Under the Lehman ancestors (1850–1969)
Emanuel and Mayer Lehman
In 1844, 23-year-old Henry Lehman,10 the son of a beasts merchant, emigrated to the United States from Rimpar, Bavaria.11 He acclimatized in Montgomery, Alabama,10 breadth he opened a dry-goods store, "H. Lehman".12 In 1847, afterward the accession of his brother Emanuel Lehman, the close became "H. Lehman and Bro."13 With the accession of their youngest brother, Mayer Lehman, in 1850, the close afflicted its name afresh and "Lehman Brothers" was founded.1214
During the 1850s, affection was one of the a lot of important crops in the United States. Capitalizing on cotton's top bazaar value, the three brothers began to commonly acquire raw affection from barter as transaction for merchandise, eventually alpha a additional business trading in cotton. Aural a few years this business grew to become the a lot of cogent allotment of their operation. Afterward Henry's afterlife from chicken agitation in 1855,1215 the actual brothers connected to focus on their commodities-trading/brokerage operations.
By 1858, the centermost of affection trading had confused from the South to New York City, breadth factors and agency houses were based. Lehman opened its aboriginal annex appointment in New York City's Manhattan apple at 119 Liberty Street,15 and 32-year-old Emanuel relocated there to run the office.12 In 1862, adverse difficulties as a aftereffect of the Civil War, the close teamed up with a affection merchant called John Durr to anatomy Lehman, Durr & Co.1617 Afterward the war the aggregation helped accounts Alabama's reconstruction. The firm's address were eventually confused to New York City, breadth it helped activate the New York Affection Barter in 1870;1518 Emanuel sat on the Lath of Governors until 1884. The close aswell dealt in the arising bazaar for railroad bonds and entered the financial-advisory business.
Herbert H. Lehman
Official U.S. Senate Photo
Lehman became a affiliate of the Coffee Barter as aboriginal as 1883 and assuredly the New York Banal Barter in 1887.1518 In 1899, it underwrote its aboriginal accessible offering, the adopted and accepted banal of the International Steam Pump Company.
Despite the alms of International Steam, the firm's absolute about-face from getting a bolt abode to a abode of affair did not activate until 1906. In that year, beneath Philip Lehman, the close partnered with Goldman, Sachs & Co.,1920 to accompany the Accepted Cigar Co. to market,21 followed carefully by Sears, Roebuck and Company.21 During the afterward two decades, about one hundred new issues were underwritten by Lehman, abounding times in affiliation with Goldman, Sachs. A part of these were F.W. Woolworth Company,2122 May Department Stores Company, Gimbel Brothers, Inc.,23 R.H. Macy & Company,23 The Studebaker Corporation,22 the B.F. Goodrich Co. and Endicott Johnson Corporation.
Following Philip Lehman's retirement in 1925, his son Robert "Bobbie" Lehman took over as arch of the firm. During Bobbie's tenure, the aggregation asperous the basic crisis of the Great Depression by absorption on adventure basic while the equities bazaar recovered.
Traditionally, a family-only partnership, in 1924 John M. Hancock became the aboriginal non-family affiliate to accompany the firm,1924 followed by Monroe C. Gutman and Paul Mazur in 1927. By 1928, the close confused to its now acclaimed One William Street location.
Pete Peterson
In the 1950s, Lehman underwrote the IPO of Digital Equipment Corporation.
In the 1930s, Lehman underwrote the antecedent accessible alms of the aboriginal television manufacturer, DuMont, and helped armamentarium the Radio Corporation of America (RCA).25 It aswell helped accounts the rapidly growing oil industry, including the companies Halliburton and Kerr-McGee. Later, it abiding the accretion of Digital by Compaq.
editAn evolving affiliation (1969–1984)
Robert Lehman died in 1969 afterwards 44 years as the ancestor of the firm, abrogation no affiliate of the Lehman ancestors actively complex with the partnership.26 Robert's death, accompanying with a abridgement of a bright almsman from aural the Lehman ancestors larboard a abandoned in the company. At the aforementioned time, Lehman was adverse able headwinds amidst the difficult bread-and-butter ambiance of the aboriginal 1970s. By 1972, the close was adverse harder times and in 1973, Pete Peterson, Administrator and Chief Executive Officer of the Bell & Howell Corporation, was brought in to save the firm.26
Under Peterson's administration as Administrator and CEO, the close acquired Abraham & Co. in 1975, and two years afterwards alloyed with the venerable, but struggling, Kuhn, Loeb & Co.,26 to anatomy Lehman Brothers, Kuhn, Loeb Inc., the country's fourth-largest investment bank, abaft Salomon Brothers, Goldman Sachs and Aboriginal Boston.27 Peterson led the close from cogent operating losses to 5 afterwards years of almanac profits with a acknowledgment on disinterestedness a part of the accomplished in the investment-banking industry.
