Lehman Brothers Declares Bankruptcy
Lehman Brothers Holdings Inc. has declared bankruptcy. Why? Well they decided to get all gung-ho on the real estate bubble and backed quite a bit in sub-prime mortgages? How much? I don’t know, but in its bankruptcy filing Lehman lists debts totalling $613 billion.
Lehman was forced into bankruptcy after Barclays Plc and Bank of America Corp. abandoned takeover talks yesterday and the company lost 94 percent of its market value this year. Chief Executive Officer Richard Fuld, who turned the New York-based firm into the biggest underwriter of mortgage-backed securities at the top of the U.S. real estate market, joins his counterparts at Bear Stearns Cos., Merrill Lynch & Co. and more than 10 banks that couldn’t survive this year’s credit crunch.
“There is likely to be a domino effect as other firms and individuals who relied on Lehman for financing feel the effects of its meltdown,” said Charles “Chuck” Tatelbaum, a bankruptcy lawyer with Adorno & Yoss in Florida and former editor of the American Bankruptcy Institute Journal. “The whole thing is frankly frightening for the U.S. economy.”
Surprisingly, Treasury Secretary Paulson declined to use tax payer funds to bail out Lehman.
In Other News:
The Dow has also fallen 266 points and Treasuries are going up as investors are looking for a safe haven for the time being. Bank of America is also offering to buy Merrill Lynch.