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Quote of the Day
Over the long term, it’s hard for a stock to earn a much better return than the business which underlies it.
— Charlie Munger
This day in history would unveil serious cultural faults in one of America’s largest and most successful banks, and lead to nearly a decade of poor returns for its shareholders. Munger may have been focusing more on underlying financials of a company, but culture also plays an important part of a company’s long-term success.
September 9th – This Day in Stock Market History
September 9, 2008 – Lehman Brothers Stock Plummets, Panic Spreads
In the crucible of the 2008 financial crisis, this day in 2008 stands out as an inflection point of fear.
Lehman Brothers, one of the most storied Wall Street investment banks, saw its stock fall 45% amid frantic rumors of its impending collapse.
Attempts to find a rescuer or capital infusion were faltering, and investors realized Lehman might not survive. The market reaction was swift and brutal: the Dow Jones Industrial Average sank over 280 points by the close, wiping out nearly all the gains from the prior day’s relief rally on the Fannie Mae/Freddie Mac bailout.
A week later, on September 15th, 2008 Lehman Brothers filed for bankruptcy, triggering an even deeper market meltdown. September 9 thus marks the last-gasp moment when Lehman’s fall went from possibility to near inevitability, with global markets bracing for a full-blown crisis.
September 9th, 2016 – Wells Fargo’s Sham Account Scandal Erupts
In September 2016, a massive banking scandal came to light: Wells Fargo admitted that thousands of employees had opened millions of unauthorized customer accounts to meet aggressive sales targets.
Regulators announced fines totaling $185 million for Wells Fargo’s abuses the day before, and on this day Wells Fargo’s stock fell as soon as trading begun.
Wells Fargo shares fell about 2% on the initial news, a modest drop at first glance. But the real damage was just beginning. The scandal triggered a furious public and political backlash. Over the ensuing days and weeks, Wells Fargo’s market value and reputation suffered greatly.
The stock would fall 10% by November, and after factoring volatility around the 2020 COVID crisis, would effectively be flat for the next 8 years.
Outrage over these fake accounts was so intense that by the end of the month CEO John Stumpf was hauled before Congress to be grilled by both Senate and House committees. Lawmakers from both parties excoriated Wells Fargo’s “toxic culture” of high-pressure cross-selling.
Ultimately, Stumpf resigned under pressure in October 2016. The bank also faced years of regulatory fallout, including growth restrictions by the Federal Reserve.
Read of the Day
Too Big to Fail by Andrew Ross Sorkin
This is the definitive inside account of the 2008 financial crisis, capturing the chaos and backroom deals as Wall Street titans and Washington power brokers scrambled to prevent total collapse.
With insider detail, Sorkin shows how fear, hubris, and desperation collided in the days leading up to Lehman Brothers’ bankruptcy. The book reads like a thriller but is grounded in real events that reshaped the global economy.
For investors, it’s a sobering reminder of how fragile the system can be when leverage, complexity, and misplaced confidence all converge.