By the aboriginal 1980s, hostilities amid the firm's investment bankers and traders (who were active a lot of of the firm's profits) prompted Peterson to advance Lewis Glucksman, the firm's President, COO and above trader, to be his co-CEO in May 1983. Glucksman alien a amount of changes that had the aftereffect of accretion tensions, which if accompanying with Glucksman’s administration appearance and a abatement in the markets, resulted in a ability attempt that ousted Peterson and larboard Glucksman as the sole CEO.28
Upset bankers who had soured over the ability struggle, larboard the company. Steve Schwarzman, administrator of the firm's M&A committee, recalled in a February 2003 account with Clandestine Disinterestedness International that "Lehman Brothers had an acutely advancing centralized environment, which ultimately became dysfunctional." The aggregation suffered beneath the disintegration, and Glucksman was pressured into diplomacy the firm.
editMerger with American Express (1984–1994)
Shearson Lehman/American Express Logo
Main article: Shearson Lehman Hutton
Shearson/American Express, an American Express-owned balance aggregation focused on allowance rather than investment banking, acquired Lehman in 1984, for $360 million. On May 11, the accumulated firms became Shearson Lehman/American Express.28 In 1988, Shearson Lehman/American Express and E.F. Hutton & Co. alloyed as Shearson Lehman Hutton Inc.29
From 1983 to 1990, Peter A. Cohen was CEO and Administrator of Shearson Lehman Brothers,30 breadth he led the one billion dollar acquirement of E.F. Hutton to anatomy Shearson Lehman Hutton.31 During this period, Shearson Lehman was advancing in architecture its leveraged accounts business in the archetypal of battling Drexel Burnham Lambert. In 1989, Shearson backed F. Ross Johnson's administration aggregation in its attempted administration buyout of RJR Nabisco but were ultimately outbid by clandestine disinterestedness close Kohlberg Kravis Roberts, who was backed by Drexel.
editDivestment and ability (1994–2008)
In 1993, beneath anew appointed CEO, Harvey Golub, American Express began to broke itself of its cyberbanking and allowance operations. It awash its retail allowance and asset administration operations to Primerica32 and in 1994 it spun off Lehman Brothers Kuhn Loeb in an antecedent accessible offering, as Lehman Brothers Holdings, Inc.33
Despite rumors that it would be acquired again, Lehman performed absolutely able-bodied beneath Administrator and CEO Richard S. Fuld, Jr.. By 2008, Fuld had been with the aggregation for 30 years, and would be the longest-tenured CEO on Wall Street. Fuld had steered Lehman through the 1997 Asian Cyberbanking Crisis, a aeon breadth the firm's allotment amount alone to $22 USD in 1998, but he was said to accept underestimated the abatement in the US apartment bazaar and its aftereffect on Lehman's mortgage band underwriting business. Fuld kept his job as the subprime mortgage crisis took hold, while CEOs of rivals like Bear Stearns, Merrill Lynch, and Citigroup were affected to resign.34 In addition, Lehman's lath of directors, which includes retired CEOs like Vodafone's Christopher Gent and IBM's John Akers were afraid to claiming Fuld as the firm's allotment amount coiled lower.34
Fuld had a assumption of "number twos" beneath him, usually blue-blooded as President and Chief Operating Officer. Chris Pettit was Fuld's agent for two decades until November 26, 1996, if he accommodated as President and lath member. Pettit absent a ability attempt with his assembly (Steve Lessing, Tom Tucker, and Joseph M. Gregory) aback on March 15 that year that acquired him to abandon its COO title, acceptable brought about afterwards the three men activate about Pettit's extramarital affairs, which abandoned Fuld's accepted rules on alliance and amusing etiquette. Bradley Jack and Joseph M. Gregory were appointed co-COOs in 2002, but Jack was demoted to the Appointment of the Administrator in May 2004 and ancient in June 2005 with a severance amalgamation of $80 million, authoritative Gregory the sole COO. While Fuld was advised the "face" of Lehman brothers, Gregory was in allegation of circadian operations and he afflicted ability to drive the basal line.35 Gregory was demoted on June 12, 2008 and replaced as President and COO by Bart McDade, who had been confined as arch of Equities, and McDade would see Lehman through bankruptcy.3637
In 2001, the close acquired the private-client services, or "PCS", business of Cowen & Co.38 and later, in 2003, aggressively re-entered the asset-management business, which it had exited in 1989.39 Alpha with $2 billion in assets beneath management, the close acquired the Crossroads Group, the fixed-income analysis of Lincoln Basic Management39 and Neuberger Berman.40 These businesses, calm with the PCS business and Lehman's private-equity business, comprised the Investment Administration Division, which generated about $3.1 billion in net acquirement and about $800 actor in pretax assets in 2007. Above-mentioned to traveling bankrupt, the close had in balance of $275 billion in assets beneath management. Altogether, aback traveling accessible in 1994, the close had added net revenues over 600% from $2.73 billion to $19.2 billion and had added agent headcount over 230% from 8,500 to about 28,600.
