Sunday September 14, 6:22 pm ET By Joe Bel Bruno, AP Business Writer
AP Source: Global banks to unveil massive lending program to help restore confidence
NEW YORK (AP) -- A top investment banking official says U.S. and foreign banks are planning major steps to inoculate the global financial system as a bankruptcy filing by Lehman Brothers appeared likely.
The official said Sunday the banks would create a pool of money up to $50 billion to lend troubled financial companies. And officials at the U.S. Treasury and the Federal Reserve are expected to say they are prepared to make additional loans.
The plan comes as top government officials and Wall Street executives hold marathon meetings about Lehman's future.
The official says the Fed and Treasury are pushing Bank of America to buy Merrill Lynch. The person, with direct knowledge of the talks, was not authorized to speak publicly because the discussions were ongoing.
Sunday, September 14, 2008
Ike, distrutte piattaforme petrolio
Danni a oleodotti, soccorsi in corso
L'uragano Ike ha distrutto diverse piattaforme petrolifere e danneggiato alcuni oleodotti nel Golfo del Messico. Le raffinerie della zona di Houston, in Texas, potrebbero rimanere chiuse per otto o nove giorni a causa del passaggio di Ike. Intanto continuano le operazioni di soccorso: almeno duemila persone sono state salvate e recuperate dopo il passaggio dell'uragano. Oltre 2 milioni di persone restano prive di elettricità.
L'uragano Ike ha distrutto diverse piattaforme petrolifere e danneggiato alcuni oleodotti nel Golfo del Messico. Le raffinerie della zona di Houston, in Texas, potrebbero rimanere chiuse per otto o nove giorni a causa del passaggio di Ike. Intanto continuano le operazioni di soccorso: almeno duemila persone sono state salvate e recuperate dopo il passaggio dell'uragano. Oltre 2 milioni di persone restano prive di elettricità.
Wall Street Prepares for Potential Lehman Bankruptcy (Update2)
Wall Street Prepares for Potential Lehman Bankruptcy (Update2)
By Craig Torres
Sept. 14 (Bloomberg) -- Wall Street readied for a potential Lehman Brothers Holdings Inc. bankruptcy after Bank of America Corp. and Barclays Plc pulled out of talks to buy it and the government indicated it wouldn't provide funds to prevent a collapse.
Banks and brokers today held a session for netting derivatives transactions with Lehman, or canceling trades that offset each other, in case the New York-based firm files for bankruptcy before midnight.
``The purpose of this session is to reduce risk associated with a potential Lehman'' bankruptcy, the International Swaps and Derivatives Association said in a statement today. The ISDA includes 218 banks, brokerages, insurance companies and other financial institutions from the U.S. and abroad.
The step indicates Wall Street lacks confidence that three days of talks to find a buyer for Lehman, held at the Federal Reserve Bank of New York, will be successful. Treasury Secretary Henry Paulson, who has led the talks with New York Fed President Timothy Geithner, was adamant two days ago against using taxpayer funds to help a purchaser take Lehman over.
U.S. regulators are betting that the financial system will be able to withstand the failure of a large institution without severe disruptions to an already weak economy.
Paulson's Stance
Paulson opposed using government money because Wall Street has had time to prepare for the Lehman situation, a person familiar with his thinking said two days ago. That would make the case different from the Bear Stearns Cos. collapse in March, when the Fed provided $29 billion of financing to help JPMorgan Chase & Co. take over the firm.
``Treasury and the Fed have determined that markets have adjusted to the situation since Bear Stearns,'' said Gilbert Schwartz, a partner at Schwartz & Ballen LLP in Washington and a former Fed Board attorney. ``If the markets, every time a big institution went bust, expected the government to step in, no one would ever adapt.''
Paulson, Geithner and Securities and Exchange Commission Chairman Christopher Cox held talks with Wall Street chiefs from the evening of Sept. 12.
The market value for all over-the-counter derivatives swelled 50 percent last year to $14.52 trillion, with interest- rate contracts accounting for almost half of the total, according to the Bank for International Settlements.
