September 15: Lehman Brothers

Lehman Brothers, with $639 billion in assets, filed for bankruptcy on this date in 2008. It was the largest bankruptcy in global history and set in motion the banking and financial crisis that has brought global capitalism to a near-standstill and damaged the wealth and well-being of millions of working people. The company was founded in 1850 by Henry, Mayer, and Emanuel Lehman, immigrant brothers from Bavaria who ran a dry-goods store and a cotton-trading business in Montgomery, Alabama that eventually transferred north and became the linchpin of the New York Cotton Exchange. By the early 20th century, the business was issuing bonds to underwrite businesses that included Woolworth’s, Gimbel’s and Macy’s, as well as Studebaker, Goodrich and Endicott-Johnson. Lehman Brothers was acquired by American Express in the 1980s and then spun off in the 1990s. Its bankruptcy — which is still being sorted out in offices and courts — was caused by overinvestment in subprime mortgages and mortgage-backed securities, along with shady accounting practices. “Within days,” wrote the New York Times, “the Treasury Department and Federal Reserve as well as governments around the world embarked on what became multi-trillion dollar efforts to keep the financial system from collapsing. Wall Street’s remaining investment banks sold themselves to bigger entities or converted into bank holding companies to secure federal protection. Job losses soared as the recession that had begun in late 2007 turned into the steepest downturn since the Great Depression.”
“Modern societies do not leave military security to private armies, nor education to private schools, nor ports, harbors and transportation systems to private conveyors, nor control of the money supply to private banks. . . . The extension of credit ought to be as equally socialised as dependence on credit has become. Lehman Brothers’ bankruptcy exposes big global private banking as unaffordable and anachronistic.” —Richard D. Wolff