Comments on: HSBC, Chinese Bank Reported To Be Interested in Lehman

By: Cash Mundy

Cash Mundy — Thu, 04 Sep 2008 04:05:00 +0000

BofA jumping in on CountryWide indeed, Peedee. Apparently the Koreans are pricing MER and LEH dubious assets.

Korean Kabuki: Enter Merrill

Merrill May Fail to Sell Bad Loans to Korea Asset (Update1)

By Bomi Lim

Sept. 4 (Bloomberg) -- Merrill Lynch & Co.'s talks to sell a ``significant'' amount of nonperforming loans to Korea Asset Management Corp. are faltering because of a dispute over price, the Korean firm's chief executive officer said.

By: Cash Mundy

Cash Mundy — Thu, 04 Sep 2008 03:57:00 +0000

And the consortium isn't consorting. Weird.

Banks Deny Consortium Plan to Buy Lehman Bros.

The Korea Development Bank is trying to form a consortium to buy Lehman Brothers, America's fourth largest investment bank, but other Korean banks on Wednesday denied they want to join.

http://cashmundy.blogspot.com/2008/09/leh-kabuki-more-of-brides-blush.htm

By: PeeDee

PeeDee — Thu, 04 Sep 2008 02:03:00 +0000

Interesting thought cash mundy. This is how I would be thinking in the Asian’s shoes – how do we put all this crap back to the Fed without making a political issue of it.

It all seems so like BofA jumping in on CountryWide though. If I were them I’d be looking at that deal and thinking ‘what did BofA do wrong?’.

By: Jesse

Jesse — Thu, 04 Sep 2008 01:14:00 +0000

Yep. the Mitsubishi interest floated out by The Times has also turned out to be a false rumour.

curiouser and curiouser.

http://jessescrossroadscafe.blogspot.com/2008/09/times-of-london-report-another-false.html

By: Cash Mundy

Cash Mundy — Wed, 03 Sep 2008 23:01:00 +0000

Speculation:

An emerging consortium of Asian banks is interested in LEH as an economical way to gain access to the Fed Term Auction Facility: a tear-down with an excellent location.

Once LEH is acquired, it accepts GSE and possibly less desirable paper and uses it as collateral at the TAF, exchanging it for T-bills.

LEH stays nominally afloat. A lot of GSE paper is quietly absorbed by the Fed without touching the open market and without an overt intervention. The Asian participants dump GSE positions in exchange for cash money or equivalent and can defend their currencies against ongoing outflows.

I don't know if this would work, but if so, it does seem appealing to everyone but US taxpayers, who have already been volunteered to foot the bailout bill.

By: Jesse

Jesse — Wed, 03 Sep 2008 21:14:00 +0000

and now the London Times tosses Tokyo Misubishi into the mix

http://jessescrossroadscafe.blogspot.com/2008/09/tokyo-mitsubishi-interest-virtual-put.html

By: doc holiday

doc holiday — Wed, 03 Sep 2008 19:24:00 +0000

Korea OT: They are at a loss as to what to do about media reports saying that the prices of vegetables, pork, chickens and other daily necessities have shot up by 10 to 50 percent in a week. Most people are now suffering the brunt of higher inflation triggered by the spiking prices of crude oil, other raw materials, grain and food. Their worries are escalating as their incomes are declining after being adjusted for inflation. The consumer price index surged 5.5 percent in June and 5.9 percent in July year-on-year. The index surpassed the central bank’s target of 2.5-3.5 percent, raising fears of stagflation. The people’s pain has grown more acute due to the economic slowdown.

More serious is that there are growing fears of a financial crisis that could batter the country next month. The so-called September crisis is based on the scenario of a potential liquidity trap since foreign investors are leaving the Korean market. Foreigners purchased $16 billion in Korean bonds on a net basis in the first half this year. But they became net sellers in June and July by disposing of $4.2 billion worth of bond issues.

http://www.koreatimes.co.kr/www/…/ 202_30247.html

By: Cash Mundy

Cash Mundy — Wed, 03 Sep 2008 16:51:00 +0000

Reading about Korea's need to defend the won and difficulties doing so due to illiquid GSE holdings, it occurred to me that there might be a subtext to KDB's apparently nonsensical LEH bid, somehow resulting in the "Fannie, Freddie and other US-related agency" paper turning into cash or treasuries as a quid-pro-quo for rescuing LEH.

I read Jesse's posting, and it looks like "a Wall Street Bond trader" has the same idea. From Jesse:

Curiouser and curiouser. A Wall Street bond trader of our acquaintance has suggested that Hank made some princely gestures vis à vis Korea's huge holdings of Fannie and Freddie in return for some sugar on the Lehman problem.

Maybe a stealth uncompensated taxpayer bailout of LEH, FNM and FRE can be quietly packaged up and sold in this way.

By: Stuart

Stuart — Wed, 03 Sep 2008 13:12:00 +0000

Lehman trying to sell itself like a two bit hooker. Screams of desperation.

By: Terry

Terry — Wed, 03 Sep 2008 12:32:00 +0000

If KDB or some other foreign government-controlled entity (a foreign GSE) takes a controlling stake in LEH or other "major US investment bank," . . .

I have to wonder what the FED's authorized role and actual actions will be in the event it threatens to go under??

Taxpayers really won't like the FED bailing out (or guaranteeing the bailing out) of a foreign-owned bank no matter how "vital" it is to the stability of the international financial system.

Just a thought....