Insolvent Banks
After the Bear Stearns episode, Paulson pushed for a resolution mechanism to shutter a failing investment bank, similar to how the Federal Deposit Insurance Corp. resolves insolvent commercial banks.
``We must limit the perception that some institutions are either too big or too interconnected to fail,'' Paulson said in a June 19 speech. ``If we are to do that credibly, we must address the reality that some are.''
Without such a mechanism in place, a failing firm has the option of filing for bankruptcy. Bear Stearns officials told the Fed in March they would have to make such a filing without emergency assistance.
Fed Chairman Ben S. Bernanke said in April that he wanted to avoid another Bear Stearns case.
``The financing we did for Bear Stearns is a one-time event,'' Bernanke said in April. ``It's never happened before and I hope it never happens again.''
Lehman Trades
The fourth-largest securities firm until the past week, Lehman has thousands of such trades in credit, equity, commodity, interest rates and currency derivatives.
The ISDA said the ``netting trading session'' began at 2 p.m. and will continue until at least 6 p.m. New York time.
``Trades are contingent on a bankruptcy filing at or before 11:59 p.m. New York time, Sunday, Sept. 14, 2008,'' the ISDA said. ``If there is no filing, the trades cease to exist.''
Barclays, the U.K.'s third-biggest bank, said earlier today it abandoned talks to buy Lehman, contending it couldn't obtain guarantees to protect against potential losses at the U.S. securities firm.
Less than three hours after the Barclays news, Bank of America also pulled out, according to a person with knowledge of the matter.
To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net Last Updated: September 14, 2008 16:25 EDT
From the desk of Dick Fuld, Lehman Brothers CEO
From the desk of Dick Fuld, Lehman Brothers CEO
Submitted By Mark McQueen
Dear Mr. Buffett:
First off, I would like to thank you for meeting with me and my Lehman Brothers team earlier this week. The opportunity to outline our plan to you personally was the highlight of my professional career. I know that it has been a few years since you had an office in Manhattan, and we aren’t asking you to take a chair and a desk, but your steady hand at Salomon Brothers is an example of what all of us on Wall Street are so desperately seeking in these difficult times.
As I clearly outlined during our meeting, I firmly believe that an investment in Lehman Brothers by Berkshire Hathaway is a classic opportunity for your great company to, once again, buy a fabulous global franchise at a very fair price. This isn’t at all like the situation that John Gutfreund put you in, and I recognize that you are wary given your previous experience. Wall Street has changed dramatically since 1991, it is far more of a franchise business that relies on capital than the “people” business that you were once used to. As you mentioned, the $700 million Salomon deal was the single largest commitment of your career at that point; and I take your point that such sums are now just the bonus pool for the commodity division
But much has changed. Over the past year, our firm’s market capitalization has shrunk by more than $30 billion (about 75%). All of the shareholder wealth that we’ve created over the past 10 years has been completely erased in a matter of months, and yet our firm has never had brighter opportunities nor a stronger safety net. This is the investment opportunity that we see for you and the rest of the Berkshire family. You have the opportunity to invest in the brokerage industry at prices not seen for a decade.
Our firm is poised to return to greatness, and many of Bear”s clients are coming our way.
Just the other day, a survey of U.S. institutional investors by Greenwich Associates found that “among the largest players, [Lehman and JP Morgan] scored highest in providing their [fixed income] clients the best support and understanding during the market turmoil.” This survey, conducted between February and April, also found that while JPMorgan was found to have slightly more institutional trading relationships, Lehman Brothers had slightly more market share.
What this survey will confirm for you is that our trading desk has continued to serve our many international clients, even when other brokerage firms were pulling back. This bodes well for the next Bull Market.
I have spoken to both the Treasury Secretary and Chairman Bernanke, and they are prepared to assure you personally that Lehman will continue to have access to the Fed’s discount window for many years to come, if so required. As such, our firm cannot fail in the traditional sense. The federal government’s balance sheet is impregnable. This is an investment circumstance that rarely presents itself in the lifetime of any investor; even one as successful as your own.
