PIMCO's Bill Gross: The Fed Will Keep Lehman Afloat

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Bill Gross just appeared on CNBC to crush the rumor that Pimco was diminishing its exposure to Lehman Brothers either by reducing its trading positions with Lehman or reducing any investment in Lehman. In his comments he said that Pimco's willingness to continue to deal with Lehman Brothers and other potentially troubled securities firms is influenced by the Federal Reserve's "temporary" broker-dealer discount window.
Gross said that the discount window takes away any solvency risk on the part of Lehman, although he said that doubts about the business model of investment banks is most likely depressing Lehman's price. The reduction of leverage across Wall Street and the decline of businesses that were, in essence, dependent on a booming real estate market and attendant mortgage boom has raised serious questions about the future profits of investment banks.

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