Lehman Brothers filed the largest bankruptcy in US history — $639B in assets, $613B debt

Lehman Brothers was founded in 1847 and grew to become the fourth-largest investment bank in the United States. By 2007, it had $639 billion in assets and 26,200 employees. The firm's core business had shifted heavily into mortgage-backed securities and real estate, fueled by cheap debt and securitization. In 2007, Lehman underwrote more mortgage-backed securities than any other firm on Wall Street.

As the US housing market turned, Lehman's mortgage portfolio deteriorated rapidly. The firm had used an accounting technique known as 'Repo 105' — temporarily moving $50 billion in assets off its balance sheet at quarter-end to make its leverage look lower than it was. When the true scale of its subprime exposure became clear, confidence evaporated. Clients withdrew, counterparties demanded more collateral, and the stock collapsed from $65.50 in February 2007 to $3.65 by September 2008.

On September 15, 2008, Lehman filed for Chapter 11 bankruptcy protection with $613 billion in bank debt and $155 billion in bond debt. It was the largest bankruptcy filing in US history. The US government, which had rescued Bear Stearns in March and would bail out AIG the next day, declined to intervene. The decision to let Lehman fail sent shockwaves through global markets. The Dow Jones dropped 504 points that day, and credit markets froze worldwide.

The Lehman collapse was the catalyst that turned the US subprime crisis into a global financial panic. Banks stopped lending to each other, governments scrambled to rescue their financial systems, and the global economy fell into the Great Recession. The bankruptcy estate took over a decade to liquidate, ultimately recovering about $100 billion for creditors. The case became the defining example of 'too big to fail' and reshaped financial regulation worldwide.