……………………………………………………………………………………………………………………………
The advance was reportedly “to allow” Lehman to settle securities trades with clients. J.P. Morgan was then immediately reimbursed by the Federal Reserve for the same 138 billion.
What was not originally reported, or likely not understood at the time due to the types of securities that Lehman did most of their business in [Credit Derivatives], it is a virtual certainty that J.P. Morgan [the largest derivatives player in the world with 8.1 Trillion in Credit Derivatives alone] was the “client” [the other side of the Lehman trades that needed to be settled].
The critical piece of information that completes the daisy-chain: The world only learned about J.P. Morgan’s 138 billion advance from a bankruptcy court document, where Lehman was asking the court for the authority to give the settlement of claims of J.P. Morgan “special status.”
It is highly likely [or a certainty on my planet] that J.P. Morgan was INSOLVENT and was “BAILED OUT” last Monday, September 15, to the tune of 138 billion dollars. This would explain why the Fed and Treasury dictated that Lehman fail – to disguise or otherwise obfuscate the recapitalization of or illicit transfer of 138 billion to A MUCH SICKER, TEETERING ENTITY, J.P. Morgan Chase.
This makes sense. Investment banks are dropping like flies, owing to their involvement in credit derivatives – this is a fact.
J. P. Morgan is – HANDS DOWN – the largest derivatives player in the world with a book of 90 Trillion in notional value on March 31, 2008 – with 9% of the book composed of Credit Derivatives. That amounts to a cool 8.1 Trillion worth of Credit Derivatives. We know this from the Office of the Comptroller of the Currency’s Quarterly Derivatives Report – pg. 24.
http://www.financialsense.com/Market/kirby/2008/0922.html

I think JPM is rapidly become the shadow MLEC…

Without access to the legal documents, it seems entirely possible to me that JP Morgan used this paltry 17 billion as a setoff against sums to it owed by Lehman.

It would seem highly likely that, during the Lehman endgame, ALL the sums advanced by JP Morgan would have been secured by assets of Lehman.

I recall the howls of Bear Stearns that they were never bankrupt, but that they merely suffered a “liquidity” crisis. However, after their books were closely examined, they were in FAR worse shape than their public pronouncements at the end.

It seems to be a similar situation with Lehman, in my view.

I recall how Lehman was continually floating stories in the media that their crown jewel Neuberger unit was worth 10 billion alone. Last week it sold for 2 billion.

Matt Dubuque
mdubuque@yahoo.com

It’s only a matter of time before that money must be returned to the NY Fed. The threat of Citigroup failing likely is what triggered the emergency bailout