We are very reluctant to raise capital at this juncture. Our recent $6 billion equity raise was intended to help us weather even the worst storm. I understand that some intermediaries reached out to you at that time, and that you rightly advised that your modus operandi was not to invest in a club format. I regret that anyone troubled you with the idea back in May, and recognize that by passing then, as you said in our meeting, you avoided suffering the 44% drop in our shares since that deal was announced on June 10th.
Your wisdom is clear. But this time it will be different.
As we discussed, approximately $145 billion of long-term debt is outstanding including current year maturities of $18.5 billion with $8 billion of commercial paper. We have a plan to deal with these debt tranches, but recognize that a partnership with you would be a tremendous asset when we return to the debt markets. My Treasury team advises that we could save in excess of 200 basis points on our medium term paper if Berkshire agreed to be our strategc investor prior to commencing our current year debt refinancing activities.
The investors who joined our shareholder group in June recognize that much of what has happened over the past 5 weeks was unforseen. But no one likes losses, paper or otherwise. That being said, they will be elated if you join their ranks, let me assure you of that. That old saying, “dilution is your friend”, rings all the more true when the name “Buffett” is involved in the dilution.
My partners and I are prepared to consider a $5 billion convertible preferred investment, paying an 8% annual cash yield, with redemption and retraction rights in, say, 20 years. Our stock rallied yesterday on the back of the positive news out of Wells Fargo. But, with a sensible discount to yesterday’s closing price of $16.65, your firm would own approximately 33% of our Company, at closing. Naturally, we would very much want you to consider joining our Board of Directors at the earliest opportunity. Other names would be welcome as well.
As we both know, an announcement that Berkshire had agreed to invest capital in our firm would propel both LEH shares and the broader bank index. If yesterday’s rally is any indication, you could earn a 25% return in a single day merely on the news of your financial commitment to me and our franchise.
I appreciate that you have been displeased with the role that you believe Wall Street has directly played in the credit crisis of the past 12 months. I noted that, during our meeting, you specifically named Lehman and Bear Stearns as two of the financial institutions that were at the forefront of the growth in the CDO, CLO, ABS, subprime and credit swap markets.
As you know, the job of an investment bank is to bring to market the products that the market wants to buy. Although we pride ourselves in our Top 5 ranking in the M&A tables, the fees generated on advisory assignments pale in comparison to the revenue that flows from the underwriting side of our industry, whether it be equity, structured products or debt. I took your point that Wall Street must play a “quality control” role in the process of selling products to our clients, and I strongly believe that we did our utmost on that front.
We were so convinced that these vehicles were money machines that we bought them for the accounts of our own captive hedge funds. We put our money where our mouths were.
I understand that you are also dubious about the long term capability of the hedge fund industry to produce returns that exceed your sense of market norms. I have two points to make on that front.
Hedge Funds are a key revenue driver on our trading desks, and excellent Prime Brokerage clients as well. Up to 40% of our daily block trades are done for hedge fund clients. Moreover, our ability to create our own hedge funds has generated substantial fees from institutional investors and pension funds around the world. Although the recent SEC push to curtail some of the more attractive trading strategies of hedge funds such as ours may hamper our ability to beat the index, the fee streams that our funds generate are extremely valuable. Particularly at times, such as now, when the underwriting and advisory revenues are weaker than we would like.
However, if you would like a commitment from me to exit the hedge fund business, I will certainly recommend such action to the Board should you agree to our investment proposal. Although I am the leader at Lehman, I am always open to well-reasoned perspectives.
In summary, let me again thank you for agreeing to meet with us. I believe that you’ve been presented with a unique investment opportunity, and one that is sure to be successful. Your hallmark is to invest in top notch management teams, and I humbly submit that we’ve demonstrated that we can navigate difficult waters.
