The Wall Street Journal reports that “people familiar with the situation” say a solution to the Lehman Brothers problem could be reached as soon as tonight.
On Saturday, the main task ahead in discussions being led by the Federal Reserve is identifying whether a so-called “bad bank” structure could be designed to hold Lehman’s souring assets. That issue is now seen by people familiar with the situation as the key stumbling block to completing a deal, especially if Treasury and Fed officials keep digging in their heels on opposition to a government-backed rescue.
Potential buyers such as Bank of America Corp. and Barclays PLC are loathe to take on Lehman’s bad assets, which are seen as an immovable object to getting a deal done, according to people familiar with the situation.
Lehman Deal Could Come Tonight As High-Level Talks Continue [WSJ]
remember bear stearns weekend…there were plenty of positive rumours on saturday…by sunday morning the fed blinked and dimon won when he told ben that they were not comfy with bear’s portfolio risks…ben then offered 29 billion…
i think the same thing will happen here…tomorrow morning will arrive with no deal in place and then the panicking will begin…
i believe that come monday morning there will be no deal…
Treasury Fails to Receive jumped 8 times normal last week to 409 billion dollars Primary dealers. Same with Fails to Deliver. Debacle?
http://www.newyorkfed.org/markets/statistics/deal.pdf
You may call me a conspiracy nut if you want, but has anyone considered these attacks on our financial institutions might be a new form of terrorism?
Short selling should be banned. If this is a free market, then it’s not working, especially if 50,000 people can lose their jobs in the space of a couple of months as a result of these market practices.
Lehman’s troubles eerily coincided with another 9/11 anniversary. The whole thing stinks of something unpleasant, even taking into consideration the meltdown of the real estate sector which is attributed to be at the root of all this.
Remember, the people who hate us are very adept at finding new ways of damaging us, does anyone think they wouldn’t do this if they could see the results?
I’m not saying I believe this, but I’d like to know who is doing it.
@3- you prolly still think we never landed on the moon… hippies.
is jeb bush still earning an honest employment there?
Maybe 3 has something there. What about the Amer Airlines article that ‘accidentally’ came up on Google search? Killed the stock, trading halted.
Not that there weren’t other issues at LEH, but all those rumors about counterparties pulling out, which at the time were not true, really beat it down and then it seemed to go into a death spiral.
Maybe that’s all it takes these days to get the ball rolling. Information is powerful.
All I want to know is whether the Citi guys got invited just because they never sleep, and they can keep the meeting going while everyone else dozes off for a couple of minutes.
And to #3, stay off the juice during the early part of the day. We all know that is what caused Wall Street’s problems, according to a juice expert.
I remember reading that Felix Rohatyn is at LEH…
http://www.lehman.com/press/pdf_2006/082206_rohatyn.pdf
Interesting that Felix could not get SWFs to buy into Fuld’s plan… After all, he gets innumerable ovations for “his” plan to save NYC in the 70s…
http://www.bloggingbuyouts.com/2008/01/22/felix-rohatyn-politics-is-driving-investments-by-sovereign-weal/
Single white females?
I bid $0.99 per share, and not a penny more
@3 — yes the theory is somewhat far fetched, but in a weird way, there could be something to that (if not terrorists, a group of individuals or banks trying to profit) — there is a little precedence with Bear.
The 9/11 timing is a little creepy though.
As always in modern Amerika, privatize the good assets and socialize the bad assets.
Hey dumb fucks, let me give it to you straight: LEH employed massive leverage to invest in crappy assets. Said crappy assets are declining in value, wiping out the equity. Occam’s razor. You don’t need a conspiracy when you can read a balance sheet.
@13 And out of control, unproven rumors contributed nothing to their demise, even a teeny weeny lil bit? Oh sorry, when I say that, you must think I’m refering to your unit, aka Lil Bit.
Please — Lehman practically invented Mortgages/structured products Derivatives. They have the biggest market share. When the dot com boom failed, then they invented mortgage/structured products and derivatives — all smoke and mirrors financial engineering.
