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Lehman Denies Fed Window Borrowing

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The Fed worked mightily to get rid of the stigma attached to banks going to its discount window. But for its newly minted investment banking fund window, the stigma perseveres. Today Lehman Brothers's treasurer spoke to CNBC to deny speculation that it accessed the Fed's borrowing window, and this denial seems to have lifted the financial sector a bit. That's stigma in action.
Lehman says the last time it went to a Fed facility was April 16. It claims its cash on hand rose $40 billion in the first quarter. But Felix Salmon points out that Lehman's hedging strategy seems to have been destined to fail because they tried to hedge specific positions. When markets behave chaotically, hedges like those attempted by Lehman fail. "We've seen this movie before, most memorably at Bear Stearns," Salmon writes.