With your financial commitment to our firm, the sailing will be smooth, and the entire U.S. financial services industry will benefit from the rising tide that would surely follow a commitment from Berkshire. The positive impact that would have on the economy is clear, which would directly beenfit the rest of the Berkshire Hathaway portfolio of companies. This is the way that America can exit the recession that you believe we are experiencing right now.
Thank you, in advance, for your time and consideration. As Senator McCain said himself, and I passed along to you, “the country needs you”, and we are honoured that you are considering this opportunity.
Yours Sincerely,
“signed”
Richard Fuld,Chairman and CEOLehman Brothers Inc.
MRM
Submitted By Mark McQueen
Dear Mr. Buffett:
First off, I would like to thank you for meeting with me and my Lehman Brothers team earlier this week. The opportunity to outline our plan to you personally was the highlight of my professional career. I know that it has been a few years since you had an office in Manhattan, and we aren’t asking you to take a chair and a desk, but your steady hand at Salomon Brothers is an example of what all of us on Wall Street are so desperately seeking in these difficult times.
As I clearly outlined during our meeting, I firmly believe that an investment in Lehman Brothers by Berkshire Hathaway is a classic opportunity for your great company to, once again, buy a fabulous global franchise at a very fair price. This isn’t at all like the situation that John Gutfreund put you in, and I recognize that you are wary given your previous experience. Wall Street has changed dramatically since 1991, it is far more of a franchise business that relies on capital than the “people” business that you were once used to. As you mentioned, the $700 million Salomon deal was the single largest commitment of your career at that point; and I take your point that such sums are now just the bonus pool for the commodity division
But much has changed. Over the past year, our firm’s market capitalization has shrunk by more than $30 billion (about 75%). All of the shareholder wealth that we’ve created over the past 10 years has been completely erased in a matter of months, and yet our firm has never had brighter opportunities nor a stronger safety net. This is the investment opportunity that we see for you and the rest of the Berkshire family. You have the opportunity to invest in the brokerage industry at prices not seen for a decade.
Our firm is poised to return to greatness, and many of Bear”s clients are coming our way.
Just the other day, a survey of U.S. institutional investors by Greenwich Associates found that “among the largest players, [Lehman and JP Morgan] scored highest in providing their [fixed income] clients the best support and understanding during the market turmoil.” This survey, conducted between February and April, also found that while JPMorgan was found to have slightly more institutional trading relationships, Lehman Brothers had slightly more market share.
What this survey will confirm for you is that our trading desk has continued to serve our many international clients, even when other brokerage firms were pulling back. This bodes well for the next Bull Market.
I have spoken to both the Treasury Secretary and Chairman Bernanke, and they are prepared to assure you personally that Lehman will continue to have access to the Fed’s discount window for many years to come, if so required. As such, our firm cannot fail in the traditional sense. The federal government’s balance sheet is impregnable. This is an investment circumstance that rarely presents itself in the lifetime of any investor; even one as successful as your own.
We are very reluctant to raise capital at this juncture. Our recent $6 billion equity raise was intended to help us weather even the worst storm. I understand that some intermediaries reached out to you at that time, and that you rightly advised that your modus operandi was not to invest in a club format. I regret that anyone troubled you with the idea back in May, and recognize that by passing then, as you said in our meeting, you avoided suffering the 44% drop in our shares since that deal was announced on June 10th.
Your wisdom is clear. But this time it will be different.
As we discussed, approximately $145 billion of long-term debt is outstanding including current year maturities of $18.5 billion with $8 billion of commercial paper. We have a plan to deal with these debt tranches, but recognize that a partnership with you would be a tremendous asset when we return to the debt markets. My Treasury team advises that we could save in excess of 200 basis points on our medium term paper if Berkshire agreed to be our strategc investor prior to commencing our current year debt refinancing activities.
The investors who joined our shareholder group in June recognize that much of what has happened over the past 5 weeks was unforseen. But no one likes losses, paper or otherwise. That being said, they will be elated if you join their ranks, let me assure you of that. That old saying, “dilution is your friend”, rings all the more true when the name “Buffett” is involved in the dilution.
