Bankruptcy of Lehman Brothers
After the financial services firm was notified of a pending credit downgrade due to its heavy position in subprime mortgages, the Federal Reserve summoned several banks to negotiate financing for its reorganization.
[6] In August 2007, Lehman closed its subprime lender, BNC Mortgage, eliminating 1,200 positions in 23 locations, and took a $25-million after-tax charge and a $27-million reduction in goodwill.
[10] Most of those gains were quickly eroded as news emerged that Korea Development Bank was "facing difficulties pleasing regulators and attracting partners for the deal.
"[11] It culminated on September 9, when Lehman's shares plunged 45% to $7.79, after it was reported that the state-run South Korean firm had put talks on hold.
[14] On September 10, Lehman announced a loss of $3.9 billion and their intent to sell off a majority stake in their investment-management business, which included Neuberger Berman.
[16][17] On September 12, Timothy F. Geithner, then president of the Federal Reserve Bank of New York, called a meeting on the future of Lehman, which included the possibility of an emergency liquidation of its assets.
[18] The New York Times reported on September 14, 2008, that Barclays had ended its bid to purchase all or part of Lehman and a deal to rescue the bank from liquidation collapsed.
[19] By Sunday, September 14, after the Barclays deal fell through, the news of impending doom swept through Lehman, and many employees arrived at the headquarters to clean out their offices.
By Sunday afternoon, the government summoned Harvey Miller of Weil, Gotshal & Manges to file for bankruptcy before the markets opened on Monday.
According to Bloomberg, reports filed with the U.S. Bankruptcy Court, Southern District of New York (Manhattan) on September 16 indicated that JPMorgan Chase & Co. provided Lehman Brothers with a total of $138 billion in "Federal Reserve-backed advances".
[26][27] On September 22, 2008, Nomura Holdings, Inc. announced it agreed to acquire Lehman Brothers' franchise in the Asia Pacific region including Japan, Hong Kong and Australia.
[28] The following day, Nomura announced its intentions to acquire Lehman Brothers' investment banking and equities businesses in Europe and the Middle East.
Apartment-building investors were also expected to feel pressure to sell as Lehman unloaded its debt and equity pieces of the $22 billion purchase of Archstone, the third-largest United States real estate investment trust (REIT).
Archstone's core business was the ownership and management of residential apartment buildings in major metropolitan areas of the United States.
Jeffrey Spector, a real-estate analyst at UBS, said that in markets with apartment buildings that compete with Archstone, "there is no question that if you need to sell assets, you will try to get ahead" of the Lehman selloff, adding "Every day that goes by there will be more pressure on pricing.
[2]:179 Putnam Investments, a unit of Canada's Great-West Lifeco, shut a $12.3 billion money-market fund as it faced "significant redemption pressure" on September 17, 2008.
In an attempt to meet their own credit needs, Lehman Brothers International routinely re-hypothecated[36] the assets of their hedge funds clients that utilized their prime brokerage services.
[37] As administrators took charge of the London business and the U.S. holding company filed for bankruptcy, positions held by those hedge funds at Lehman were frozen.
Mizuho Trust & Banking cut its profit forecast by more than half, citing 11.8 billion yen in losses on bonds and loans linked to Lehman.
Freddie said it had further potential exposure to Lehman of about $400 million related to the servicing of single-family home loans, including repurchasing obligations.
The next day, as the stock plummeted as low as $13 per share, Constellation announced it was hiring Morgan Stanley and UBS to advise it on "strategic alternatives", suggesting a buyout.
The Hong Kong government proposed a plan to buy back the investments at their current estimated value, which would allow investors to partially recover some of their loss by the end of the year.
[50] HK chief executive Donald Tsang insisted the local banks respond swiftly to the government buy-back proposal as the Monetary Authority received more than 16,000 complaints.
[52] In October 1999, the firm conducted an initial public offering of its shares and commenced trading on the New York Stock Exchange, under the ticker symbol "NEU".
In July 2003, shortly after the retired Mr. Neuberger's 100th birthday, the company announced that it was in merger discussions with Lehman Brothers Holdings Inc.
[citation needed] On November 20, 2006, Lehman announced its Neuberger Berman subsidiary would acquire H. A. Schupf & Co., a money-management firm targeted at wealthy individuals.
"[55] Richard Fuld, head of Lehman Brothers, faced questioning from the U.S. House of Representatives' Committee on Oversight and Government Reform.
[57] On October 17, 2008, CNBC reported that several Lehman executives, including Richard Fuld, had been subpoenaed in a case relating to securities fraud.
[58] In March 2010, the report of Anton R. Valukas, the Bankruptcy Examiner, drew attention to the use of Repo 105 transactions to boost the bank's apparent financial position around the date of the year-end balance sheet.
[60] On February 22, 2011, Judge James M. Peck of the U.S. Bankruptcy Court in the Southern District of New York rejected claims by lawyers for the Lehman estate that Barclays had improperly reaped a windfall from the section 363 sale.
