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149 comments on Lehman: more socialising the losses of the rich

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Jerome a Paris on September 14, 2008 - 3:15pm Permalink | Subthread | Parent | Comments top

this is getting serious:

Wall Street Prepares for Potential Lehman Bankruptcy Filing

Sept. 14 (Bloomberg) -- A group of banks and brokers began preparing for a potential Lehman Brothers Holdings Inc. bankruptcy filing today, addressing outstanding trades that the company has in over-the-counter derivatives markets.

Financial firms have started ``netting'' Lehman trades on credit, equity, interest-rate, foreign exchange, and commodity derivatives, according to a statement from the International Swaps and Derivatives Association e-mailed to Bloomberg News.

``ISDA confirms a netting trading session will take place between 2 p.m. and 4 p.m. New York time for over-the-counter derivatives,'' the ISDA said. ``Trades are contingent on a bankruptcy filing at or before 11:59 p.m. New York time, Sunday, Sept. 14, 2008. If there is no filing, the trades cease to exist.''

That is, if A is owed x by Lehman, and Lehamn owes x to B, A and B agree to eliminate Lehman and to say that A is owed x by B.

That's a good thing, but preparing for this means that the likelihood of bankruptcy is not remote.

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Nate Hagens on September 14, 2008 - 4:06pm Permalink | Subthread | Parent | Comments top

I don't see how they could do this all in 2 hours. It's just not that transparent and most trades are not queal apples to apples but Macintoshes and Granny Smiths.

If LEH goes bankrupt (which after having worked there, I won't say will make me happy), the financial markets will get crushed tomorrow (though a 'bankruptcy' might indicated reality to a system suddenly used to Monty Hall campaigns.)

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rexowner on September 14, 2008 - 5:51pm Permalink | Subthread | Parent | Comments top

Yes, this is a total mess.

BTW, Macintosh is a computer, Mcintosh is a fruit,
but maybe that's what's meant.

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nh3 on September 14, 2008 - 4:12pm Permalink | Subthread | Parent | Comments top

Bank of America Said to Walk Away From Talks to Buy Lehman

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Jerome a Paris on September 14, 2008 - 4:45pm Permalink | Subthread | Parent | Comments top

Things are accelerating... this is the front page of the WSJ website right now (4:30pm EST)

Merrill and AIG are also in desperate straits if Lehman goes bankrupt and these are their attempts to push that off.

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nh3 on September 14, 2008 - 4:56pm Permalink | Subthread | Parent | Comments top

Reuters: Merrill Lynch in talks to sell itself to Bank of America for at least $38.25 billion

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Slumlord on September 14, 2008 - 5:10pm Permalink | Subthread | Parent | Comments top

That's about a 50% premium to Friday's closing price. The short covering rally in Merrill will be rather dramatic.

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nh3 on September 14, 2008 - 5:14pm Permalink | Subthread | Parent | Comments top

why would BAC take on such deal at this joint?

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nh3 on September 14, 2008 - 9:29pm Permalink | Subthread | Parent | Comments top

Bank of America to buy Merrill Lynch for $29/share: CNBC, citing WSJ

Bank of America Reaches Deal for Merrill

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DaveMart on September 15, 2008 - 9:35am Permalink | Subthread | Parent | Comments top

It sounds as though they have created an institution which is 'too big to fail'.
Perhaps this is of a size whereby if it gets into trouble an attempt by the US government to guarantee it would bankrupt them?
How would a bail-out if it became necessary compare in size to the F & F bail-out?
EDIT:
Why the heck is BOA paying over the odds for Merril Lynch?
Something smells very, very fishy to me, and my guess would be that taxpayers money and/or guarantees are being funnelled surruptitiously:

Without this buyout announcement Merrill Lynch (MER) would have gotten absolutely crushed Monday. That is absolutely certain. The closing price of Merrill Lynch was $17.05 on Friday. Mother Merrill's market cap was roughly $26 billion.

Thus... Bank of America (BAC) agreed to pay $44 billion for a company that would have been worth $18 billion on Monday's open, assuming a $5 markdown on Monday to $12. Why?

No one had any cash to buy Merrill other than BAC - so what's the rush?

http://seekingalpha.com/article/95414-bank-of-america-merrill-shotgun-ma...

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nh3 on September 14, 2008 - 5:30pm Permalink | Subthread | Parent | Comments top

Lehman Inches Toward Bankruptcy After Potential Buyers Drop Out

``The best case is that the Fed offers a 48-hour standstill by backing Lehman's liquidity directly to win time for other bidders to come forth or the previously interested parties to reconsider,'' said Sean Egan, president of Egan-Jones Ratings Co. in Haverford, Pennsylvania. ``The worst case is bankruptcy, and Lehman goes down the tube.''

bank holiday?

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nh3 on September 14, 2008 - 6:20pm Permalink | Subthread | Parent | Comments top

Pimco's Gross sees tsunami of risk if Lehman fails

"It appears that Lehman will file for bankruptcy and the risk of an immediate tsunami is related to the unwind of derivative and swap-related positions worldwide in the dealer, hedge fund, and buyside universe,"

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DaveMart on September 14, 2008 - 6:24pm Permalink | Subthread | Parent | Comments top

Sounds like he is looking for more taxpayers money. That is what he was predicting if F & F were let fail, so if we are in for a tsunami anyway perhaps he would refund the $1.7bn or so he has conned out of the Government.

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unplanner on September 14, 2008 - 6:35pm Permalink | Subthread | Parent | Comments top

The DJ INdustrial futures are already getting hammered...

http://www.bloomberg.com/index_americas.html

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149 comments on Lehman: more socialising the losses of the rich

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