My partners and I are prepared to consider a $5 billion convertible preferred investment, paying an 8% annual cash yield, with redemption and retraction rights in, say, 20 years. Our stock rallied yesterday on the back of the positive news out of Wells Fargo. But, with a sensible discount to yesterday’s closing price of $16.65, your firm would own approximately 33% of our Company, at closing. Naturally, we would very much want you to consider joining our Board of Directors at the earliest opportunity. Other names would be welcome as well.
As we both know, an announcement that Berkshire had agreed to invest capital in our firm would propel both LEH shares and the broader bank index. If yesterday’s rally is any indication, you could earn a 25% return in a single day merely on the news of your financial commitment to me and our franchise.
I appreciate that you have been displeased with the role that you believe Wall Street has directly played in the credit crisis of the past 12 months. I noted that, during our meeting, you specifically named Lehman and Bear Stearns as two of the financial institutions that were at the forefront of the growth in the CDO, CLO, ABS, subprime and credit swap markets.
As you know, the job of an investment bank is to bring to market the products that the market wants to buy. Although we pride ourselves in our Top 5 ranking in the M&A tables, the fees generated on advisory assignments pale in comparison to the revenue that flows from the underwriting side of our industry, whether it be equity, structured products or debt. I took your point that Wall Street must play a “quality control” role in the process of selling products to our clients, and I strongly believe that we did our utmost on that front.
We were so convinced that these vehicles were money machines that we bought them for the accounts of our own captive hedge funds. We put our money where our mouths were.
I understand that you are also dubious about the long term capability of the hedge fund industry to produce returns that exceed your sense of market norms. I have two points to make on that front.
Hedge Funds are a key revenue driver on our trading desks, and excellent Prime Brokerage clients as well. Up to 40% of our daily block trades are done for hedge fund clients. Moreover, our ability to create our own hedge funds has generated substantial fees from institutional investors and pension funds around the world. Although the recent SEC push to curtail some of the more attractive trading strategies of hedge funds such as ours may hamper our ability to beat the index, the fee streams that our funds generate are extremely valuable. Particularly at times, such as now, when the underwriting and advisory revenues are weaker than we would like.
However, if you would like a commitment from me to exit the hedge fund business, I will certainly recommend such action to the Board should you agree to our investment proposal. Although I am the leader at Lehman, I am always open to well-reasoned perspectives.
In summary, let me again thank you for agreeing to meet with us. I believe that you’ve been presented with a unique investment opportunity, and one that is sure to be successful. Your hallmark is to invest in top notch management teams, and I humbly submit that we’ve demonstrated that we can navigate difficult waters.
With your financial commitment to our firm, the sailing will be smooth, and the entire U.S. financial services industry will benefit from the rising tide that would surely follow a commitment from Berkshire. The positive impact that would have on the economy is clear, which would directly beenfit the rest of the Berkshire Hathaway portfolio of companies. This is the way that America can exit the recession that you believe we are experiencing right now.
Thank you, in advance, for your time and consideration. As Senator McCain said himself, and I passed along to you, “the country needs you”, and we are honoured that you are considering this opportunity.
Yours Sincerely,
“signed”
Richard Fuld,Chairman and CEOLehman Brothers Inc.
MRM
Derivative traders open session to reduce Lehman risk
Derivative traders open session to reduce Lehman risk
Sun Sep 14, 2008 3:05pm EDT
NEW YORK (Reuters) - An emergency trading session has been opened between Wall Street dealers with Lehman Brothers counterparty risk, the International Swaps and Derivatives Association said Sunday.
The session will run from 2 p.m. to 4 p.m. and will involve credit, equity, rates, foreign exchange and commodity derivatives, the ISDA said in a statement.
The aim is to reduce risk associated with a potential bankruptcy filing by Lehman Brothers Holdings Inc.
"Trades are contingent on a bankruptcy filing at or before 11.59 p.m. New York time Sunday," said the statement. "If there is no filing, the trades cease to exist."
