Lehman Brothers Too Big To Fail? Don't Count On It
Wall Street is in a full meltdown. Bear Stearns (BSC) is gone, so the markets are wondering who's next. The leading contender? Lehman Brothers (LEH).
Lehman's stock dropped 15% on Friday, and it's down by another third in pre-market trading. Some specific concerns:
* Like Bear Stearns, Lehman is relatively small and undiversified.
* Like Bear Stearns, Lehman just reiterated that its "liquidity position is strong."
* Like Bear Stearns, at least one of Lehman's trading partners is cutting it off: The WSJ reports that Southeast Asia's biggest bank, DBS Holdings, has asked traders not to enter new transactions with Lehman Brothers. "DBS has sent an internal e-mail saying it would not deal with Lehman Brothers from now on." [Update: DBS has since re-authorized some Lehman trades]
* Like Bear Stearns, Lehman gambles about $30 for every $1 it has.
* Like Bear Stearns, Lehman chose not to raise additional capital last fall.
* Like Bear Stearns, no one has any idea what's really on Lehman's balance sheet (including, probably, Lehman)
* Unlike Bear Stearns, says an analyst at ING, Lehman is NOT too big to fail, which means that the Fed might not be in such a panic to bail it out.
If Lehman is hellbent on following the Bear Stearns playbook, it will now trot Dick Fuld out onto CNBC to say that the bank is in great shape. And then, a day or two later, it will go bankrupt.
More on the Wall Street Meltdown:
$2 Bear Stearns Sale Reveals The True Value of All Stocks
Bear Stearns Debacle: Shareholders Getting What They Deserve
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Down 155 on Friday, up huge on Monday, explain that.
It is unclear that the seriousness of what just happened has sunk in.
While BILLIONS were taken out of treasuries by individuals who claimed they knew something no one else knew, and their expertise gets blown out of the water, there not a sign that anyone is asking for the money back. It must be OK then. And it seem further OK that the tax payers are told to do the bailing.
It sure is a good thing we exported all those trillions of dollars that can now come back as loans.
How about starting with a simple fix of the boardroom.... just for starters....
http://pacificgatepost.blogspot.com/2008/03/letter-to-ceos-of-fortune-1000-cos.html
....... then go from there. Pass it on.
I think Bear Sterns bailout might go down as the biggest heist in history. How did bushbuddies do here?. all that money, who has it now? Carlyle subsidiaries taking it in the shorts too. I know HenryWaxman is busy now, but this smells bad..
yes this sounds really bad. you know that all sorts of people profitted for the last 4 years off of this mess and they have headed to the high ground of the free market and NOW they want us working slobs to pick up the pieces...
It's time to fix the tax structure and give a free ride to the working stiff and let these sleazes fix what they broke!!!
Well, sure. The CEOs are ready to walk away with bizillion dollar going-away presents while leaving middle-income American TAXPAYERS HOLDING THE BILL. Thanks for the screw job, NUTTY LIAR GWBush.
Ever since the 80s this is what we have been hearing: "poverty sucks"; "Greed is good".
No one makes posters saying morality is good; it is important to have mettle, it is important to acquire knowledge, no one says it important to be true to yourself; or that it is important to have the courage of your convictions.
Maybe that is why we have become the country we have become; and the village idiots are running the show; maybe that is why so many can’t believe their eyes and ears, when they see or experience Barack Obama.
But you know what? It is not worthwhile to do anything not to be poor; or to have money, at any cost or at the cost of your equanimity, and your spirit.
And you know what else? "Greed" is a sickness, and it brings the afflicted to a poor end.
The reason greed is not good is because it is a hungry and insatiable monster; and no matter how much it gobbles up it is never satisfied.
Those that are afflicted with the sickness of greed run roughshod over others; feelings, family, people or countries don’t matter to them. Sadly, possessions, to them, are more important than anything else in life. Those that are afflicted with greed will do anything for money and more money. To wit: look at the sub-prime mortgage mess; they knew what they were doing, and now they are blaming the victims of their scam:
“The ownership society”.
Still, we see the run to become rich; to make it; to be on top. For what? It seems only so that they can blow it on cocaine; or to go see strippers and to shell out $4,000 or more with a prostitute for two hours? Is it worth exploiting others, for that? We have had better s*** and it was free.
The victims of greed over-expand; over-reach; and are never satisfied. Pan Am; Bear Stearn; TWA; Eastern, Wall Street, et. al.
There are more important things in life than being rich, and they are: having a sense of who you are; getting along with others; respect others and respecting yourself; acquiring knowledge and being true to yourself. At what price peace of mind? Enough said.
No one has any idea how this will play out, other than it can't be good. It'll be a question of how many people get hurt. Those doing the hurting will grab their piles and scurry off into the woods to wait for our collective memories to fade again. I seem to remember something like this on a smaller scale some twenty years ago called the savings and loan crisis and it seemed huge at the time. A couple more bubbles followed that one so I guess we are a little more thick skinned now. That one spawned the Resolution Trust, phoenix like from the what was the FSLIC. My guess is that we are still paying for that one and that was just a sundry fleecing of the nation's Savings and Loans (with a little assist from a young John McCain and with major cheerleading from Lord Reagan). Notice how many of those S&Ls became banks and how many of those are in deep mierda now?
As the criminals, the gods of Wall St. watch their thing deflate and shrivel at least they got an endorphen rush as former scourge, Gov. Spitzer surrendered his. Totally pathetic. but they are not the losers.
Cheers,
Jack
Google ' Eliot's Mess Greg Palast ' and read.
Lehman better be left to their own making. The US Gov /taxpayer does not need to prop up any investment banks.
