The culmination of the crisis caused by subprime mortgages was the filing for bankruptcy on September 15, 2008 by Lehman Brothers. The Federal Reserve contacted a number of banks in order to negotiate financing for the reorganization of the financial services company after it was informed of an impending credit downgrade due to its heavy position in subprime mortgages. This was done after the company had received notification of the impending credit downgrade. After these conversations came to a dead end, Lehman Brothers submitted a petition for bankruptcy under Chapter 11 that is still the largest in the history of the United States, including more than 600 billion dollars in assets.
The headquarters of Lehman Brothers in New York City, one year before the company filed for bankruptcy
The bankruptcy led to a one-day decrease of 4.5 percent in the Dow Jones Industrial Average, which at the time was the greatest decline since the terrorist events on September 11, 2001. It was a warning sign that the government's ability to manage the crisis was reaching its limits, and it sparked widespread financial anxiety. Both the money market mutual funds, which are an important source of credit, and the interbank lending market tightened, which threatened the imminent failure of banks. Money market mutual funds saw mass withdrawal demands to avoid losses. In response to the widespread fear, the government and the Federal Reserve system implemented a number of hastily enacted emergency measures.
The parent business, Lehman Brothers Holdings, Inc., was still in the process of being liquidated as of the month of May 2022 before the Bankruptcy Court for the Southern District of New York. The company's debtors have continued to be monitored by caretaker offices located both in the United States and in other countries.