Lehman brothers causes a stir..

Discussion in 'Financial Cents' started by Tango3, Sep 14, 2008.

  1. Tango3

    Tango3 Aimless wanderer

    "Holy guacamole" batman!!!!

    Turned on cnn tonight where the news is " special coverage" of Lehmans brothers going under:
    Death watch for Lehman Brothers as no buyer emerges

    3 hours ago
    WASHINGTON (AFP) — A last-ditch effort to find a buyer for troubled Wall Street investment bank Lehman Brothers appeared near collapse in a turbulent weekend for the finance sector.
    As emergency weekend talks on Lehman's woes were being held in New York, a London source at British bank Barclays, who requested anonymity, said it walked away from negotiations because of concerns it would have to guarantee the 158-year-old US firm's trading commitments.
    The news came as US Treasury and Federal Reserve officials scrambled to head off a collapse of Lehman Brothers which some say could send shockwaves through the global financial system.
    Separately, reports swirled about a possible buyout of another troubled Wall Street giant, Merrill Lynch. And American International Group, the insurance giant, was set to unveil restructuring plans in the face of a massive share price drop.
    "Clearly things are changing quickly and are very fluid," said David Kotok, chief investment officer at Cumberland Investments.
    "The Fed and the Treasury are trying to get a deal done before the markets open on Monday. It now appears that this original effort to merge Lehman with one party has failed."
    Meanwhile specter of liquidation loomed: the International Swaps and Derivatives Association, a group of market dealers, said it was holding a special trading session Sunday "to reduce risk associated with a potential Lehman Brothers Holding Inc. bankruptcy filing."
    It said any trades were contingent on a bankruptcy filing Sunday.
    "I think the most likely option for Lehman is a bankruptcy filing by the end of the day today," said Peter Cohan of the consulting firm Peter Cohan & Associates.
    Barry Ritholtz of the research firm FusionIQ said a bankruptcy could mean further financial market turmoil.
    "We are now on bankruptcy watch, with the midnight hour as the key line in the sand." he said. "The Wall Street open Monday in the event of a Lehman failure will be wild."
    According to some analysts, the talks on Lehman Brothers were snagged over whether the Federal Reserve would guarantee a deal with Lehman's troubled mortgage securities as was done to avert a meltdown earlier this year of Bear Stearns, bought by JPMorgan Chase.
    "We infer that the problem at Lehman is bigger or worse than at Bear Stearns or both," Kotok said.
    Peter Morici, economist at the University of Maryland, said finding a buyer for Lehman Brothers may be difficult because of its "toxic" holdings in soured real estate assets.
    "No other large firm should buy Lehman whole -- its toxic real estate and securities are too difficult to value," he said. "Only a fool would think he could fairly assess their value, unless those are assigned them a value of zero."
    But Morici said Lehman's demise may hasten needed reforms on Wall Street.
    "Sooner or later after enough dominos fall, compensation structures and business practices will return to more conservative norms of 10 and 20 years ago," Morici said. "Only then will the credit crisis resolve and the economy have a decent shot at full recovery."
    Meanwhile Bank of America, described in recent days as a leading takeover candidate for Lehman Brothers, was now in advanced discussions to buy Merrill Lynch, another Wall Street giant ravaged by the subprime real estate crisis and credit crunch.
    The New York Times said the talks centered around a buyout of Merrill at 25 to 30 dollars a share in stock, making the deal worth some 38 billion dollars. Merrill ended Friday at 17.05 dollars.
    The Wall Street Journal reported that AIG, which has also been slammed by real estate losses, planned a comprehensive restructuring by early Monday morning that is likely to include the disposal of major assets including its aircraft-leasing business and other holdings.
    Lehman shares have tumbled more than 90 percent this year and failed to recover on plans announced Wednesday to sell off key assets to shore up its finances.
    The beleaguered Wall Street firm, seen as in desperate need for a capital injection, lost an estimated 3.9 billion dollars in its fiscal third quarter amid fresh writedowns on mortgage assets.
  2. Tracy

    Tracy Insatiably Curious Moderator Founding Member

    It'll be interesting to watch AIG and see what holdings they drop.
  3. BAT1

    BAT1 Cowboys know no fear

    Dow is down 504 points at 5pm. AIG has a lot of clients in Houston. Of course they are reinsured, but before long the reinsurers will fall at this rate. Which domino next. Washinton Mutual? Cramer is on TV blaming the CEO's not the Govt. If this was planned it is a surefire way to promote Facisim. Most of Lehman Bros employees got 40% of their pay in stock options. It's all about Paper vs Gold
    Gas is 95 a barrel, at least that is good. [cow]
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