That and the ratings agencies who are paid by these companies to rate toxic crap with good rating
That and the American public buying weird mortgages with Pay as you want plans and ARM’s
Stupid people buying stupid products expecting that housing prices would go up forever.
That and mortgage brokers selling these things to make a commission (I know a mortgage broker who worked in Homdel NJ who is now independently wealthy, quit working 2 years ago)
That and the American obsession with having to buy McMansions in the suburbs when you don’t make enough money to pay off your credit card bills, or student loans.
That and the fed kept lowering interest rates
There’s no terrorists – it was just a financially engineered Gold rush that is now bust. It’s American’s own stupidity.
Terrorists aren’t that clever
Anyone know their synthetic CDO^2 exposure? I can imagine those craptastic things are probably worth NOTHING.
Would they really be stupid enough to lever against imaginary cash flows coming from those ‘assets’? Are they even on their balance sheet?
No respect for ratings agencies. Corrupt mofos.
On another note, doing due dilligence on LEH would be fascinating work. I’m pretty creative but it looks like they’ve got some stuff that’s so toxic no one wants to touch it with a barge pole.
So the “only” obstacle is a “bad bank” is needed to acquire the toxic securities?
Like that wasn’t the problem all along? Was there any doubt they could have sold the “good” assets for far more than Friday’s market cap?
Do the math – sounds like they’ll need to PAY someone to take on the liabilities that go along with the toxic assets.
This is the crux of the matter. Until they have someone willing to buy the toxic securities, they’ve made NO progress whatsoever.
#3 wrote:
“Short selling should be banned. If this is a free market, then it’s not working, especially if 50,000 people can lose their jobs in the space of a couple of months as a result of these market practices.”
Maybe we should not allow people to buy on an uptick? This would stop bubbles.
If someone is long (without margin) you can never squeeze them. If they are “right” they can hang on until they are vindicated. But if someone is short, they can be forced to cover at a loss (i.e. they must return the stock on demand) no matter how much capital they have.
So IMO, the odds are stacked in favor of the longs, not the shorts. Unless you think you can repeal the law of gravity, or legislate prosperity, the problem lies elsewhere than with shorts.
Did you notice that there really ARE problems with the assets at LEH, despite a year’s worth of denials? Was that caused by the shorts?
Pay day is Monday. Hope LEH employees check to see that the money lands in their accounts …
LEH going down like a tipped cow. This weekend. You heard it here first.
The Other Guy From Delaware
I bid $0.69 per share and not a penny more (and that is not a typo)
21 – Is that supposed to be a serious comment?
Fuld will try to get something for his people, if he can. He probably feels too guilty already.
If Fuld wants to get something for his people, he shouldn’t have been paying them almost completely in LEH stock for the past few years.
Lots of people gonna be wiped out.
Superb reporting Carney. Well done, this is the only post I am following (except for my bloomberg screen) of course.
I think we’re all missing the big story here: MER & AIG
LEH is only counter party to something like $700 billion in derivatives trades. MER is counter party to over 4 TRILLION. AIG is just massive, they have a cool 1 trillion sitting on the liability side of their balance sheet.
LEH is small potatoes. I’d rather my tax dollars bailout AIG or MER.
@26– linking to a wsj story is ‘superb reporting’?
@ 25 lots of people are already wiped out. I know 4 of them had all their stock in Lehman, they work there. Stupid I know…
One guy had 300,000 of the stock, holding it to pay for his kid’s tuition. Now he has nothing.
Some of these people drank the Kool Aid.
@23: Yes, it was a serious comment. Problem, asshat?
TOGFD
@3 That’s fucking retarded.
Sell the toxic stuff on the balance sheets of LEH, AIG et al to the cable companies. Then cable companies will add it to their monthly fees in their regular temporal fucking of cable subscribers by “fees” and new pricing “structures”.
I’ll get a Nobel for that idea. You can thank me later.
