Lehman Bros

The Lehman Brothers Scandal The Lehman Brothers is a Global financial services firm that’s been around for 158 years, founded by Henry Lehman and his brothers, Emanuel and Mayer, where they have survived railroad bankruptcies, the Great Depression, two world wars and a capital shortage. What was the Lehman Brothers scandal? Well the Lehman Brothers, Ernst & Young and Banks in the Cayman Islands together covered up the Lehman Brothers hiding over $50 billion in loans disguised as sales. Throughout 2003 and 2004, with housing rising in value in the U.S, Lehman acquired five mortgage lenders, including subprime lender BNC Mortgage and Aurora Loan Services, which specialized in loans to borrowers without the need of full documents. Lehman's recording of revenues from Lehman's real estate businesses enabled revenues in the capital markets unit to surge 56% from 2004 to 2006, a faster rate of growth than other businesses in investment banking or asset management. The firm secured $146 billion of mortgages in 2006, a 10% increase from 2005. Lehman had reported that there were record profits every year from 2005 to 2007, especially in 2007, where the firm reported a net income of a record $4.2 billion on revenue of $19.3 billion. In February 2007, the stock reached a record $86.18, giving Lehman a market capitalization of close to $60 billion which got the attention of others. Early in 2007, holes in the U.S. housing market were beginning to show as defaults on subprime mortgages rose to a seven-year high. On March 14, 2007, a day after the stock had its biggest one-day drop in five years on concerns that rising defaults would affect Lehman's profitability; the firm reported record revenues and profit for its fiscal first quarter. In the post-earnings conference call, Lehman's chief financial officer (CFO) said that the risks posed by rising home were well contained and would have little impact on the firm's earnings. He also said that he did not predict problems