The Economics of Lehman Brothers - How a 158 Year Old Bank Died in a Weekend | The Market Brief

Lehman Brothers had just posted the best year in its history, making roughly $4.2 billion in profit. Just 18 months later, the 158-year-old investment bank was gone. So what actually killed Lehman? In this breakdown, we unpack the business model that made Lehman billions, how investment banks really make money, why 31-to-1 leverage can turn tiny losses into total destruction, and why having more than $600 billion in assets didn’t mean Lehman had enough cash to survive. We’ll break down: How investment banks make money from advice, underwriting, trading, and investing Why $4.2 billion in profit could coexist with extreme financial fragility How 31:1 leverage magnified both returns and losses How Lehman became deeply exposed to mortgages and real estate How overnight repo funding created a dangerous dependence on lender confidence Why Bear Stearns was an early warning What Repo 105 did to Lehman’s balance sheet Why Lehman ultimately ran out of liquidity And why the real problem wasn’t that Lehman was poor—it was that it was rich in the wrong things This is the story of leverage, liquidity, incentives, and borrowed confidence—and how they can bring down a financial giant almost overnight. #LehmanBrothers #FinancialCrisis #Economics