Lehmans: From a general store in Alabama to a global banking giant

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The Independent Online

Lehman Brothers, one of the oldest investment banks, was founded by Henry Lehman, a German immigrant to America, in the 1840s. He opened a general store in Alabama, and in 1850 he was joined by his brothers Emanuel and Mayer, who named the firm Lehman Brothers.

By the late 1850s, the brothers had established themselves as cotton traders, and opened an office in New York, America's commodity trading capital. By the 1880s they had expanded into merchant banking, listing on the New York StockExchange in 1887. By the turn of the century, the bank was a founding financier for retailers such as Mears, Woolworth and Macy's.

While the Great Depression hit the banking sector hard, Lehman Brothers capitalised on the difficult conditions by becoming pioneers of new financial instruments, arranging loans between companies and private lenders and enabling businesses to continue raising capital.

Through the 20th century the firm continued to grow, underwriting major IPOs and advising some of America's largest companies. In the 1970s, it acquired Abraham & Co, then merged with Kuhn, Loeb & Co to become the fourth-largest investment bank in the US. In 1984 it was taken over by American Express, which merged it with its investment banking arm, Shearson. Ten years later, it was spun out of Amex and back on to the New York Stock Exchange.

In 2001, the company's headquarters were damaged by the terrorist attacks on the World Trade Centre, forcing a temporary move across the Hudson to New Jersey. The following year it was back in Manhattan, at plush new offices off Times Square.

By 2006, it was the number one dealer on the London Stock Exchange by volume, and was voted number one in the Barron's 500 annual survey of corporate performance in the US and Canada.

However, in 2007, it became clear that Lehman had heavy exposure to the sub-prime sector. Earlier this year, it reported losses of $2.8bn for a single quarter, and had to sell over $6bn in assets. By the end of the first half of 2008, the bank had lost almost three-quarters of its market value in six months.

Rumours of a takeover by the Korean Development Bank, and then Barclays, helped to push up the shares, but by this weekend, talks had ended, leaving the company with no choice but to file for bankruptcy.

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