Lehman Brothers Bank Collapse Paper

After 158 years in business as a major New York investment bank, Lehman Brothers collapsed in 2008. Investors had lost confidence after the company revealed enormous losses in its mortgage banking unit. Attempts to rescue the company failed, and it filed for bankruptcy. The economy was already distressed, but Lehman’s failure helped trigger the steep and prolonged decline that has been called the “Great Recession” (Davidson, 2012).

How did poor results in one unit, mortgage banking, bring down a major, diversified bank? How did the collapse of one bank bring down the global economy? Lehman’s misfortune illustrates the interconnectedness of banking, which is a system, as well as how failures in the banking system can spread through a larger system, the economy. As Meadows states in Thinking in Systems, a “system is more than the sum of its parts” (2008, p. 12).

As you review Peter Senge’s The Fifth Discipline: The Art & Practice of the Learning Organization, consider his premise that “today’s problems come from yesterday’s solutions” (2006, p. 57). Think back through your own work history to identify a situation that illustrates poor systems thinking. Consider whether managers were applying yesterday’s solutions to a current problem.

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