5 Biggest Failed Companies Due To Poor Management

1. Lehman Brothers Holdings Inc.

Asset Value at Time of Bankruptcy: $691 billion

Lehman Brothers Holdings Inc. was the fourth largest investment bank in America before trouble hit. The firm was headquartered in New York, New York, United States.

Lehman Brothers Holdings Inc.’s management practices, which saw the firm borrow unimaginable amounts to write mortgages, and then use these mortgages as the basis of a new asset class (called a mortgage backed security) to sell to other investors, is a bone chilling example of how a handful of executives can ruin lives and generations. By 2008, Lehman Brothers Holdings Inc. had $680 billion in assets that were supported by only $23 billion of its own capital. As the U.S. economy slowed down due to high interest rates, these mortgages defaulted, and Lehman Brothers Holdings Inc. was left unable to pay its obligations.

Lehman Brothers Holdings Inc. declared bankruptcy on September 15, 2008, just eleven days before Washington Mutual, Inc. would fall. As a result of the decisions taken by these banks, the U.S. Federal Reserve’s balance sheet has grown from $1 trillion in 2008 to close to $8.6 trillion as of November 2022. This balance sheet shows the Fed’s purchases, and it often buys distressed securities, such as mortgage backed ones by printing the U.S. dollar, to stop the market from destroying itself. From September 1, 2008, to December 8, 2008, the balance sheet grew from $905 billion to $2.2 trillion, resulting in a weaker dollar and reduced consumer purchasing power for the ordinary American.

In short, the impact of the decisions made by Lehman Brothers Holdings Inc. that led to the 2008 financial crisis is still felt globally in 2022.

Disclosure: None. You can also take a look at 10 Growth Stocks with Upside Potential and 15 Best Consistent Dividend Stocks to Buy. 

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