Lehman Brothers filed for Chapter 11 bankruptcy protection in New York after weekend negotiations to find a buyer collapsed, leaving the investment bank without the emergency backing it had sought from the Federal Reserve.
The failure of a firm with roughly $600bn in assets marked the largest bankruptcy filing in American history and removed any remaining assumption that large Wall Street institutions would be rescued. Credit markets seized almost immediately as banks became unwilling to lend to one another, and share prices fell sharply from Tokyo to London.
The immediate cause was Lehman's exposure to securities backed by American subprime mortgages, whose value had been falling for more than a year. Regulators and lawmakers spent the following weeks assembling emergency support for the wider banking system, but the collapse is widely treated as the moment a housing downturn became a global financial crisis.
