Lehman Brothers

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Lore & Background

The firm started in 1844 when 23-year-old Hayum Lehmann immigrated from Rimpar, Bavaria, changed his name to Henry Lehman, and opened a dry-goods store in Montgomery, Alabama. After his brothers Emanuel and Mayer joined, the firm became Lehman Brothers in 1850. They accepted raw cotton from forced labor plantations as payment for merchandise, eventually making cotton trading their main business. The 1860 census listed Mayer Lehman as the owner of seven enslaved people. After Henry's death from yellow fever in 1855, the brothers shifted operations to New York City, where they helped found the New York Cotton Exchange in 1870. The firm underwrote its first public offering in 1899—the preferred and common stock of the International Steam Pump Company. Under Philip Lehman, starting in 1906, the firm partnered with Goldman, Sachs & Co. to bring companies like Sears, Roebuck and Company, F.W. Woolworth Company, and R.H. Macy & Company to market. Robert Lehman took over in 1925 and weathered the Great Depression by focusing on venture capital. In the 1930s, Lehman underwrote the IPO of the first television manufacturer, DuMont Laboratories, and helped fund RCA. After Robert Lehman died in 1969, non-family leaders took over. In 1973, Pete Peterson was brought in to save the firm, leading it from losses to five consecutive years of record profits. In 1984, American Express acquired Lehman for $360 million, and in 1994 it was spun off as Lehman Brothers Holdings, Inc. under CEO Dick Fuld. Fuld steered the firm through the 1997 Asian financial crisis and the 1998 collapse of Long Term Capital Management. By May 2008, the firm had $639 billion in assets.

Reader's Guide

Lehman Brothers' significance lies in its role as the largest bankruptcy in U.S. history and its central part in the 2008 financial crisis. The firm's collapse followed the exodus of clients, drastic stock declines, and asset devaluation by credit rating agencies, largely due to its involvement in the subprime mortgage crisis. Its failure caused global markets to immediately plummet and gave support to the 'too big to fail' doctrine. After the bankruptcy, major British bank Barclays announced its agreement to purchase a significant and controlling interest in Lehman's North American investment-banking and trading divisions, along with its New York headquarters building. On September 20, 2008, a revised version of that agreement was approved by U.S. bankruptcy court judge James M. Peck. The next week, Nomura Holdings announced it would acquire Lehman Brothers' franchise in the Asia–Pacific region, including Japan, Hong Kong and Australia, as well as its investment banking and equities businesses in Europe and the Middle East. The deal became effective on October 13, 2008. The firm's history also reflects its origins in the cotton trade, including its use of enslaved labor, and its evolution into a major investment bank that underwrote IPOs for companies like Sears, DuMont Laboratories, and Digital Equipment Corporation.

Did You Know?

• Lehman Brothers was founded in 1850 by three brothers—Henry, Emanuel, and Mayer Lehman—who originally ran a dry-goods store in Montgomery, Alabama.
• The 1860 U.S. census listed Mayer Lehman as the owner of seven enslaved people, reflecting the firm's early involvement in the cotton trade.
• Lehman underwrote the IPO of the first television manufacturer, DuMont Laboratories, in the 1930s.
• On September 15, 2008, Lehman's bankruptcy filing became the largest in U.S. history, surpassing the previous record held by Worldcom, Inc.
• After the bankruptcy, Barclays purchased a controlling interest in Lehman's North American investment-banking and trading divisions, while Nomura Holdings acquired its Asia-Pacific and European operations.