February 15, 1827, is the birthdate of Emanuel Lehman, one of the trio of brothers who founded the brokerage house that bore their name. From a general store that stood across the square from the slave market in pre-Civil War Montgomery, Alabama, Lehman Brothers evolved into one of Wall Street’s largest and most prestigious investment banks.
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But all that came to an end on September 15, 2008, when Lehman Brothers, with more than 26,000 employees worldwide and some $600 billion in assets, filed for bankruptcy, presaging the start of a recession from which the world is still struggling to emerge.
Emanuel Lehman was born Mendel Lehmann in the small town of Rimpar, north of Wuerzburg, Bavaria. His father, Abraham Lehmann, was a successful cattle trader, and his mother was the former Eva Loew. Mendel and his nine siblings attended a Catholic-run school in the morning and studied Hebrew and Jewish subjects in the afternoon with a local cantor.
In 1847, Mendel sailed to the United States, to which his older brother Henry had emigrated three years earlier. Henry had opened a shop, first in Mobile, Alabama, which he then moved to Montgomery, and Emanuel, as he now called himself (the brothers dropped the second “n” from their surname), joined him in operating it. When their younger brother Mayer came over in 1850, he too signed on, and the store sign was changed to read “Lehman Bros.”
Cotton and the Confederate cause
At the time, the cotton business in the South was growing at an unprecedented rate – the yield doubled between 1849 and 1859 – and the Lehmans put themselves at the service of the crop’s producers. Commuting along the Alabama River, Emanuel sold farmers equipment and bought their cotton, which was in demand in the textile mills of both New England and Europe.
Henry Lehman was felled by yellow fever in 1855, but once Emanuel and Mayer recovered from the shock, they expanded the business further. The following year, Emanuel moved to New York, where he opened an office to handle the growing trade with Northern clients.
Much of that business came to a halt during the 1861-1865 Civil War, although the Lehmans did business with both sides and Mayer had some success in running the Union’s maritime blockade to prevent the transport of cotton from the South. (Mayer was both a slave owner and an enthusiastic supporter of the Confederate cause.)
After the war, the Lehman siblings raised money for the reconstruction of Alabama, but by 1868 Mayer had joined Emanuel in New York. By now, Lehman Brothers was selling much more than cotton; it was doing business in iron, sugar, coffee and petroleum, as well as financing the construction of many of the railroads now crisscrossing the expanding country.
Mayer served as the public face of the firm, while Emanuel handled the paperwork. (The family had a saying: “Mayer made the money, and Emanuel conserved it.”)
So close were Emanuel and Mayer that they were said not to own separate bank accounts. In 1859, Emanuel married Pauline Sondheim, who bore four children before her death in 1871. One of them, Philip, took over the principal management of Lehman Brothers after Emanuel retired a few years after Mayer’s death in 1897.
Emanuel Lehman died on January 10, 1907, a month short of his 80th birthday.
Under Philip’s direction, Lehman Brothers moved from being a mercantile bank to an investment bank, and arranged the initial stock offerings for companies such as Sears, Woolworth and Continental Can. The bank became an early victim of the subprime-mortgage crisis that swept through the global markets. With declared assets of $639 billion and debt of $619 billion, the bank’s bankruptcy filing on September 15, 2008 was the biggest in history.