We've known for most of the day that Lehman Brother has been actively shopping itself in a desperate attempt to avoid catastrophe. Now names of potential buyers are starting to come in. The Wall Street Journal is reporting that Bank of America is in talks with Lehman.
Perhaps most interesting is the Journal's reporting on who isn't participating. Up until just a few minutes ago we were hearing rumors that HSBC could put in a bid over night, despite earlier denials from the bank. Now the Journal says no bid is expected from HSBC. Others who aren't "expected to participate" include Goldman Sachs, France's BNP Paribas, Germany's Deutsche Bank, and Spain's Banco Santander. Barclays is a maybe.
While Lehman is looking for buyers, the potential buyers are looking for Hank Paulson and Ben Bernanke. Pressure is mounting on the government to become involved, as the Journal story makes clear.
But potential buyers remain wary about plugging holes in Lehman's balance sheet, and are increasingly looking to the U.S. government to help backstop future losses, according to people familiar with the talks.A number of these buyers would "come out of the woodwork," if the U.S. were to step in, said one person monitoring the process. It remains unclear whether the U.S. Treasury or Federal Reserve would take such steps, as was done when the government assisted J.P. Morgan Chase & Co. in its Bear Stearns takeover in March.
Any government involvement would likely require an under-market price for shareholders. When the Fed and Treasury helped JP Morgan Chase buy Bear Stearns, the price of the stock was reduced from around $30 a share to $2 a share. A similar haircut for Lehman from recent market prices could result in a take-under priced at less than a dollar.
Lehman Brothers in Sales Talks; B of A Seen As a Potential Suitor [Wall Street Journal]
Posted by guest , Sep 11, 2008 4:13PM
link does not work
Posted by AJ , Sep 11, 2008 4:15PM
I thought Ken Lewis gave up on investment banking?
Posted by guest , Sep 11, 2008 4:15PM
Aloe is the new mayo!
Posted by guest , Sep 11, 2008 4:17PM
Lewis needs someone to carve up all of those loans Countrywide is making.
Posted by guest , Sep 11, 2008 4:18PM
Bank of America Brothers! The Outer Banks are the new Hamptons.
Posted by bank_teller , Sep 11, 2008 4:20PM
"I don't make money, I print it."
-Hank Paulson
Posted by guest , Sep 11, 2008 4:22PM
I would like to tip my cap to JC and BL for excellent coverage of today's events. You guys have captured virtually every angle of this story.
Nice work! DB has kicked major ass today!
Great info, enjoy reading all the posts. (among the gems have been 'too long, didn't write', and 'price targets of the infinity symbol'. Hilarious. Thanks.
Posted by diablo , Sep 11, 2008 4:22PM
Has Lewis figured out how to use FHLB money to buy LEH?
Posted by guest , Sep 11, 2008 4:26PM
Now the Journal says no bid is expected from HSBC. Others who aren't "expected to participate" include Goldman Sachs, France's BNP Paribas, Germany's Deutsche Bank, and Spain's Banco Santander. Barclays is a maybe.
It sounds like they are planning a party for LEH and then the fed realized "shit, we have way too much food and booze, who else should we invite" because LEH has no friends.
Posted by guest , Sep 11, 2008 4:27PM
Will the great Richard Moody and his elite Lynchburg College education keep his job at the new Lehman, we all want to know.
Posted by guest , Sep 11, 2008 4:27PM
Ken Lewis said he had enough fun with investment banking. He now realizes that Dick Fuld is not having that much fun and he wants back in.
Posted by guest , Sep 11, 2008 4:30PM
"Any government involvement would likely require an under-market price for shareholders."
Wrong Wrong Wrong. That should read, "Any purchase agreement would likely require government involvement to force an under-market price for the sale."
Posted by guest , Sep 11, 2008 4:30PM
seriously in case LEH dies..what happens next?
would a not bail out be that catastrophic at this stage?
Posted by guest , Sep 11, 2008 4:31PM
Agree with @7. DB really kept on top of this story. More Lehman stuff please. It's not going to get old with this level of coverage.
My vote goes for Bank of Brothers.
Posted by guest , Sep 11, 2008 4:33PM
BAC is basically trying to get paid back by the Treas. and Fed, because they didn’t get a penny when they took down Countrywide, and then JPM got the Fed to take down $33 billion for it’s Bear Sterns dalliance.
BAC has kept Countrywide debt remote from their own holding company, and have explicitly not backed it. So it has that leverage against the Treas & Fed, in that it could threaten to let Countrywide file for bankruptcy, have the FDIC absorb the losses from it’s piece of shit assets sprinkled around the country, and then cherry pick as it pleases. Or, it can get some sweet love, and make the Lehman problem go away.
Posted by guest , Sep 11, 2008 4:35PM
BAC is basically trying to get paid back by the Treas. and Fed, because they didn’t get a penny when they took down Countrywide, and then JPM got the Fed to take down $33 billion for it’s Bear Sterns dalliance.
