Lehman Brothers

On this day in 2008, the Wall Street investment firm Lehman Brothers filed for Chapter 11 bankruptcy, causing the S&P to lose more than 500 points by day's end, and costing its 26,000 employees their jobs. Lehman's collapse was the largest bankruptcy in world history. Investors, including the pension funds of many middle-income Americans, saw Lehman's stock plummet 96 percent by the close of the day. One of only five investment banks on Wall Street, Lehman was a 158-year-old storied institution that had survived all manner of economic crisis, including the great railroad bankruptcies of the 1800s. As technology made trading stock easier, it became less profitable for large banks, and Lehman sought out riskier and riskier investments. They bought up large bundles of mortgages in a housing market that in recent years had seen a doubling and tripling of home values. A large number of these were subprime mortgages, sold to homeowners and investors that should have never been approved, and were unable to pay them back, making them virtually worthless.