Lehman Brothers And The Financial Crisis

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Lehman Brothers Holdings, Inc. on September 15, 2008 was the fourth- largest U.S. investment bank, which sought Chapter 11 protection, ultimately initiating the largest bankruptcy proceeding in history. Lehman Brothers was very successful in pursuing a high-leverage, high-risk business model to fund its operations. Beginning in 2006, they began to invest aggressively in the real-estate related assets, soon having significant exposures to subprime mortgages, just as the markets were turning for the worst. Lehman Brothers employed a staff of accountants and risk professionals to monitor its balance sheets and risks constantly. It decided to take questionable actions to stay alive in the market. Nevertheless, they ultimately failed due to an …show more content…

Leman’s demise was mainly its significant exposure to the subprime mortgage and real estate markets. As the markets began to slow down, a retraction was sparked for short-term loans as the growing concerns of unknown exposures spread to other types of assets. Lehman relied on these short-term markets to raise billions daily. Ultimately, it’s inability to secure funding was their undoing.
This overview of the case provides Lehman’s background information, it’s controls, performance measures, key personnel, as well as the market and regulatory environment during the financial crisis.
1. How/why compliance with external controls does not ensure sufficient internal controls?
2. Do performance measures and the reporting of those measures play a role in economic crimes or misconduct?
3. Would the activities at Lehman and E&Y be considered fraud or misconduct and why?
The Rise and Fall of Lehman Brothers
Founding and Early Years
During the mid-1800s, Henry, Emanuel, and Mayer Lehman emigrated from Germany, to Montgomery, Alabama. In 1844, they established a small shop that sold groceries to local cotton farmers. Often farmers paid their bills in cotton and the

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