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Lehman Bros files for bankruptcy
America's 4th biggest investment bank, Lehman Bros, has filed for bankruptcy 158 years after it was formed.
The bankruptcy followed the refusal of firstly the US Treasury and then its fellow investment banks to bail it out or buy it out. The full statement is here.
The impending bankruptcy sparked a day of drama on Wall St, including the shock decision by Merrill Lynch to sell out to Bank of America to avoid following Lehman, the widening of new lending facilities by the Federal Reserve to including the acceptance of equity as collatoral, a desperate attempt by the world's biggest insurer AIG to borrow US$40 billion from the Fed to avoid collapse and the creation of a US$70 billion cash pool by 10 of the world's biggest banks to help other banks.
Traders await the opening of markets in Europe and America with a combustible mix of fear and panic.
20 Comments
Hi Merril Lynch has sold
Hi Merril Lynch has sold out for 74 billion nz at a premium of 70%percent per share Ithink thats more than the nz economy ?Iheard some little guy in a pinstripe suit on tv3 saying Merril Lynch had gone belly up?MUST BE A BIG BELLY? HOPE NZ WILL BE SO LUCKY!
At this point in time
At this point in time Lehmans has said it * intends* filling for *protection* from creditors for some parts of its business only. The US has various BK laws. This 'Chapter' can allow it to trade out of the mess if it is possible. Then again if the whole world thinks they are already BK then they are of course doomed.
Meanwhile they have more or less unlimited ability to go to the Federal reserve for loans where they can if necessary pledge their own stock or *any* security with a AAA rating for cheap loans. I imagine that by mid week when clarity is restored this could be seen in a less cataclysmic light.
BOA has agreed to buy MER for a pretty generous price.
Things can be much worse.
Moody's cuts Lehman's paper to
Moody's cuts Lehman's paper to junk:
http://www.cnbc.com/id/26716265/for/cnbc/
Horse......stable door...........bolted
You have to ask yourself - how useful are ratings?
The actual bankruptcy petition is
The actual bankruptcy petition is here: http://blog.rebeltraders.net/wp-content/uploads/2008/09/show-case-doc.pdf
They owe Citibank US$180 billion. Yes, billion.
Did Cullen say just the
Did Cullen say just the other day that the worst was over for the New Zealand economy?
We know now how much we can "trust" Cullen's words, not at all.
The credit squeeze continues, house prices will continue to fall, New Zealand will be lucky to get one quarter of positive growth this year in the fourth quarter.
So much for Cullen's economic management skills.
Andrew, This looks, maybe, Cataclysmic
Andrew,
This looks, maybe, Cataclysmic to me.
"....with a combustible mix of fear and panic.".. Great wordsmithing Bernard.
This Lehman Bros crisis could well be the "match"... that pushes sentiment into a panic phase.
Amongst my own friends, .. for the first time,... I can hear the "jitters".
HBOS, the large UK bank,
HBOS, the large UK bank, which has expanded aggressively both here and in NZ, fell a staggering 18% in London trading today, on fears about its balance sheet:
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/09/15/bcnhbo...
Its put money into Strategic Finance and a number of other financial companies.
If I was a Finance Director of acompany dependent on HBOS for financing I would be looking over my shoulder about now.
A very good site at
A very good site at which to follow the US debt crisis if you haven't already found it:
http://theautomaticearth.blogspot.com/
thks for the link Andy....
thks for the link Andy.... looks very interesting.
Do u know any background on the authors...??? thanks
The site is run by
The site is run by 2 Canadians (I think!), Stoneleigh and Ilargi, who used to provide a very useful financial overview for the oil/resource depletion site the oildrum until about 12-18 months ago, when they started the stand-alone theautomaticearth, as a clearing house for stories about the US credit crunch etc. I believe both have background in the financial services industry (though memory could be wrong there). Ilargi has been particularly bearish these past 6 months and has proved, like Roubini, to be most prescient.
thanks for that Andy...
thanks for that Andy...
Does anyone on this blog
Does anyone on this blog understand what filing for bankruptcy in the US actually means?
Deflation
Deflation
Mitch, yes it's a bit
Mitch, yes it's a bit interesting the way it's being reported - as I'd have imagined they are putting the entity into Chapter 11. But then the media are showing folks carrying boxes out of the building, giving the implication they've all packed up their desks and are gone today. So, who knows - maybe it's not a Chapter 11 filing?
The Economist's take on the
The Economist's take on the situation ('A Nightmare on Wall Street'):
http://www.economist.com/finance/displaystory.cfm?story_id=12231236
Re: Lehmans bankruptcy and what
Re: Lehmans bankruptcy and what it means - here is the best summary I have seen yet (from a legal expert at Fortune magazine):
http://legalpad.blogs.fortune.cnn.com/2008/09/15/lehman-stress-test-for-...
So, no, its not a get out of jail card (as for the airlines etc) - Lehmans is indeed wide open to counterparty claims.
Major US investment banks have
Major US investment banks have always traded as if they were too important to be left to fail. A message is being sent here.
Oh - fascinating. So perhaps
Oh - fascinating. So perhaps the employees are simply bailing? They'd likely have the inside running on where this is all heading. Sort of a black hole phenomena in financial/economic terms.
Hahaha .... no, it's a
Hahaha .... no, it's a hasty exit with the evidence they couldn't shred.
http://money.cnn.com/2008/09/15/news/companies/lehman_endofwallstreet_tu...
"Fuld, for example, has cashed out almost $500 million worth of stock in his 14 years as CEO, according to Fortune's Allan Sloan; that's four times Lehman's stock market capitalization as of Monday morning."
"Time to spring into action:
"Time to spring into action: Harcourts CEO" (http://www.scoop.co.nz/stories/BU0809/S00322.htm)
"...and moves by the US Government that have improved the outlook for the American economy and for global finance markets and we have a recipe that suggests more positive times ahead in the domestic real estate market"
LOL, I hope he feels ashamed that this went out.