The 18 months that led to the fall of Lehman Brothers




Two brokers for the Lehman Brothers Bank head office in New York, 15 September 2008 (AFP / Archives / NICHOLAS ROBERTS)

From the beginning of 2007 and the multiplication of defaults on property loans, until September 2008, back on the events that led to the bankruptcy of Lehman Brothers Bank, symbol of the global financial crisis.

– Early 2007: the reverse of the "subprime" –

In February several US banks specializing in loans for subprime mortgages went bankrupt.

These loans with variable interest rates, almost blindly granted to financially vulnerable households, turned against borrowers when they started to rise. Millions of households noticed that they were unable to make higher monthly payments, while their creditors were submerged while the value of their homes plummeted.

Some analysts mention a "risk" for the financial markets, but most say they are optimistic, as this sector "has minimal impact" on the US economy.

– Summer 2007: large banks and affected markets –

In June, investment bank Bear Stearns announced the bankruptcy of two hedge funds that had invested heavily in financial collateral created by subprime loans that collapsed. It is the first large banking institution to suffer the damage of the crisis.

In August, while other banks, such as the French BNP Paribas, disclose their investments in this credit risk, the global equity markets lapse.

As the interbank market is affected (banks are reluctant to lend each other money), several central banks intervene by injecting billions of cash.

– End 2007: environment deployment, trust from Lehman Brothers –

While the world's largest banks (UBS, Citigroup) continue to undergo the crisis, in December 2007 Lehman Brothers published record year results with a net profit of 4.2 billion, reducing billions of dollars in impaired assets. dollars.


The global financial crisis of 2008-2009 (AFP / Laurence Saubadu, mhc / vl)

The New York investment bank does not report any new impairment or provisions to reflect the consequences of the & subprime & # 39; to absorb, and praises its ability to operate outside market cycles & # 39; through its diversification.

However, Lehman Brothers sacked more than 3,000 employees in its mortgage business between August 2007 and January 2008.

– Early 2008: panic on board –

On January 22, 2008, faced with the fall of global equity markets, the central bank of the US lowered its main interest rate by three-quarters of the points to 3.50%, an exceptional measure, followed by a further drop of half a point per week later.

In February, the bank Northern Rock, the fifth largest bank in Great Britain, will be nationalized by the British government in a critical state.

On March 16, JP Morgan Chase Bear bought Stearns for a pittance (15 times less than its market capitalization), in order to prevent cascading bankruptcies. The market estimates that Lehman, who had withdrawn 1400 new jobs earlier this month, could be the next bank to "fall".

– Summer 2008: wells from Lehman Brothers –

On 2 June, the rating agency Standard and Poor & # 39; s lowered the rating of the group with an indent to "A".

A week later, Lehman Brothers published a quarterly loss of $ 2.8 billion, the first since the bank launched its IPO in 1994. The action collapses, the number two and three have landed.


Monday, September 15, 2008, 1:45 am, Lehman Brothers filed for bankruptcy (AFP / Archives / NICHOLAS ROBERTS)

The group tries to collect cash at all costs, including finding a partner to buy back some of its activities.

On 10 September, the South Korean bank KDB, which is likely to enter the capital, announces the end of the talks. Lehman publishes the same catastrophic results on the same day.

Despite an attempt by the US Treasury to organize a recovery, Lehman Brothers filed for bankruptcy on September 15 due to lack of copper. The American authorities refrain from saving her.


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