Sun Sep 14, 2008 3:05pm EDT
NEW YORK (Reuters) - An emergency trading session has been opened between Wall Street dealers with Lehman Brothers counterparty risk, the International Swaps and Derivatives Association said Sunday.
The session will run from 2 p.m. to 4 p.m. and will involve credit, equity, rates, foreign exchange and commodity derivatives, the ISDA said in a statement.
The aim is to reduce risk associated with a potential bankruptcy filing by Lehman Brothers Holdings Inc.
"Trades are contingent on a bankruptcy filing at or before 11.59 p.m. New York time Sunday," said the statement. "If there is no filing, the trades cease to exist."
Wall Street Prepares for Potential Lehman Bankruptcy (Update1)
Wall Street Prepares for Potential Lehman Bankruptcy (Update1)
By Craig Torres
Sept. 14 (Bloomberg) -- Wall Street prepared for a potential Lehman Brothers Holdings Inc. bankruptcy after Barclays Plc said it pulled out of talks to buy the firm and the government indicated it wouldn't provide funds in a resolution.
Banks and brokers today held a session for netting derivatives transactions with Lehman, or canceling trades that offset each other, in case the New York-based firm files for bankruptcy before midnight New York time.
``The purpose of this session is to reduce risk associated with a potential Lehman Brothers Inc. bankruptcy filing,'' the International Swaps and Derivatives Association said in a statement today. The ISDA includes 218 banks, brokerages, insurance companies and other financial institutions from the U.S. and abroad.
The step indicates that Wall Street lacks confidence that three days of talks to find a buyer for Lehman, held at the Federal Reserve Bank of New York, will be successful. Treasury Secretary Henry Paulson, who has led the talks with New York Fed President Timothy Geithner, was adamant two days ago against using taxpayer funds in a resolution.
The fourth-largest securities firm until the past week, Lehman has thousands of such trades in credit, equity, commodity, interest rates and currency derivatives.
``ISDA confirms a netting trading session will take place between 2 p.m. and 4 p.m. New York time for over-the-counter derivatives,'' the ISDA said. ``Trades are contingent on a bankruptcy filing at or before 11:59 p.m. New York time, Sunday, Sept. 14, 2008. If there is no filing, the trades cease to exist.''
The announcement came after Barclays, the U.K.'s third- biggest bank, said it abandoned talks to buy Lehman, contending it couldn't obtain guarantees to protect against potential losses at the U.S. securities firm.
To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net Last Updated: September 14, 2008 15:19 EDT
By Craig Torres
Sept. 14 (Bloomberg) -- Wall Street prepared for a potential Lehman Brothers Holdings Inc. bankruptcy after Barclays Plc said it pulled out of talks to buy the firm and the government indicated it wouldn't provide funds in a resolution.
Banks and brokers today held a session for netting derivatives transactions with Lehman, or canceling trades that offset each other, in case the New York-based firm files for bankruptcy before midnight New York time.
``The purpose of this session is to reduce risk associated with a potential Lehman Brothers Inc. bankruptcy filing,'' the International Swaps and Derivatives Association said in a statement today. The ISDA includes 218 banks, brokerages, insurance companies and other financial institutions from the U.S. and abroad.
The step indicates that Wall Street lacks confidence that three days of talks to find a buyer for Lehman, held at the Federal Reserve Bank of New York, will be successful. Treasury Secretary Henry Paulson, who has led the talks with New York Fed President Timothy Geithner, was adamant two days ago against using taxpayer funds in a resolution.
The fourth-largest securities firm until the past week, Lehman has thousands of such trades in credit, equity, commodity, interest rates and currency derivatives.
``ISDA confirms a netting trading session will take place between 2 p.m. and 4 p.m. New York time for over-the-counter derivatives,'' the ISDA said. ``Trades are contingent on a bankruptcy filing at or before 11:59 p.m. New York time, Sunday, Sept. 14, 2008. If there is no filing, the trades cease to exist.''
The announcement came after Barclays, the U.K.'s third- biggest bank, said it abandoned talks to buy Lehman, contending it couldn't obtain guarantees to protect against potential losses at the U.S. securities firm.