BAC has kept Countrywide debt remote from their own holding company, and have explicitly not backed it. So it has that leverage against the Treas & Fed, in that it could threaten to let Countrywide file for bankruptcy, have the FDIC absorb the losses from it’s piece of shit assets sprinkled around the country, and then cherry pick as it pleases. Or, it can get some sweet love, and make the Lehman problem go away.
Posted by guest , Sep 11, 2008 4:36PM
@8 ooh good call
Posted by guest , Sep 11, 2008 4:36PM
Germany's Deutsche Bank isn't expected to bid?
But the Germans always make good stuff. You follow me DB guy? LEH needs to get this deal done in the next 20 minutes, because we can't do this all day.
SPODE
Posted by redpandot , Sep 11, 2008 4:37PM
@15;16 although repetitive, a sweet point.
Posted by guest , Sep 11, 2008 4:37PM
Wrong, wrong, wrong.
Posted by Investorcluzo , Sep 11, 2008 4:39PM
does anyone have a recording of the comment kenny boy said during the earnings call that lead to 3 rounds (so far) of layoffs in the investment banking division? please send so that we can remind his dumb a$$ that charlotte based commercial banks have no business in the rough and tumble world of wall street...make the bad man STOP, if that damn stock goes back to $18, it's won't see $30 again (in my lifetime). fire ken's short a$$ and get someone in there who will stay the course. change is not good! hey kenny, keep the damn change to yourself...
Posted by guest , Sep 11, 2008 4:41PM
Everything about BofA getting into this smells to high heaven of arm-twisting; does anyone realize how in bed with one another Lb and C'wide were? This might be an effective way to prop up the housing market, as these guys all know their way around bad mortgages, but in the long-run a painful one.
Posted by guest , Sep 11, 2008 4:41PM
Yeah good job to DealBreaker, the coverage has been superb.
Bank of Lehmerica?
Posted by bank_teller , Sep 11, 2008 4:47PM
@Cluz - actually sounds fine to me, since BofA can use the NB biz and send the rest of the firm to fuckall for whatever likely price Kenny gets.
Also, it would be worth the laugh just to see the Lehman bankers being integrated with Charchar "culture".
Posted by guest , Sep 11, 2008 4:50PM
24 Careful there. BofA was very bad at integrating the U.S. Trust business, which is similar to NB.
Posted by guest , Sep 11, 2008 4:51PM
free eyebrow arch with online banking.
lewis also eyeing F, GM, brooklyn bridge.
brosefs of america.
-retail
Posted by guest , Sep 11, 2008 4:53PM
Cluzo - I just looked at the 4/21 and 7/21 BAC conf call transcripts on Bloomberg and couldn't find it under "fun" or "banking" searches, but it might be he said something else close to that.
Posted by guest , Sep 11, 2008 4:57PM
http://img389.imageshack.us/img389/4295/bankofbrothersqc7.jpg
Posted by Investorcluzo , Sep 11, 2008 5:04PM
@27 - it must have been at an investor conference. the guy has no internal monologue - he and biden should take a class on how to speak extemporaneously to the press.
Posted by guest , Sep 11, 2008 5:04PM
One of you bitches needs to register it.
BankofBrothers.com
http://www.whois.net/dnr/index.php?d=bankofbrothers&tld=com
SPODE
Posted by guest , Sep 11, 2008 5:04PM
@24 - We welcome LEH with open arms down here. One and all are welcome to kiss the collective ass of the "CharChar" mafia. They're not the first and won't be the last.
Posted by guest , Sep 11, 2008 5:06PM
http://www.nytimes.com/2008/04/21/business/21cnd-bank.html?_r=1&pagewanted=print&oref=slogin
“I’ve had all the fun I can stand in investment banking right now"
Posted by guest , Sep 11, 2008 5:10PM
BankofBrothers needs to merge with Citibank forming ShittyBankofBrothers in order to survive.
SPODE
Posted by guest , Sep 11, 2008 5:11PM
#32 - thanks. But it looks like the whole quote from the 4/21/08 NY Times is:
Last year, Mr. Lewis told investors, "I’ve had all the fun I can stand in investment banking right now," suggesting that he was seeking to pare back his ambitions to rival the likes of Citigroup and JPMorgan Chase in that sector. (He later said he has no such plans.)
(So he made the quote some time in 2007)
Posted by Investorcluzo , Sep 11, 2008 5:14PM
c'mon people, how could you miss it - it was underneath your nose the whole time:
http://dealbreaker.com/2007/11/are_we_having_fun_yet_ken_lewi.php
what I want is a recording, I know it's out there: 3rd quarter earnings call. make it happen, this IS the internet...
Posted by guest , Sep 11, 2008 5:20PM
Articles like this are the reason that Main Street doesn't trust ... Wall Street. What does Ws know that everyone else (Wsj, Nyt, Db) does not?
http://www.bloomberg.com/apps/news?pid=20601109&sid=aSNaUd6Kj.5k&refer=home
If even a quarter of what Hank Paulson said could be counted on, we would not be hearing this.
