Each and every one of us knows that the first bank to fail during the financial crisis was Lehman Brothers. I remember the day it happened as the news was pasted EVERYWHERE. Headlines told of mass extinction of the US financial system and noted that Lehman Brothers was the genesis of the great collapse. But what really happened?
The headlines were correct and Lehman did submit to Chapter 11. However, what most people didn’t realize that Chapter 11 did not mean that they were gone. In fact, Lehman has had one of the strongest years (2012) as a bank and just recently came out of bankruptcy. But how did they manage to do this without the scrutiny of the public eye? The answer is quite simple and pretty deceiving. When Lehman went bankrupt they reformed their company as a trust company committed to repaying around 60,000 claims against them amounting to nearly $360 Billion. The day after the collapse they sold their main office and were quick to disappear from the public’s radar. Lehman had begun to play the waiting game.
Just prior to the collapse, Lehman had overtaken Archstone which was a major player in the real estate market and was a key factor in Lehman’s demise. However, they waited until the market stabilized and people were willing to pay the same amounts for their assets as they were pre-collapse, and sometimes more. Even more interesting is that they had, before agreeing to sell to two of their main competitors, begun the process of an IPO which analysts estimated would have been one of the biggest of the year, right behind Facebook. This is not to say that Lehman is alive and kicking just yet, they have a long way to go to finish paying back the people they owe, though they have amazingly managed to stay alive this long.
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