Lehman's Hedges Backfire

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Are we in for another round of write-offs from Wall Street? That's what Susanne Craig argues in the Wall Street Journal's "Heard On The Street" column today. This time the losses are coming from a rebound in the mortgage markets. Banks that had shorted mortgages to hedge their long exposures are now finding their shorts have become "counter-productive."
The worst off, Craig writes, is Lehman Brothers, which is looking at write-downs of somewhere between $1.5 billion and $2 billion. That eats up almost half the $4 billon of capital Lehman was forced to raise when rumors spread that the bank might face a crisis. Morgan Stanley is a distant second, with less than half that amount expected.

Trouble Hid in the Hedges
[Wall Street Journal]

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