounting policies; never before seen levels of market volatility; and a high leverage business model employed by many investment banks. On the fateful “Lehman weekend” of September 13, 2008 the most senior leaders within Treasury, the NY Fed, and the SEC chose not to bail out Lehman and instead advised Lehman’s board to “take action”. In 2010 court-appointed examiner Anton R. Valukas released a landmark 2,200 page report based upon a review of over 34 million documents and 300 interviews to try to understand what happened and the lessons for the future. His findings serve as a basis for this case.