They have succeeded in burying the most illuminating fact of what is going on at that meeting this weekend. All the heavy financial hitters (banks and IBs)are there, as is the Fed, Treasury, and the SEC. Guess who did not get a seat at the table? Wait for it…..LEHMAN is not present. They are carving it up like its Munich, 1938. Guess when you carry the toxic stuff at 85 cents, considering MER puked them out at 22 cents, and had to finance the buyer, there is no capital left at LEH once that stuff is adequetely accounted for. Pretty clear we’ve seen the last of LEH if there opinion/approval is not needed.
#3
Quick lesson……
Shorts only succeed in taking a 60 dollar stock and turning it into a 3 dollar stock only when the entity is rotten to the core, and maliciously misleading the investing public about the state of their books.
Lehman has been the subject of going belly up since the moment BSC went under. Not a large reach considering it is almost refelxive for traders to look for the next vistim of what ever contagion is spreading. Notice the talk of MER now that LEH has but a couple of breaths left?
We are all well aware that the nation’s financial markets could be targeted by evil-doers, but this is not that.
I am actually glad David Einhorn has been vindicated considering what LEH tried to do to the guy for pointing out the obvious, even if he was the only one to see it at the time. That would be why he made the most money out of this debacle. Fair is fair. If LEH was honest, they’d still be in business.
carney, wsj is on fire. where are thou?
@33
How can that be true? Lehman not present?
I thought Dick Fuld was one of the tribe?
# 3 doesn’t understand captial markets.
It would be great if someone did this to us but as usual our own worst enemy lies within.
This toxic crap on financial instiutions balance sheets (or in many cases not on their balance sheets) is what caused them to reach pic highs and will now ultimately cause many of them to reach epic lows (or in some cases cause thier demise).
Banning short selling is the same as banning long buying.
LEH’s demise is NOT the fault or rumors or short selling. It is the fault of those running the company. They had 6 monthes to get thier house in order and instead of hitting the bid Dick Fuld decided to keep upping his price. Delusions of grandeur have no place on Wall Street circa 2008.
wait, what’s this, no private equity? sounds like the toxicity of the “assets” (probably better classified as “liabilities”) were such that taking them gratis is/was not enough. I have to agree with @18, someone will need to get PAID to take on this $hitshow. I’m not sure you can sell this thing piecemeal and still have a “bad bank” structure (without a wink and a nod or explicit guarantee from hank). recall, LEH said on the call that they would provide seller financing for REI at 4x.
if the feds do manage to create an “auction” type atmosphere with bofa and barclays, I hope – dare I say, pray – that kenny boy does the right thing by throwing in his cards and walking away from the table. the market will not sit idly by while the good ol’ boy from charlotte continues his empire building – bofa shares will plummet. best case scenario – they split the deposits and bofa gets a lift in the deposit cap as a reward for taking some pain away from the FDIC. that said, why would all those different banks be in the discussions if there was going to be sale of the entire company (sans government backstop)? is this becoming circular?
now, let’s move on watchovaya, when are they going to take a walk to the confessional? all those california mortgages they acquired in the golden west deal must be burning a hole in their reserves. who’s going to save them?
@35 – did you see how many reporters wsj has on this? five! carney is a one man gang while bess is out getting drunk from all the libations the frat boys at brother jimmy’s are sending her way…
@36
You are just as surprised as I am. But on further reflection, would Fuld or anyone else have the intestinal fortitude to sit there while the vultures pick at the carcass? Clearly there is no role for him, and he is in the position to veto shit.
Apparently, todays meeting is over. Nothing finalized and the mood was gloomy.
Also, Lehman has hired law firm Weil, Gotshal & Manges LLP to prepare a potential bankruptcy filing.
And the shit show is just really getting going….
@40
There are at least 3 meetings going on. First is the one trying to get LEH sold. Second is working on the seizure/liquidation if first meeting fails. Third meeting is everyone else on the street calculating LEH counterparty exosure and an attempt to prevent crash if LEH goes into liquidation. That’s alot of assets hitting the street at the same time capital is short…..
