Sep. 15--On a dramatic Sunday a year ago, the 158-year-old New York investment bank Lehman Bros. Holdings Inc. collapsed like a house of cards as it filed for bankruptcy protection, and eventual liquidation, with more than $600 billion in debt.

Within months, the nation's unemployment would soar, gross domestic product would sink like a rock, and the financial and auto industries would be bailed out.

It seemed like an event out of America's financially reckless Gilded Age, one for the textbooks.

Economists say today that among the many financial catastrophes of the fall of 2008 -- the plunging stock market, the AIG bailout, the foreclosures, and the subprime mortgage crisis -- Lehman Bros. was one that most traumatized the global economy.

"It was the sheer shock that they actually failed," Bill Dunkelberg, a Temple University professor and chief economist with the National Federation of Independent Business, said of Lehman Bros.'s inglorious end on Sept. 14, 2008. "It generated so much uncertainty. Everybody pulled back."

Said Robert Dye, senior economist with PNC Financial Services Group: "All the economic statistics fell off a cliff after Lehman Bros."

After Lehman, Americans lost confidence in the nation's financial institutions as they read about wobbly banks and declining housing prices.

They asked: How many more Lehmans were out there? Is my money safe? Can banks be trusted?

Two weeks after Lehman's bankruptcy, Congress failed in its first attempt to secure a $700 billion bailout of the financial system, and the stock market plunged 777 points in one day.

Toxic mortgages and frozen credit markets were terms that dominated cable-TV business talk shows.

Within four months of Lehman's demise, the U.S. industrial output had plunged in most industries. Nobody seemed to be buying.

Dow Chemical Co., which had a deal to acquire Philadelphia's Rohm & Haas Co. for about $15.5 billion at the time, would later say that the operating capacity at its plants in December fell to 44 percent, the lowest rate ever recorded at the giant company.

The nation's companies shed 100,000 to 150,000 jobs a month between January and August 2008, which was considered a mild recession.

But after Lehman, it got much worse. In January 2009, the nation's companies chopped 741,000 jobs, a startling bloodbath for the labor market, said Dye.

In Philadelphia, unemployment soared to 10.5 percent in July, the latest figure available, from an annual average jobless rate of 7.2 percent in 2008.

"Some people look back and say, 'The system survived,' " said Mark Vitner, managing director and senior economist with Wells Fargo. "I say, 'Yeah, after two heart transplants and a lot of luck.' "

Contact staff writer Bob Fernandez at 215-854-5897 or bob.fernandez@phillynews.com.

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