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Lehmon Brothers Essay

5065 words - 21 pages

Lehman Brothers
Was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth-largest investment bank in the US (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.
At 1:45AM on September 15, 2008, the firm filed for bankruptcy protection following the massive exodus of most of its clients, drastic losses in its stock, and devaluation of its assets by credit rating agencies. Lehman's bankruptcy filing is the largest in US history, and is thought to have played a ...view middle of the document...

Capitalizing on cotton's high market value, the three brothers began to routinely accept raw cotton from customers as payment for merchandise, eventually beginning a second business trading in cotton. Within a few years this business grew to become the most significant part of their operation. Following Henry's death from yellow fever in 1855, the remaining brothers continued to focus on their commodities-trading/brokerage operations.
By 1858, the center of cotton trading had shifted from the South to New York City, where factors and commission houses were based. Lehman opened its first branch office in New York City's Manhattan borough at 119 Liberty Street, and 32-year-old Emanuel relocated there to run the office. In 1862, facing difficulties as a result of the Civil War, the firm teamed up with a cotton merchant named John Durr to form Lehman, Durr & Co. Following the war the company helped finance Alabama's reconstruction. The firm's headquarters were eventually moved to New York City, where it helped found the New York Cotton Exchange in 1870; Emanuel sat on the Board of Governors until 1884. The firm also dealt in the emerging market for railroad bonds and entered the financial-advisory business.
Lehman became a member of the Coffee Exchange as early as 1883 and finally the New York Stock Exchange in 1887. In 1899, it underwrote its first public offering, the preferred and common stock of the International Steam Pump Company.
Despite the offering of International Steam, the firm's real shift from being a commodities house to a house of issue did not begin until 1906. In that year, under Philip Lehman, the firm partnered with Goldman, Sachs & Co., to bring the General Cigar Co. to market, followed closely by Company. During the following two decades, almost one hundred new issues were underwritten by Lehman, many times in conjunction with Goldman, Sachs. Among these were F.W. Woolworth Company, May Department Stores Company, Gimbel Brothers, Inc., R.H. Macy & Company, The Studebaker Corporation, the B.F. Goodrich Co. and Endicott Johnson Corporation.
Following Philip Lehman's retirement in 1925, his son Robert "Bobbie" Lehman took over as head of the firm. During Bobbie's tenure, the company weathered the capital crisis of the Great Depression by focusing on venture capital while the equities market recovered.
Traditionally, a family-only partnership, in 1924 John M. Hancock became the first non-family member to join the firm, followed by Monroe C. Gut man and Paul Mazur in 1927. By 1928, the firm moved to its now famous Street location.
In the 1930s, Lehman underwrote the initial public offering of the first manufacturer, Dumont, and helped fund the Radio Corporation of America (RCA). It also helped finance the rapidly growing oil industry, including the companies Halliburton and Kerr-McGee. In the 1950s, Lehman underwrote the IPO of Digital Equipment Corporation. Later, it arranged the acquisition of Digital by Compaq.
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