@cluzo– “@35 – did you see how many reporters wsj has on this? five! carney is a one man gang while bess is out getting drunk from all the libations the frat boys at brother jimmy’s are sending her way…”
wow, you’re a douchebag. (for thinking carney linking to one story is being “on this” and for the bizarre/lame attack on bess).
BTW,
Weil Gothalk & Manges, run!
One of the interesting things that I’d wager is complicating matters is the upcoming election.
Note how none of the Sovereign wealth funds (SWF’s) or foreign banks were proported to have representatives present. Further, the Federales’ can’t keep looking [openly at least] like they are sticking it to Joe taxpayer which is why they are picking their spots.
Ultimately a fortune was made due to the instruments that have now collapsed. If the companies and individuals didnt maintain adequate reserves then it is they themselves that are to blame (not short shellers etc.). Pigs (lipstick or no lipstick) get slaughtered. The question is who is going to pick over the carcass?
-C
*Note: This is not meant to endorse one candidate or the other so please lets leave that mire for another board.
@43
It’s standard. BSC had a bankruptcy filing ready to go. they need to cover all bases.
so what happened to that call of BAC taking them at $7 by the end of the weekend? Duh.
To WSJ:
Why would ANYBODY close a deal this evening when the price/backstop/whatever will be much cheaper at noon tomorrow? To those referring to Monday morning as a deadline, that would be Monday moring in the Asian markets, which is Sunday afternoon here. The way I see it, the game clock reads 9hrs 55 minutes left.
who is advising lehman?
@48 advising them what? like they have a choice? it’s over charlie.
@48
A whole shitload of lawyers. Bankers generally spend little time on goose eggs.
@42: and that makes you? let me guess, new to dealbreaker. welcome aboard – now go look up sarcasm. thanks for playing.
Carney – you need to answer the phone or is there another number besides the tips hotline (212-334-1871) for after hours fireworks?
Carney here. What do you have?
@ 50
Exactly what i have been thinking all day. The only ones that are going to make a shitload of money this weekend are the lawyers/lawfirms.
Who knows maybe JC went back to Skadden for the weekend?
Me, Me, I’m the Carney you want.
53 54 56
OK it was all me
and I’m not he
i’m just way bored
but 52 seriously, what’s so fireworky that your knickers are all in a twist?
@55
The lawyers are on bended knee PRAYING no deal happens. A bankruptcy will allow them to purchase all the beachfront homes of the now out of work LEH bankers/traders. They can feast on the LEH carcass for a minimum of five years. A successful resolution before tomorrow afternoon is a lawyers worst nightmare. It would be akin to watching a winning lottery ticket burn in the fireplace.
OK, give it a rest, its Sat night
Time to go bang some fresh pink Pussy!
@59
Good to know you wear your rose colored glasses when your out trolling….
From the NY Times: Check the last sentence.
A spokesman for the New York Federal Reserve Bank in New York confirmed the meeting but declined to provide details on the discussions. The Wall Street executives included the following chief executives: Lloyd Blankfein of the Goldman Sachs Group, James Dimon of JPMorgan Chase, John Mack of Morgan Stanley, Vikram Pandit of Citigroup and John Thain of Merrill Lynch. Representatives from the Royal Bank of Scotland and the Bank of New York Mellon were also present. Lehman Brothers was noticeably absent from the talks.
It’s a shame that none of this structural danger in our financial system will inform the opinions of people who are trying to make up their minds on Cain or Bama.
I almost wish Cain and Palin would win, as it would create a mass civics lesson in how to DP yourself economically, and lesson learned, voters will make better judgements four years now.
@52– the tips line is 973-495-0177
http://dealbreaker.com/2008/08/pssssthave_you_heard_about_how.php
@62
This is one situation where you can’t blame the politicians. For one, both the Dems and GOP gladly feed at the Wall Street trough. Secondly, Wall Street accomplished this huge fucking mess all by themselves.
Sorry guys. Was out trying to gather intelligence. Update in a moment.
