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Lehman Brothers files for bankruptcy

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Tuesday, September 16, 2008

Lehman Brothers’ headquarters in New York City.
Image: David Shankbone.

Lehman Brothers, a major American investment banker, has filed paperwork for bankruptcy. It would be the largest collapse of an investment firm in 18 years.

Lehman attempted to find a buyer over the weekend but it met with no success. The last remaining bidder, Barclays PLC bank pulled out Sunday afternoon. Barclays, a United Kingdom-based bank, had become the sole bidder after a consortium led by Bank of America pulled out early Sunday morning citing that it would need government support before considering a bid. The support would consist of backing bad debts owed by Lehman. Barclays cited a similar reason for withdrawing its bid.

As of Monday morning, no buyer has come through to take control of the firm. As a result, the firm filed for bankruptcy protection.

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The main sticking point for potential buyers appears to be the unwillingness for the U.S. government to provide financial support. Hank Paulson, Treasury secretary, has repeatedly said that no government money will be given to Lehman or used in any takeover the firm. Government money was used in the takeover of Bear Stearns by JPMorgan Chase in March of this year. Bear Stearns suffered similar problems as Lehman.

A spokesmen for Barclays told the Financial Times, "the proposed transaction required a guarantee for the trading operations of Lehman Brothers that was potentially open-ended, and we were not willing to provide that guarantee."

Paulson, along with other government officials, proposed a solution that Lehman would get split into two separate entities. However, this proposal has been discarded by many of Wall Street banks.

Members of the G8 have reportedly been keep abreast of the situation by U.S. government.

The firm, which has over 25,000 staffers, has suffered bad results due to the subprime mortgage crisis.



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This page is archived, and is no longer publicly editable.
Articles presented on Wikinews reflect the specific time at which they were written and published, and do not attempt to encompass events or knowledge which occur or become known after their publication.

Got a correction? Add the template {{editprotected}} to the talk page along with your corrections, and it will be brought to the attention of the administrators.

Please note that due to our archival policy, we will not alter or update the content of articles that are archived, but will only accept requests to make grammatical and formatting corrections.

Note that some listed sources or external links may no longer be available online due to age.


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