The moment was happened in September 2008 when the 150-year-old investment bank Lehman Brothers collapsed, precipitating the worst global economic crisis since the 1930s.
After failing to find buyers for the troubled financial giant, that was weighed down by risky debt holdings made up of at sub-prime mortgages, U.S. authorities declined to offer a bailout and allowed the institution to fail.
Monday, September 15, 2008, at 1:45 a.m., Lehman Brothers filed for bankruptcy, taking the world by surprise leaving well over $600 billion in debt, as well as 25,000 employees in shock.
It was the biggest bankruptcy in American history. On Wall Street, the Dow Jones plunged 500 points, the largest drop since the attacks of September 11, 2001. Stunned traders streaming out of the building carrying boxes of their belongings became a symbol of the crisis.
Some were caught by surprise. But others, like Lawrence McDonald, a former trader and co-author of a 2009 book on the collapse, “A Colossal Failure of Common Sense: The Incredible Inside Story of the Collapse of Lehman Brothers” — said the management had long been alerted to the excessive risks they took to increase short-term profits.
The top Lehman leadership, housed on the bank’s 31st floor, “drove us 162 miles (261 km) an hour…right into the biggest sub-prime iceberg ever seen,” he told AFP.
Before filing for bankruptcy in 2008, Lehman was the fourth-largest investment bank in the United States (behind Goldman Sachs, Morgan Stanley, and Merrill Lynch), doing business in investment banking, equity and fixed-income sales and trading (especially U.S. Treasury securities), research, investment management, private equity, and private banking.