Why did Lehman Brothers go bankrupt?

The giant investment bank succumbed to the sub-prime mortgage crisis that has rocked the United States and the global economy. Lehman was strangled by a massive credit crisis and fast plummeting real estate prices. The gargantuan $60 billion loss in bad real estate loans forced the bank to file for bankruptcy. However, the fall of the 158-year-year institution that started cotton trade in US before the American Civil War and financed the railroad that built a nation, got hit by a large dose of bad luck, pride, arrogance and greed. Primarily, the pride of its chief executive office Richard Fuld. But there were more reason. Check out what they were. . . Lehman's collapse was also triggered by the refusal of other banks to do business with it because of its complex and, at times, opaque ways of trading. Housing loans made by the bank to people with little support made these loans very risky, and when interest rates rose, these borrowers could no more repay Lehman. This led to huge losses, the extent of which is not yet clear. Thus other banks stopped trading with Lehman. This led to it losing almost all business and triggered its fall. The final straw for Lehman was the fact that both Barclays Plc of the United Kingdom and Bank of America Corp pulled out of takeover talks. BofA bought out Merrill Lynch for $50 billion. However, Barclays has now said that it is in discussions with Lehman Brothers about buying certain assets of the stricken US investment bank. "Barclays confirms that it is discussing with Lehman Brothers the possible acquisition of certain Lehman Brothers assets on terms that would be attractive to Barclay's shareholders," Britain's third largest bank said in a statement. How far is the CEO of the company responsible for Lehman's fall? Wall Street analysts believe that it was the 'hubris' of Richard Fuld, the 62-year-old CEO of Lehman, who did not take the telltale signs of impending doom very seriously. Fuld, nicknamed The Gorilla for his foul temper, intimidating presence and tough talk, rejected many bids to save Lehman because he thought that the sinking giant was much bigger than Wall Street was giving it credit for, and wanted to get more price for the sale of the company. Analysts say if the bank was sold just a week before it went kaput, it could have been saved the ignominy of a bankruptcy, but Fuld was far too adamant to see reason. Result: the end of a 158-year-old financial giant. Will everyone in Lehman lose their jobs? The bankruptcy administrators, PricewaterhouseCoop ers, feels that as Lehman's operations were essentially centralized at New York, the folding up of the investment banker in the US will have a telling impact on all its operations globally. Over 5,000 employees in the UK have already lost their jobs, while about 20,000 in the US might as well forget going back to their work stations. About 2,500 Lehman employees in India too face the axe.

Why Lehman Bros went bust; What it means for you

Lehman Brothers is no more. Merrill Lynch has gone down the Bank of America maw. AIG too could go belly up. With a doubt, these developments in America are the most shocking events to have hit global financial markets. So where did it all begin? And what does it mean for the Indian stock markets? Find out. . .
What is (or was) Lehman Brothers?
America's fourth-largest investment bank Lehman Brothers Holdings Inc has filed the biggest bankruptcy petition known to mankind.
The 158-year-old firm was founded by brothers Henry, Emanuel and Mayer Lehman, Jewish immigrants to the US from Germany, in 1850. Henry set up a general store in Alabama in 1844 and was later joined by his brothers. In 1850 they set up the merchant bank in New York after having made money in railway bonds. So what went wrong?

Lehman Bros, which till June 2008 had not reported a quarterly loss even once, had earlier survived many an economic crises, like railroad bankruptcies of the 1800s, the Great Depression in the 1930s, and the collapse of Long-Term Capital Management in the 1990s.
Thus the collapse of the giant investment bank came as a major shock for the entire world markets that plunged after Lehman filed a Chapter 11 petition with US Bankruptcy Court in Manhattan.
The $613 billion (some estimates put the size at $639 billion) bankruptcy thus throws up the question: why did the Wall Street giant go bust?