HAHAHAHAHAHA
Yahoo has predicted correctly that Lehman will fail
http://finance.yahoo.com/q?s=LHBI.PK
My .02: There will not be a liquidation of Lehman. The market will go into a tailspin if Lehman goes under, simply on CDS positions, not to mention all the illiquid assets that will be dumped in the market.
They already have the outlines of structure in place: “bad bank” with toxic assets financed by a consortium of Wall Street players + sale of rest of Lehman to Barclays or BOA or some other last second darkhorse. What is being haggled over right now is price and whether the acquirer can get anything from the Fed/Treasury/SEC or other regulators.
Just my .02, no inside info to report.
@67
Yes, I read that as well. Big problem. The banks and IB’s have to use 3 billion each of very scarce capital to set this thing up, and then BofA or Barclays walks off with a clean bank. That’s a hard swallow. Cheaper than a crash is the only argument anyone has to support it. Plus, continuing erosion of the price of this shit could leave them all looking at a downgrade. Everyone has this crap in their portfolios.
http://WWW.BANKOFLEHMAN.COM AND http://WWW.BARCLAYSBROTHERS.COM BOTH FOR SALE….CHECK OUT EBAY!!! LOL TYPE IN “LEHMAN BROTHERS” ON EBAY.
@62 Seriously?
That is what i thought after the first bush term – “people will make better judgements”. Granted kerry/edwards was not a great alternative but still better than bush/cheney.
Massive civic lessons only occur when people actually under civics.
If people actually understood civics, then they would vote for the first candidate who said “everyones taxes are going up”, “there will be no new spending and much of the old will be curtailed”, “the economy is weak and getting weaker”, “we will have a comprehensive energy plan that includes, conservation, alternative energy, more refining capacity and perhaps new areas of drilling but regardless of what we do gas prices are going to stay above or at $3 a gallon” and finally “i don’t give a rat’s ass about gay marriage, i believe in a womans right to choose(because she can choose to say NO) but i do believe in the seperation of church and state”, now lets get to work”!
Of course that is pure fantasy but one can dream.
New tips line for this weekend: 646-526-FEAR. For real.
http://WWW.BANKOFLEHMAN.COM AND http://WWW.BARCLAYSBROTHERS.COM BOTH FOR SALE….CHECK OUT EBAY!!! LOL TYPE IN “LEHMAN BROTHERS” ON EBAY.
70 can i vote for you?
@ 67 & 68
But does saving Lehamn really achieve anything or merely move the toxic crap around thus moving off an eventual day of reckoning?
The economy is getting worse and the housing market continues to detoriate. It will probably take 5 years before housing prices start to acclerate from thier lows sometime in 2010. The prices of 2006 to early 2007 may not be seen again until 2016.
Eventually these assets may become less toxic but when – 5 years, 10 years? How much longer can we be in this “i don’t know” period?
My .02 is the longer we dance around the problem the worse it gets. This weekend it is LEH, next AIG, next WM, next MER…
The all are facing the same problems and merely hoping the market gets better, sinking moe capital into the exisitng entity and/or coming up with a way to move around the toxic waste is not working.
My point is we may crash on Monday morning but saving Lehman is not going to help us avoid the crash but merely but it off for another Monday. Maybe the crash of the smallest of the financial instituions will finally force Wall Street, fed, treasury ect. to start actually working on a viable solution (if there is one).
@74
Yes. Yahoo agrees with you. Hence, they’ve prepared a slot for LEH in the OTC
@47 I thought I read somewhere Monday is a holiday in the Asian markets. Maybe not?
SPODE
@74
Yes, crashes most certainly have a way of focusing the mind. I basically agree with you. Also, it is possible to save LEH and crash anyway, whichj would really make people look foolish. I just think at this point, under these circumstances, a crash in the financial economy, already in a credit crunch, would crash the real economy as well, creating that word we never speak. Incidentally, prior to the 1930′s, they were quite common.
@76
Nice call, looks like China and Japan may be closed…..Leaves Australia, NZ, and the rest open……a situation which can create even more problems as they take action in London and NY because they are handcuffed at home. Could get dicey…..We’ll see soon enough. Really nice call.
