Five years since Lehman failure heralded crisis

 
Tim Wallace
Follow Tim

THIS WEEKEND marked the fifth anniversary of the collapse of Lehman Brothers, the landmark moment that began the sharp spiral into the financial crisis.

The iconic investment bank was declared bankrupt after more than 150 years of business, and its web of complex trades around the world baffled investors and regulators, and sparked panic globally.

Shortly after institutions like insurance giant AIG were bailed out and the rich world was plunged into its deepest recession since the 1930s.

But there are now strong signs of economic recovery.

Lehmans’ administrators PwC, which is untangling the wreckage, this weekend said it is increasingly likely the bank’s creditors will get back 100 per cent of what they are owed – a stark turnaround from the fears in 2008 that they would lose as much as half their cash.

Meanwhile regulators like the Bank of England are increasingly confident major lenders are well capitalised enough to avoid collapsing when the economy slows down.

And they are making progress on creating plans for resolving any bank that does fail, aiming to ensure they will never again be troubled by impenetrable webs of international contracts.

TIMELINE: THE COLLAPSE OF LEHMAN BROTHERS

1850
Lehman Brothers was founded in Montgomery, Alabama, USA.

1970s
Lehman went on an acquisition spree to turn around its fortunes and become a top five US investment bank.

1984
Brokerage firm Shearson, owned by American Express, bought the bank.

1994
Lehman was sold off as an independent investment bank once more. Dick Fuld was appointed chairman and chief executive.

August 2007
The bank shut its subprime mortgage lending unit over fears it was over-exposed. But it continued to hold subprime mortgages.

10 September 2008
A write-down of $5.6bn (£3.5bn) on mortgage assets plunged the bank into losses.

15 September 2008
After rivals decline to buy the bank and the government refuses to bail it out, Lehman Brothers filed for bankruptcy protection in the largest such case ever.

September 2013
Administrators PwC tell creditors they could get all of their money back from the wreckage of the bank.