What happened to Lehman Brothers?

Usually I don’t pay too much attention to what’s happening on Wall St. My investing strategy, outlined in my Investing for Beginners piece, is to buy quality low cost highly diversified index funds and hold them for the long term.

Lehman Brothers HeadquartersHowever, it was hard not to pay attention today when Lehman Brothers announced they were filing bankruptcy. This is the largest bankruptcy in U.S. history even surpassing that of Worldcom & Enron and spells the end of 150+ year old company. Other major news of the day was that Bank of America was acquiring Merrill Lynch and that AIG was also in major financial trouble. The result of all this bad news was a 500 point drop in the DOW, the largest since the terrorist attacks on 9/11/2001.

I’ve been browsing my favorite financial sites this evening trying to learn more about what happened to Lehman Brothers today and why. I know of course that we are in the midst of a credit crisis and a lot of financial institutions got themselves into trouble by taking on too much sub prime related securities and that a lot of them were searching for extra capital but what exactly caused Lehman Brothers to go down today?

I wanted to share one article I found titled “The End of Wallstreet” from CNN Money that gave me a better picture of why Lehman Brothers went belly up. The article goes on to predict what will happen to Morgan Stanley and Goldman Sachs, the two remaining Wall Street investment banks. Its a good read so if your searching for some information on what went down today, you may want to check it out.

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