Henry, As a former equity analyst myself, let me say you pretty much were the reason Eliot Spitzer came after us. So a fan of yours, I am not. Enjoy your millions as I do mine and stay out of trouble.
Ok, maybe this is crazy... but why don't we just nationalize one of these suckers? Instead of just handing them our natl. money for a bail out, why don't we just buy them directly?
I mean, you have JPM paying something like $250 million for the shares (which is nothing) and then there is the $30 Billion govt support behind it. So why not just skip the middle man (JPM) and let the govt take over the firm?
This could work out well in the future, as the gov't would have a player in the game, which would serve to keep the other players honest. Not to mention that when things eventually turn around, a nice $15 billion in quarterly earnings going straight into our natl budget would please a lot of people.
The point is that at $250 million, this is the bargain of a lifetime... a bargain only made possible by the security of the Fed. So if the Fed is gonna take all the risk, why not get in a position for some of the reward?
That could work.
Up to a point.
How about this?
Only the Congress of the United States may create money and regulate the value thereof and of foreign coin, etc.
All, just as the U.S. Constitution calls for. (art. 1; Sect 8, I think)
So, rather than nationalize one of these suckers, why not just create a soverign Central US Bank and do what needs to be done?
Nationalize the monetary system.
Put the people in charge of their money.
The invisible hand has run its course, as far as the good of the US economy goes.
Picking up the pieces will require that we act with a rational monetary policy strictly directed to pursue the economic interest of the country; the public interest.
The monied-interests will offer scant federal regulation and an internationally coordinated "financial stabilization" plan, which will be the final attack on our constitutional rights.
Do not be overwhelmed by their smoke-and-mirrors.
We must act to protect our rights, and it can be done.
The people.
The Congress.
Their Money.
Their Country.
The neo-cons have been thundering about shock and awe and threatening the world with war. And war we have had, pointless meaningless war making neo-cons profit. The war we should have prosecuted was Afghanistan but we did not. We took it as an opportunity to threaten the world and beat up on other people. What we have going on is a different kind of war. This is an economic war where people pull out their assets and are leaving the U.S. to die. We cannot eat aircraft carriers. We cannot eat tanks. We cannot live in tanks. Finally the Reasonomic model is blowing up having reached its logical conclusion. It is a fraud and this is what we have. Who do we attack when they won't buy out treasury bonds? Who does the U.S. attack when countries withdraw their money from our market place.
The question is does the U.S. really have any friends? Why should the Arabs help the U.S. when the U.S. won't resolve the Middle East problem? We may be on the verge of a major war! Can we afford another war? Who is going to finance our war and buy our treasury bonds? Who wants the dollar? We can sell Rush Limbaugh and we can sell Bush 1 & 2. I guess we can sell Tony Blair also.
Well said. We are reaping the fruits of "military Keynesianism."
And this bastardization of Keynesian economic theory, coupled with rampant Chicago School free markets, has led us to this point.
Read about how Jeb Bush and Lehman brothers ripped off Florida taxpayers with these questionable securities. Here's the link:
http://bartblog.bartcop.com/2007/12/21/how-jeb-bush-and-lehman-brothers-robbed-florida-taxpayers/
It's funny how say, the Bush , Bin-Laden and Saud families keep comming up in our financial meltdown. The Carlyle Group failed last week and the Bush/Bin- Laden families were original partners but, I believe they both bailed out when the company was in better shape according to the books anyway. There is an intricate link between the Bush, Bin-laden and Saud families besides the results of 9-11. It seems the crumbling towers was just a metaphor for both our economy and our country.
The Carlyle Group did not fail. An associated hedge fund, Carlyle Capital based in Guernsey, the Channel Islands failed. The Carlyle Group owns Dunkin Donuts, Baskin-Robbins, Hertz Rent A Car. If you don't like the Carlyle Group, don't support their companies.
Actually, it was CCC that failed, an independent spinoff. The Carlyle Group had about an 11 percent stake max, if memory serves, and said the failure would not affect their profits.
Oh yeah, that was pretty smooth, nice MSM coverage. NOT!.
I can't see how every "Mr. and Mrs. american homeowner" could be complaining much. Anyone who sold their house in the inflated market was paid real money.
Unless they have an IRA or 401k. The funds in those are at risk if the market crashes. It's all connected.
The have-mores sneeze and the have-nots get the cold
"Steal a little and they throw you in jail; steal a lot and they make you a king." Bob Dylan
Let's phone in and ask Cramer. How silly.
Here's all you need to know about the Bear thing and why Lehman is NOT in the same boat:
"The deal's value is more than 90 percent below the company's Friday closing share price of $30.85. But JPMorgan said the total price tag would be $6 billion to account for litigation and severance costs."
The important words there are "severance costs". In other words, the Bear bigwigs are basically giving the company away for HUGE severance packages worth tens if not hundreds of millions of dollars into their own bank accounts at the expense of shareholders, who are going to essentially lose everything. The Bear-Stearns deal is fraudulent and criminal in nature. All supported by the GOP (who is probably getting paid off as well), who OK'd the deal in literally minutes, in spite of deals like this typically taking months to approve. It can not be used as a barometer for other companies unless they too are eyeing fraudulent sales.
"Severance costs" - SEVERANCE costs? Hell, the last time I got canned, my "severance" was a few old computer paper boxes (for putting my stuff in - but I got to keep the boxes, whoopee!).
Pray tell - why do the Big Boys at Bear and Stearns deserve severance pay? At most, they should get what the scum (their lower-level employees) get - 2 weeks vacation pay. And if they were popular Big Boys, throw in a bye-bye party, with BYO (bring your own) food.
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