The Lehman Rally of August 2008

Lehman Brothers
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Lehman Brothers

It was the long, hot summer of 2008.

There was a lot of talk about Fannie Mae and Freddie Mac needing to be rescued by the U.S. government. The Treasury Department was said to be fighting with the Federal Reserve over who should take the losses.

But one Wall Street investment bank that had been struggling for much of year saw a tremendous rally in the closing weeks of August. That investment bank was called Lehman Brothers.

Here's the The New York Times story on the rally, dated Aug. 22, 2008.

Shares in Lehman Brothers rose substantially Friday as investors renewed hopes that the troubled investment bank was moving closer to raising capital to buffer it against a deteriorating economic environment.

Capping a volatile week, the stock soared 16 percent on a report that the state-run Korea Development Bank was considering buying the bank, an idea that a spokesman for the South Korean firm said was “erroneous.” Lehman’s stock closed the day up 5 percent at $14.41.

The spokesman for Korea Development Bank told The New York Times that the bank was in the process of being privatized and was looking at various acquisitions. But he denied that buying Lehman was an option.

“We have various thoughts for our future, but we don’t have any specific institutions in mind,” said the spokesman, who declined to be named, citing company policy.

Lehman’s suddenly soaring stock underscores the volatility surrounding the firm as it scrambles to assess its options in the face of an abysmal third quarter. Only days ago, its shares tumbled more than 13 percent.

Sound familiar?

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