Lehman Brothers played a major role in the subprime mortgage crisis, which ultimately led to its downfall. Subprime mortgages are loans made to borrowers with poor credit histories and low credit scores. These loans are often characterized by high interest rates and fees, and they are often made to borrowers who cannot afford to repay them.
Lehman Brothers was heavily involved in the securitization of subprime mortgages. Securitization is the process of pooling together a group of loans and selling them as a security. This process allowed Lehman Brothers to sell off the risk associated with subprime mortgages to other investors.
However, the value of subprime mortgages began to decline in 2007, as more and more borrowers defaulted on their loans. This led to losses for Lehman Brothers and other financial institutions that had invested in subprime mortgages.
In addition to the subprime mortgage crisis, Lehman Brothers was also affected by the global financial crisis that began in 2008. The global financial crisis was caused by a number of factors, including the collapse of the housing market, the rise in oil prices, and the failure of several major financial institutions.
The global financial crisis caused a sharp decline in the value of Lehman Brothers' assets. This led to a loss of confidence in the firm, and its creditors began to demand repayment of their loans. Lehman Brothers was unable to meet these demands, and it filed for bankruptcy on September 15, 2008.
The collapse of Lehman Brothers was a major event in the global financial crisis. It led to a loss of confidence in the financial system, and it contributed to the economic recession that followed.