Lehman Brothers: One Year Of Rumors And Declining Stock

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It's been about a year since Lehman Brothers began getting ground down by the rumor mill. The decline in Lehman's stock price began in mid July, and really took off downward by mid August. The pricing on Lehman's credit default swaps went absolutely wild in August, and rumors began flying that Lehman was facing serious trouble.
Lehman came out a number of times last summer to quell rumors. But that didn't stop the decline. The most specific "rumor" that was circulating last summer wasn't a rumor so much as an analysis of Lehman's financial statements claiming that Lehman was mismarking assets on it's balance sheet.
"Lehman's previous 10-q lays out it very clearly," a DealBreaker commenter wrote. "They have a number of securities they classify in Level II and Level III. The Level III securities seem to be clearly marked-to-model, and Level II is somewhat marked-to-model."
For a long, long time Lehman denied there were any problems. In the end, it appears the rumor mongers were largely correct. Lehman's balance sheet was loaded up with so much toxic sludge that it had to raise billions of dollars to keep afloat. Even its most loyal customers have gone on the record as saying that the reason it is safe to do business with Lehman is that the Federal Reserve won't allow it to fail.

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