@ 77
I hear you. And around the time of BSC agreed 100%.
Now, i just don’t see the financial economy, on the back of the credit crunch, doing anything except a continual slow decent into a death spiral. The real economy is already descending into the abyss. Would a better time for a crash be when unemployment is %10? Not to say with a crash it doens’t get there, fast.
Maybe its time to rip the band aid off?
#74
@79
A cold look at the real economy will show that its certainly not burning up, its hanging in there pretty well. Wall St. people. when the Street hits the skids, always think the real economy is in the shitter as well, but its not. Its moving along, and is certainly not in crisis like the financial economy. Remember, the crash of 1987 was never noticed outside the financial world. The economy went into recession in very late 1990 when the S&L’s all blew up under real estate exposure…..Remind you of anything? Kind of scary because LEH, andd therefore the rest of them, have shitloads of real estate exposure.
#78
Only Japan will be closed Sept. 16 (Tue). That’s a holiday for respect of the aged. Means that Sunday evening, NY time, all Asian markets will open (their Sept. 15) as is usual every Sunday evening (their Monday morning).
http://www.youtube.com/watch?v=iI9J3nxB0KM
incredible. you want to fix the economy don’t vote for this fucking retard. seriously, watch this video of palin and gibson. it’s frightening (especially in that– unlike bush– she actually believes she’s smart).
#80
What street do you live on, or better, what planet? Things are bad already, and just getting worse.
@83
Depends on your frame of reference. Unemployment just hit six percent, which used to happen in good times. Inflation, outside of petroleum, not great but a pittance compared to late 70′s early 80′s. Exports are huge,blah, blah, blah. Gramm wasn’t off base when he said there are alot of whiners around. Part of the difference is age. If all you have lived through is late 80′s on, you have no idea how shitty things can get. This ain’t that. Yet. 72nd Street, b/w Park and Madison. Quite nice. That would be planet Earth.
@82
It was Charlie Gibson who looked like the asshole in that interview. Smug, arrogant, condescending. HE was wrong about the “Bush Doctrine”, not her. I guarantee you, one on one, Sarah Palin would eat you for lunch. There’s a tough broad in there.
@85– jesus christ. enough with the “she’s one tough broad” bs. yeah, a tough woman is appealing, if she actually has shit to back it up. this one doesn’t, and the shtick is grating. watch the economy video: http://www.youtube.com/watch?v=iI9J3nxB0KM
she could not answer a damn question.
@86
Let’s resume this conversation in a year. You’ll see. We’ve had Presidents, not to mention Veeps, from more modest circumstances. And, I would refer you to the book “The Best and the Brightest.” That’s the story of the Harvard fuckers who got us into Vietnam and stuck with it for 12 years.
@beentheredonethat– it’s predictable though still satisfying to see you couldn’t come up with a defense of her being able to answer shit on what she’d do with the economy, beyond– smart people are dangerous! elect the dumb!
#81 was wrong. Japan will not open tomorrow evening NY time. The holiday is Sept 15 this year. China will open and the rest of Asia. Japan will be open Monday evening, NY time.
@88
One, I do not believe her to be dumb.
Two, whatever you may think of her, her resume is certainly more substantial than Obama’s.
Third, since when does Washington control the economy?
Fourth, are you part of that liberal sect that is going crazy because the race is obviously slipping away?
Fifth, if you want to win the White House, it is a very bad idea to have 200,000 screaming Germans supporting that quest. Might as well have Barbra Streisand sing for you. Wait, that’s next month……
Sixth, any idea where I can get some greek columns on the cheap?? Denver, maybe?
@89
I was trying to figure a Tuesday holiday, never know…..In any case, thanks for chasing it down, didn’t want to bother anyone on Sat. night….
@82, 86, 88:
The Palin “interview” was heavily edited to make Palin look bad.
The full transcript has been made available:
http://www.pajamasmedia.com/instapundit/archives2/024281.php