naked capitalism

Anonymous says:

gaspo… yves… gaspo… yves… now which of the two would i believe most? it’s not the former.

JP says:

Ya know, the funny thing is that the headlines are ignoring Merrill.

If you removed WaMu and LEH, Merrill would be THE story today. Down 15%? They are in deep trouble.

Yves Smith says:

Anon of 1:44,

You are right. Distress has now become relative.

Anon of 1:20,

Thanks for the vote of confidence, but there are scenarios under which both stories could be accurate. Reality is multi-faceted and in this case, the situation is dynamic.

For instance: Lehman approaches GS. GS really is not interested, but instead of saying no, offers terms it is certain Lehman will reject (and in fact, are so one-sided, even given Lehman’s failing standing, that they would go ahead). It is almost always better to leave the door open, even a crack than to close it.

Goldman, after all, may want to avoid a “no” in case it can pick up pieces it might want as things unravel. The asset management business does have value. There are advantages to getting the first call. Plus Goldman may want to have looked like a responsible citizen (”we did have an initial conversation but were clearly too far apart.”)

In addition, it isn’t unheard of for two sides in a negotiations or deal feelers to interpret a statement made in two different lights.

S says:

tape reporting JPM, BAC, CS, and GS interested in bidding for the asset management business

Anonymous says:

in France, isn’t an “ource” a “bear”? Or is that “ourse”?.

Yawner says:

WSJ reporting BAC is bidding but wants backstop.

viking says:

one thing we know: Lehman’s books are as cooked as Fannie and Freddie

another we know because of this: nobody wants to take this on without a government backstop–too risky when Lehman may be a giant net liability

one thing I think (in line with Matt Dubuque): the Fed is done bailing.

LEHMAN WILL NOT BE BAILED, IMHO. The market will realize this soon. They have protected the mortgage market, which apparently was close to complete collapse, so much so that Paulson didn’t not bother to get an accurate sense of how much it might cost, so urgent was the situation. He said this, point blank, on TV.

Also in reports now that the banks want a BSC/JPM set up but that the Fed has not offered to facilitate.

THAT’S BECAUSE THEY PULLED THE MORTGAGE MARKET INTO THE BUNKER AND LOCKED THE DOORS BEHIND THEM.

No more bailouts. Let that sink in. Then go buy your puts.

Shawn H says:

Washington Post:

“The Treasury Department and the Federal Reserve are engineering a sale of Lehman Brothers through a consortium of private firms. The details are not finalized, but sources familiar with the matter say the purchase is expected to be completed and announced this weekend before Asian markets open on Monday morning.”

doc holiday says:

The market is acting positive about the destruction of Bear, Fannie, Lehamn, WaMU, Merrill, etc, and subprime writedowns, etc, — this this is a VERY good sign that the bottom is ALMOST in, when there is nothing left besides a market for wild speculation! BUY now, place your bets on the next failure before you get priced out … retards!

tyaresun says:

Matt,

Don’t be in such a hurry. It seems BAC might take over LEH if it can get a JPM like deal.

Anonymous says:

From calculatedrisk:

Dogbert writes:
Lehman paid out $9.5 billion in bonuses in 2007. http://www.bloomberg.com/apps/ne…BPLc& refer=home

Now, they're looking for a few billion to survive. Is this insane or what?

London Derivatives Trader says:

With LEH trading below $3.60 in the after-market, this is an incredible set-up for the greatest trade ever.
LEH is a great franchise and Wall Street will not let it fail for obvious systemic reasons, nor will it let it go the way of BSC. If it did, when will this run on the bank end? Who will the shorts crush next? MER? MS? GS?!?
I am convinced that LEH will be snapped up by a large financial institutions for $20-25/share by Sunday. When this deal is announced LEH shares will run up to $35 in a massive short covering wave. This will send a clear signal that the financial sector is no longer fair game.

JP says:

Who will the shorts crush next? MER? MS? GS?!?

MER. No question.
But it’s not the shorts that crushed it. They’ve be self-crushing like much of wall street.

Anonymous says:

London Deriv:
Banks losing $4bn that can’t raise $5bn from Korean bankers are NOT going to sell for $25/share. The KDB looked at the books, realized it couldn’t mark the toxic level 3 garbage, and looked the door on any deal. The days of over-paying for brand are dead and gone, and every one knows that Fuld is desparate–no premium will be paid (unless BofA is the sucker mark, but even they won’t come out of single digits after the CFC debacle).

Good luck playing this one long.

Anonymous says:

Krispy Kream had more future value before they went under, but LEH is being floated along by counterparties and various hedged entities that still hope to (also) survive. This is toast, move along and let the blood be washed into the gutter!

Dean says:

No naming calling please. Yves gets upset.

Anonymous says:

The main problem with Lehman is the concern for a credit rating downgrade which will lead to a liquidity issue in having to post more cash for derivative positions. It doesn’t seem to be exactly the same as Bear Stearns. In Bear’s scenario there was client cash running out the door and assets that were imploding on a daily basis. I would think that a deal with a large commercial bank with a AA- rating or better would establish confidence in Lehman. Then they could jettison the mortgage assets even at a discount to where they are held on the books and you would still have a good company to work with bought for less than book value (if the deal is done significantly less than $27.29 bvps).

dd says:

The karma continues:
Argentina's Fernandez to Lehman: Worry About Yourself
Argentine President Cristina Fernandez de Kirchner told Lehman Brothers Holdings Inc. to worry about its own finances, three weeks after the firm said the South American country could default within two years.

“Today the news in the papers, in all the papers, is the collapse of another bank far away in the United States — that bank that predicted the collapse of Argentina,'' Fernandez, 55, said during a speech last night. “They should spend more time looking at their own accounts rather than looking at other countries.''

http://www.bloomberg.com/apps/news?pid=20601009&sid=a.jRC3N5zcrE&refer=bond

dd says:

Actually, a clarification, way back in the 1980’s the meme was no one was entitled to holding books..but technically the Fed of course, uber-alles.

dd says:

And here I would like to defend the SEC loyal troops who believed in investor protections against the Fed/Greenspan de-regulatory nightmare. A regulated banking structure will fall quickly against the force of unregulated entities and securities free-riding on the regulated structure. The SEC managed to shut down the first attack albeit much belatedly due to the Feds insistent de-regulatory stance. Even the 1987 meltdown did not convince the de-regulatory faction of its folly. Greenspan won (after bailing out the very same bear with continental cash) that now sits on its own Maiden books and the investor protection champions lost. Now of course the SEC is safely in coxed. Very sad.