To contact the reporter on this story: Craig Torres in Washington at ctorres3@bloomberg.net Last Updated: September 14, 2008 15:19 EDT
Barclays Abandons Talks to Buy Lehman, Citing Potential Losses
Da Bloomberg
By Ben Livesey and Yalman Onaran
Sept. 14 (Bloomberg) -- Barclays Plc, the U.K.'s third- biggest bank, said it abandoned talks to buy Lehman Brothers Holdings Inc., contending it couldn't obtain guarantees to protect against potential losses at the U.S. securities firm.
Barclays, which had emerged as a leading candidate to acquire all or parts of Lehman, pulled out
amid a third day of emergency negotiations led by the U.S. Treasury and Federal Reserve, Leigh Bruce, a spokesman for the London-based bank said in a phone interview today.
The U.S. government is racing to find a solution for the faltering investment bank before markets open tomorrow, two people familiar with the situation said. Barclays walked away because it couldn't get guarantees from the government or agree on a private-sector deal to mitigate Lehman's potential losses, Bruce said.
Wall Street executives arrived at the New York Federal Reserve building in lower Manhattan this morning to discuss a rescue plan, including Citigroup Inc. Chief Executive Officer Vikram Pandit and Robert Wolf, chairman for the Americas at UBS AG. JPMorgan Chase & Co. sent CEO Jamie Dimon, Investment Bank Co-CEO Steven Black and General Counsel Stephen Cutler.
Barclays's takeover approach depended sealing off losses from Lehman's mortgage-related holdings, according to people familiar with the talks. Bank of America Corp., the biggest U.S. consumer bank, also is among the potential bidders for New York- based Lehman, which has lost 94 percent of its market value this year after record losses from investments tied to mortgages.
Barclays Writedowns
``The solution is to force the merger of Lehman now, this weekend, with a big commercial bank,'' said Richard Bove, a Lutz, Florida-based analyst at Ladenburg Thalmann & Co.
Barclays, which has taken $7.6 billion of writedowns on its mortgage positions in the last four quarters, raised 4.5 billion pounds ($6.4 billion) in a share sale in July. The bank's 5 billion pounds of buyout loans and 12 billion pounds of commercial mortgages may spur further markdowns, Collins Stewart analyst Alex Potter said last week.
``Acquisitions are difficult for Barclays because of capital constraints,'' said Simon Willis, an analyst at NCB Stockbrokers Ltd. in London, who has a ``reduce'' rating on the London-based bank.
New York Fed President Timothy Geithner, 47, and U.S. Treasury Secretary Henry Paulson, 62, are pushing Wall Street to contribute money to a so-called bad bank that would assume at least some of Lehman's $50 billion of devalued real estate assets. That would make it easier for a buyer to take over the rest of the company while the assets are sold off.
Long-Term Capital
The approach is similar to one Lehman presented to investors last week, which the company said would cost $5 billion to $7 billion. The firm's mortgage-related assets have a face-value of about $74 billion before writedowns, based on figures the firm has reported. About another $10 billion of high-yield leveraged loans have been marked down to $7 billion during the past year, as market prices for the debt sank.
An arrangement involving the collaboration of Wall Street banks would be reminiscent of the rescue of hedge fund Long-Term Capital Management LP, which failed in 1998 as Russia defaulted on its debt, roiling global markets. Spurred by the New York Fed, securities firms including Lehman contributed cash to prop up LTCM.
Led by Chief Executive Officer Richard Fuld, Lehman may be forced to liquidate unless buyers step up for all or part of the 158-year-old company, Paulson and Geithner told the heads of Wall Street's biggest firms at a meeting Sept. 12. Paulson has said he's reluctant to use government money to rescue Lehman. Talks with the banks continued yesterday without producing an agreement.
Dimon Waves
Across the street from the New York Fed's stone façade in downtown Manhattan this morning, journalists and television cameras chronicled a procession of black town cars bearing bankers to the building.
