By Priya Kanth, Business & Economy
· 2 min read
The essentials
- •The firm, which controls more than $600 billion in assets, was unable to find a partner willing to take on its soured real estate holdings without government backing.
- •Barclays and Bank of America were both reported to be in talks to buy all or part of Lehman.
- •Lehman's collapse does not touch bank deposits, which remain insured up to $100,000 by the FDIC.
- •The filing covers only the holding company, not its broker-dealer subsidiaries or other units.
The short answer
NEW YORK, Sept. 15 - Lehman Brothers Holdings Inc., the 158-year-old investment bank, filed for Chapter 11 bankruptcy protection early Monday after a weekend of emergency talks failed to produce a buyer or a federal rescue. It is the largest bankruptcy filing in United States history. The firm, which controls more than $600 billion in assets, was unable to find a partner willing to take on its soured real estate holdings without government backing.
NEW YORK, Sept. 15 - Lehman Brothers Holdings Inc., the 158-year-old investment bank, filed for Chapter 11 bankruptcy protection early Monday after a weekend of emergency talks failed to produce a buyer or a federal rescue. It is the largest bankruptcy filing in United States history.
The firm, which controls more than $600 billion in assets, was unable to find a partner willing to take on its soured real estate holdings without government backing. Treasury Secretary Henry Paulson and Federal Reserve officials made clear over the weekend that taxpayer money would not be used to save the bank.
Barclays and Bank of America were both reported to be in talks to buy all or part of Lehman. Barclays walked away Sunday after British regulators declined to approve a deal. Bank of America turned its attention to Merrill Lynch instead, and agreed late Sunday to buy that firm for about $50 billion, or $29 a share.
Stocks fell sharply on the news. The Dow Jones industrial average dropped more than 500 points, its steepest one-day decline since the market reopened after the Sept. 11 attacks. Shares of American International Group, the giant insurer, fell by more than half as investors worried it could be next. AIG has asked the Federal Reserve for a $40 billion lifeline.
What it means for ordinary people: Lehman's collapse does not touch bank deposits, which remain insured up to $100,000 by the FDIC. But it adds pressure on a credit market that has been tightening for more than a year, and it raises new questions about how much risk is still hidden on the balance sheets of other large firms.
The filing covers only the holding company, not its broker-dealer subsidiaries or other units. Lehman said it is still exploring a sale of its broker-dealer operations and is talking with potential buyers for its asset management unit.
Analysts said the coming days will turn on whether lenders keep funding other big banks, and whether the government will step in for any other firm that runs into trouble.
Sources
- 01Lehman Brothers and Merrill Lynch, Sept. 15, 2008, Mortgage News Dailymortgagenewsdaily.com
- 02Merrill Lynch sold and Lehman gone, FNArenafnarena.com
- 03Bankruptcy of Lehman Brothers, Wikipediaen.wikipedia.org
Corrections
No corrections have been made to this article.
About the reporter
Senior Business & Economy Reporter, Trestlewire
I was an equity research analyst for five years and have been a financial reporter since 2000. I covered the end of the dot-com bubble from a markets desk, spent the autumn of 2008 reading bank filings at two in the morning in Chicago, and have written about every Federal Reserve rate cycle since. The lesson from all of it is short: the number comes first, and the story is the explanation for the number.
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