Failure pattern · United States · 2003–2008
Lehman Brothers: the largest bankruptcy in US history
A 158-year-old investment bank borrowed heavily to bet on property. When US housing collapsed, it failed in September 2008 with about $639 billion of assets, triggering the worst phase of the financial crisis.
By Shivam Bhandari · Reviewed 31 October 2026 · How we write
by the numbers
- Founded
- 1850
- Leverage
- about 30 to 1
- Assets at bankruptcy
- about $639 billion
- Bankruptcy date
- 15 September 2008
What happened
Lehman Brothers, founded in 1850, grew aggressively in mortgage lending and commercial property in the 2000s. It operated with leverage of about 30 to 1 — so a fall of a few percent in its assets' value could wipe out its equity.
As the US housing market turned in 2007, Lehman's mortgage-linked assets lost value. It used an accounting manoeuvre known as ‘Repo 105’ to temporarily move tens of billions of dollars off its balance sheet at quarter-ends, making its leverage look lower. Talks to sell the bank to Korea Development Bank, Bank of America, and Barclays failed, and the US government declined to rescue it.
Lehman filed for bankruptcy on 15 September 2008, with about $639 billion of assets — the largest in US history. Credit markets froze worldwide, and governments then stepped in to rescue other banks.
Timeline
- 2006
Aggressive expansion in property.
- 2007
Housing downturn begins.
- 2008
Rescue talks fail; bankruptcy (September).
what went wrong
- Extreme borrowing left no buffer for losses.
- Concentrated bets on one asset class.
- Accounting that obscured the true risk.
the lesson
Debt magnifies both gains and losses; with enough leverage, a small decline can destroy a business that seemed unshakeable.
Apply it to your business
- 1Know how much your asset values could fall before you're insolvent.
- 2Avoid concentrating risk in one market.
- 3Don't count on a rescue.
Laws at work in this story
Figures are rounded and drawn from public reports, company filings and widely cited coverage at the time. Check the company's latest filings before relying on any number.