September 2008 — Lehman Brothers
Lehman Brothers, September 2008 — The Fund Manager's Seat
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It's Monday, September 15, 2008. Lehman Brothers has just filed the largest bankruptcy in U.S. history. You manage a diversified fund with meaningful exposure to financial-sector stocks and short-term credit markets. Your phone hasn't stopped ringing since 6 a.m.
Six months earlier, the government had backstopped Bear Stearns' sale to JPMorgan, and many investors had come to assume any large, interconnected institution would get similar treatment. Lehman's failure over the weekend — after Barclays and Bank of America both walked away from rescue talks — is a genuine regime change: the government just showed it will, in fact, let a major firm fail.