Lehman Brothers Bankruptcy Would be Biggest in 18 years

Written by:
C Costigan
Published on:
Lehman Brothers

The New York Times was reporting on Sunday that the bankruptcy of Wall Street investment firm, Lehman Brothers, was imminent and would likely be the biggest investment bank to fail in over 18 years.

In one the most extraordinary days in Wall Street's in history, Merrill Lynch is near an 11th-hour deal with Bank of America to avert a deepening financial crisis while another storied securities firm, Lehman Brothers, hurtled toward liquidation, according to people briefed on the deal.

The news was likely to set the markets into a tailspin.

Lehman Brothers was a 7/4 favorite to fail at online gambling websites offering these odds back in March.

Lehman Chief Financial Officer Erin Callan acknowledged the difficult market conditions at that time.

"Given the challenging environment and our previously stated view that it will likely continue the balance of the year, issuing convertible preferred is appropriate as it optimizes our funding and accelerates our plan to reduce leverage, and at the same time minimizes dilution to our shareholders," Ms. Callan said.

She added: "We also felt this was the right time, as there was a window of opportunity in the market as we have received significant interest from several key institutional investors who have been strong supporters of the firm over time."

According to the New York Times, the weekend's once unthinkable outcome came after a series of emergency meetings at the Federal Reserve building in downtown Manhattan in which the fate of Lehman hung in the balance.

In the meeting Federal Reserve officials and the leaders of major financial institutions were trying to complete a plan to rescue the stricken investment bank.

But as the weekend unfolded, Barclays and Bank of America, which had both considered buying all or part of Lehman, decided that they could not reach a deal without financial support from the federal government or other banks.

As a result, people briefed on the matter said late Sunday that Lehman Brothers would file for bankruptcy protection, in the largest failure of an investment bank since the collapse of Drexel Burnham Lambert 18 years ago.

Financial betting was available at intrade.com.

Business/Financial News