Posted by guest , Sep 11, 2008 5:21PM
#34, he did. it's in the Sept 2007 conference call. Maybe Sept 18 or something
I was interviewing with them at the time, so I listened to the conference call and heard it firsthand.
Lewis says is it in a characteristically Southern way.
Posted by guest , Sep 11, 2008 5:21PM
Think I can trade Tom Brady to BOA in fantasy?
Posted by guest , Sep 11, 2008 5:23PM
I like the new name The Sovereign Brothers Bank of America
Posted by guest , Sep 11, 2008 5:28PM
once again. you can thank mayo for this one:
MIKE MAYO: Ken, just a follow-up on the investment bank. You had a lot of different heads in the investment bank the last few years. Could one potential improvement measure be a joint venture or acquisition to gain some additional experience?
KEN LEWIS: I don't think so, Mike. I mean I always say I never say never, but I've had all of the fun I can stand in investment banking at the moment. So to get bigger in it is not really something I want to do. But we do have to, again, as I said we got to go back and assess all of these businesses, and see where our strengths are and where they're not, and act accordingly.
MIKE MAYO: And as it relates to asset quality, generally, you mentioned not only home equity, home builders, but also small business. So I guess the question is, what percent of your loan portfolio are you worried about? You said there is some additional softness that you weren't exactly anticipating.
You can get the transcript here.
http://www.accessmylibrary.com/coms2/summary_0286-33277436_ITM
Posted by guest , Sep 11, 2008 5:33PM
Mayo strikes again!
Posted by Investorcluzo , Sep 11, 2008 5:34PM
ok, hypothetical here. maybe this could work (again, hypothetically speaking)...bofa comes in to purchase the "good bank" and gets all of NB (which still hasn't been sold). someone please explain how leh gets debt to rei. the equity is easy, are we to assume that the senior (or sub) debt can be assigned without the consent of the holders to the "bad bank"? so, hypothetically, bofa gets a "real" investment bank with stellar investment management and a trading book that is "suitable" for the downsized good bank. we all know bofa doesn't pay (well), so how long before the key bankers/pm's leave? this is a disaster waiting to happen.
@40 - nice work...MAYO!!!!
Posted by guest , Sep 11, 2008 6:05PM
Hey Cluzo (@21), you NY guys seem to do a pretty good job of fucking things up so no need to pick on the boys from the south.
Posted by guest , Sep 11, 2008 6:21PM
The boys from the south are a joke, you say banking anywhere south of DC and people think you are a teller. When they move the bull to Tryon you can talk.
Posted by guest , Sep 11, 2008 6:27PM
@44
This is 43. FYI, I'm not from the south and I'm not a banker (wanker). My observations are from the outside looking in and unbiased. Believe me, you BY boys have fucked up everything you've touched (the internet stocks, housing, research, etc).
Posted by Investorcluzo , Sep 11, 2008 6:52PM
@43/43 - I'm going to pretend you were having a momentary lapse of something. c'mon now, tricky-dick fuld went to colorado - everyone I know that went to that school are pot smoking miscreants...and big daddy cayne went to purdue. sounds to me like the mid-west is fking people up something fierce! sure, they may be native ny'ers, but they weren't the smartest guys in the room ( ; bottom line, if you want to play in the big pool, you better know how to swim (or have some floaties). as for internet stocks, who do you think was buying that stuff? that's right, main street. the whole late 90's day trading phenomenon was a result of the guys/girls in the baby pool getting ahead of themselves only to learn a hard lesson. you heard it here first, after wamu, wachovia is going down...so much for the charchar mafia. full disclosure, I'm long the puts.
Posted by guest , Sep 11, 2008 7:07PM
@44 - now that you mention it, the BofA "museum" at 100 N. Tryon does have a nice collection of war trophies (from Fleet, BankAmerica, etc.) High time for a proper investment bank's booty! Argh!
Posted by guest , Sep 11, 2008 10:23PM
my dick is fooled
Posted by guest , Sep 11, 2008 10:47PM
@21 / cluzo - do me a favor and re-read your own post and imagine it is satire. see what i mean? bofa can't survive in the "rough and tumble" world of investment banking? you're joking, right? you mean they don't have the culture of say, a bear stearns or lehman brothers...? or merrill?
forgive the rest of us if we don't accompany you on your little trip down memory lane.
Posted by guest , Sep 11, 2008 11:43PM
bake sale to save Lehman.
Posted by guest , Sep 12, 2008 8:37AM
Its clear that BAC is going to get the shaft on this deal. If they buy LEH, they will loose all the top to mid tallent and be stuck with a half broke I.B. and a bunch of former commercial branch managers to try and run it. I give it 6 months till Mr. Lewis is saying they are done with I-Banking...again.