Looking Back on Lehman

By no means was the market outlook rosy before Lehman Brothers' Sept. 15, 2008, collapse, but we now know economic conditions were much worse than we imagined. News of mortgage defaults and the ensuing credit crunch surfaced as early as 2007, but at the time, few envisioned a turmoil so strong that it would overcome the behemoths of Wall Street and spread through other established financial institutions.

Lehman's fall and the ensuing crisis at AIG, Merrill Lynch, Washington Mutual and others sent the economy into a nose-dive. Markets did not reach their lows until six months later, on March 9, 2009. On Sept. 11, 2008, the S&P 500 was at 1,249, compared with 676 on March 9--a 46% decline. The S&P has made back some of its losses since then, closing at 1,044 on Sept. 10, 2009, but many worry we're still not out of the woods.

Though the strong market recovery over the last six months has pushed the events of last fall seemingly further into the rearview mirror, a look into Morningstar's commentary archive shows just how critical and fast-paced the events were unfolding just prior to and immediately after Lehman's fall, which triggered a chain of events ultimately requiring massive government bailout efforts.

Videos
Weighing Outcomes for Lehman, WaMu (9/12/2008)
On the Friday before the firms' fates were sealed, we thought the odds were long that the government would actually let Lehman fail. Today, bank analyst Matt Warren characterizes the lack of a rescue as a critical mistake. 

Market's Next Test: Lehman CDS Settlement (10/08/08)
Unraveling credit default swaps and the upcoming Lehman CDS auction.

Risk from Lehman CDS Settlement Lessens (10/10/08)
Friday's settlement helped clarify an opaque credit default swap market.

Stock Analyst Notes
Strategic Changes with Lehman's 3Q Results (9/10/08)
Lehman to spin off its commercial real estate related assets as a separate company.

Lehman Files for Chapter 11 (9/15/08)
Despite recent attempts to sell the firm, Lehman Brothers announced that it is filing for Chapter 11 bankruptcy.

Barclays Buys Lehman Assets for a Song (9/18/08)
Barclays announced that it reached an agreement to purchase a significant chunk of now-bankrupt Lehman's operations, plus Lehman's Manhattan headquarters.

Articles
Lehman, AIG, Merrill: Which Funds Are Most Affected? (9/15/08)
The top holders of the headline-making financials firms.

All-Star Managers' Second-Quarter Update (9/15/08)
Topnotch stock-pickers persevere in the face of falling prices.

A Large Money Market Fund Breaks the Buck (9/17/08)
What does this mean for your money market investment?

Funds Exposed to Other Endangered Financials (9/17/08)
These funds made big bets on investment banks.

Short-Sale Restrictions and Inverse ETFs (9/19/08)
How the SEC's unprecedented ban affects these ETFs.

Which Funds Have Been Light on Financials? (9/22/08)
These offerings have dodged some of the market's recent bullets.

Note to Uncle Sam: You Want Us to Pay for What? (9/23/08)
A primer on the securities at the center of a proposed $700 billion bailout for the financial industry.

Our Outlook for Financial Services Stocks (9/24/08)
The effects of the credit crisis on the financial services sector vary widely by industry segment.

Our Take on the Third Quarter (9/24/08)
Stocks suffer through as historic market events unfold.

Why Is Everyone So Desperate to Spend $700 Billion? (9/25/08)
Why Bernanke and Paulson are anxious to push through a rescue package.

Three Financials Experts Pick through the Wreckage (9/25/08)
Fund managers spotlight winners and losers as the sector reshuffles.

Big Funds That Avoided Troubled Financials (9/26/08)
Which mutual funds have managed to sidestep the carnage?

The Heart of the Matter: What Are Swaps? (10/3/08)
A look at what Warren Buffett calls 'financial weapons of mass destruction.'

Is the Market Wired with Weapons of Mass Destruction? (10/6/08)
Swaps are like nuclear technology--raw power wrapped in risk.

Market Caught in Nasty Feedback Loop (10/10/08)
Fear makes opportunities for those with cash, patience, and fortitude.

Uncertainty at the Heart of the Mortgage Crisis (10/14/08)
Why knowing the 'right' price is a lot harder than it sounds.

Grantham: Stocks Haven't Been This Cheap since 1987 (10/14/08)
Market seer Jeremy Grantham predicted financial debacle, and now he's buying.

Lehman: One Year Later
As the market recovers from the Wall Street titan's failure and a chilling credit crisis, PIMCO's El-Erian, TCW's Gundlach, Morningstar analysts, and others chart the landscape, risks, and opportunities for investors today.