Lehman Brothers history

An INVESTMENT BANKING house founded by Henry Lehman in Montgomery, Alabama, in 1845 as a dry goods merchandiser. Lehman was born in Germany in 1821 and immigrated to Alabama, where he established his general merchandise store. Lehman died in 1854, and the store passed to his two brothers. Emanuel Lehman opened an office in New York City in 1858, trading in cotton. Another brother, Mayer, had close ties with the Confederate government in Richmond, and the company prospered before the Civil War supplying the Confederate Army. They became so prosperous trading commodities that they were able to loan the state of Alabama $100,000 after the war.

In 1868, the New York City office continued to prosper, but the firm remained primarily a commodities trading firm until the 1890s. It was a member of many of the futures exchanges in New York, including the New York Cotton Exchange and Coffee Exchange. It was also a member of the NEW YORK STOCK EXCHANGE, having joined in 1887. The firm began turning its attention toward investment banking when Philip Lehman entered the firm in 1882. Born and educated in New York City, he became a partner five years later.

In the 1890s, Lehman Brothers began establishing banks in New York, the best-known of which was the Trust Company of America, founded in 1899. After the turn of the century, the firm began a rapid entry into the investment banking business. It underwrote stocks of newly emerging companies in growing industries, notably retailing. Before World War I, it joined with GOLDMAN SACHS in underwriting many new issues, the best known of which was for SEARS, ROEBUCK & CO. in 1906.

The first nonfamily member of the firm was not admitted to a partnership until 1924. Most of the partners were members of the Lehman family. The best-known outside of banking circles was Herbert Lehman, who became a partner in 1908 and retired in 1928. Subsequently he was elected governor of New York and a U.S. senator from New York.

In the first quarter of the century, Lehman underwrote new stock issues for companies such as the Underwood Corp., the Studebaker Corp., and the F. W. Woolworth Corp. After the Glass- Steagall Act was passed in 1933, Lehman Brothers became purely an investment banking firm and remained a partnership in the post–World War II years. From 1928, the firm was run by Robert “Bobbie” Lehman, the son of Philip Lehman, who was responsible for shaping the firm for the remainder of the 20th century.

In the 1970s, Peter G. Peterson became chairman of the firm. He helped reorganize it after several years of poor performance and was succeeded by Lewis Glucksman. In 1977, the firm acquired KUHN LOEB & CO., and in 1984, merger talks were held with Shearson American Express. Lehman Brothers was acquired by Shearson, and the company changed its name to Shearson Lehman American Express, becoming the second-largest securities house on Wall Street. In the mid-1990s, AMERICAN EXPRESS began to restructure itself, and Lehman Brothers was spun off as a public company, assuming its original name. It remains one of Wall Street’s best-known and oldest investment banking firms.

Further reading

• Auletta, Ken. Greed and Glory on Wall Street: The Fall of the House of Lehman. New York: Random House, 1986. 
• Geisst, Charles R. The Last Partnerships: Inside the Great Wall Street Money Dynasties. New York: McGraw-Hill, 2001.