At the 2008 ALB China Law Awards,41 Lehman Brothers was crowned:
Deal of the Year – Debt Bazaar Deal of the Year
Deal of the Year – Disinterestedness Bazaar Deal of the Year
editResponse to September 11 agitator attacks
The above New York City address now endemic by Barclays.
On September 11, 2001, Lehman active three floors of One Apple Trade Centermost breadth one of its advisers was dead in the agitator attacks of that day. Its all-around address in Three Apple Cyberbanking Centermost were acutely damaged and rendered abstract by falling debris, displacing over 6,500 employees. The coffer recovered bound and rebuilt its presence. Trading operations confused beyond the Hudson River to its Jersey City, New Jersey, facilities, breadth an ad-lib trading attic was congenital in a auberge and brought online beneath than forty-eight hours afterwards the attacks. If banal markets reopened on September 17, 2001, Lehman's sales and trading capabilities were restored.
In the after months, the close fanned out its operations beyond the New York City city breadth in over 40 acting locations. Notably, the investment-banking analysis adapted the first-floor lounges, restaurants, and all 665 guestrooms of the Sheraton Manhattan Auberge into appointment space.42
The coffer aswell experimented with flextime (to allotment appointment space) and telecommuting via basic clandestine networking. In October 2001, Lehman purchased a 32-story, 1,050,000-square-foot (98,000 m2) appointment architecture for a appear sum of $700 million. The building, amid at 745 Seventh Avenue, had afresh been completed, and not yet occupied, by battling Morgan Stanley.
With Morgan Stanley's apple address amid alone two blocks abroad at 1585 Broadway, in the deathwatch of the attacks the close was re-evaluating its appointment affairs which would accept put over 10,000 advisers in the Times Square breadth of New York City. Lehman began affective into the new ability in January and accomplished in March 2002, a move that decidedly additional assurance throughout the firm.citation needed
The close was criticized for not affective aback to its above address in lower Manhattan. Afterward the attacks, alone Deutsche Bank, Goldman Sachs, and Merrill Lynch, of the above firms, remained in the city area. Lehman, however, credibility to the facts that it was committed to break in New York City, that the new address represented an ideal accident breadth the close was atrocious to buy and Morgan Stanley was atrocious to sell, that if the new architecture was purchased, the structural candor of Three Apple Cyberbanking Centermost had not yet been accustomed a apple-pie bill of health, and that in any case, the aggregation could not accept waited until May 2002 for aliment to Three Apple Cyberbanking Centermost to conclude.
After the attacks, Lehman's administration placed added accent on business chain planning. Unlike its rivals, the aggregation was almighty concentrated for a bulge-bracket investment bank. For example, Morgan Stanley maintains a 750,000-square-foot (70,000 m2) trading-and-banking ability in Westchester County, New York. The trading attic of UBS is amid in Stamford, Connecticut. Merrill Lynch's asset-management analysis is amid in Plainsboro Township, New Jersey. Aside from its address in Three Apple Cyberbanking Center, Lehman maintained operations-and-backoffice accessories in Jersey City, amplitude that the close advised abrogation above-mentioned to 9/11. The amplitude was not alone retained, but expanded, including the architecture of a backup-trading facility. In addition, telecommuting technology aboriginal formed out in the canicule afterward the attacks to acquiesce advisers to plan from home was broadcast and added for accepted use throughout the firm.43
edit2003 SEC litigation
In 2003, the aggregation was one of ten firms which accompanying entered into a adjustment with the U.S. Balance and Barter Agency (SEC), the Appointment of the New York State Attorney Accepted and assorted added balance regulators, apropos disproportionate access over anniversary firm's analysis analysts by its investment-banking divisions. Specifically, regulators declared that the firms had break associated analyst advantage with the firms' investment-banking revenues, and promised favorable, market-moving analysis coverage, in barter for underwriting opportunities. The settlement, accepted as the “global settlement”, provided for absolute cyberbanking penalties of $1.4 billion, including $80 actor adjoin Lehman, and structural reforms, including a complete break of investment cyberbanking departments from analysis departments, no analyst compensation, anon or indirectly, from investment-banking revenues, and the accouterment of free, independent, third-party, analysis to the firms' clients.
