What Caused the Failure of Lehman Brothers? Could it have been prevented? How? Recommendations for Going Forward
Between 2003-2004, Lehman obtained five mortgage lenders, together with the BNC Mortgage and Aurora Loan Services, which focused in ALT- A loans (without complete documentation to borrowers) during the housing boom in the USA.
Lehman’s acquirement appeared perceptive; income from Lehman’s real estate businesses allowed income in the capital markets unit to flow to 56% between 2004-2006, a quicker rate of growth. The firm securitized $146 billion of mortgages in 2006, a 10% increase from 2005, and accounted record profits until 2007. In 2007, the firm announced the net income of $4.2 billion on $19.3 billion revenue.