Pandit arrived at 7:50 a.m. wearing a light gray jacket and pink open-collar dress shirt. At about 9 a.m., the New York Fed police began directing the cars into a garage, where they could drop off passengers outside of the view of the press. When JPMorgan CEO Dimon's car arrived at 9:05 a.m., it was detained briefly for a security check. Dimon, visible through the tinted window, waved to reporters.
At about 11:30 a.m., five delivery-men arrived at the Fed building with carts of sandwiches, as the talks continued.
Barclays President Robert Diamond, 57, was leading a team to review Lehman's books and gauge the level of guarantees the bank would need to cover potential losses, the people said. Diamond had the backing of his board, the people said.
KDB, Goldman
Lehman CEO Fuld, who participated in the Long-Term Capital talks and built Lehman into the biggest U.S. underwriter of mortgage securities during his four decades at the investment bank, was pushed toward a forced sale this past week after talks about a cash infusion from Korea Development Bank ended, eroding investor confidence and the company's market value.
In addition to Pandit and Dimon, the government met Sept. 12 with CEOs including Morgan Stanley's John Mack, Goldman Sachs Group Inc.'s Lloyd Blankfein, Merrill Lynch & Co.'s John Thain and Credit Suisse Group AG's Brady Dougan, according to the people, who asked not to be identified because the gathering was private.
Robert Kelly, CEO of Bank of New York Mellon Corp., UBS's Wolf, and Christopher Cox, chairman of the U.S. Securities and Exchange Commission, also participated, the people said. Bank of America CEO Kenneth Lewis didn't attend because his company is a potential bidder for Lehman, one person said.
Helping lead the discussion was Kendrick Wilson, a former Goldman executive whom Paulson tapped last month as an adviser.
Bear Stearns Legacy
HSBC Holdings Plc, Europe's largest bank by market value, is also considering a bid for Lehman, the Wall Street Journal reported yesterday, without saying where it got the information. Goldman, the largest securities firm, is interested in Lehman's real-estate portfolio, the Journal said.
HSBC spokesman Richard Lindsay said the company doesn't comment on market speculation. Goldman spokesman Lucas van Praag also declined to comment.
Paulson, the former chairman of Goldman, doesn't want to put up money to help fund any Lehman acquisition, a person familiar with his thinking said Sept. 12.
Unlike when the Fed committed $29 billion to help JPMorgan take over Bear Stearns Cos. in March, Lehman has access to a lending facility for brokers that would permit an orderly process for unwinding the firm, the person said.
Paulson stepped in last week to guarantee the debt and mortgage-backed securities of home-loan financing companies Fannie Mae and Freddie Mac.
Bankruptcy Counsel
If the government's resistance to fund the purchase lowers the price offered for Lehman, Fuld could balk as well, said Brad Hintz, an analyst at Sanford C. Bernstein & Co.
``We might have a Mexican standoff, with two guys holding guns to each others' heads but nobody firing,'' Hintz said.
Lehman hired the New York law firm Weil, Gotshal & Manges LLP to advise the company on a potential bankruptcy filing, the Journal reported yesterday, without saying where it got the information.
The government is pushing for a quick resolution because Paulson is concerned panic may spread to other financial institutions, Ladenburg Thalmann's Bove said. American International Group Inc., the largest U.S. insurer, and Seattle- based lender Washington Mutual Inc. each plummeted in New York trading last week on speculation about their financial health.
AIG may move up plans to raise capital or sell assets after the shares plunged 46 percent, according to a person familiar with the company. WaMu, which fell 36 percent, may sell parts of its nationwide bank-branch network to raise cash, according to L. William Seidman, a former chairman of the Federal Deposit Insurance Corp.
Asset Write-Offs
A Lehman sale may be possible without government backing, an analysis of Lehman's distressed mortgage assets shows. In a worst-case scenario -- with the assets discounted more deeply than in recent distressed sales -- a buyer could write off almost half of Lehman's mortgage holdings and still have $7 billion of equity left in the company, based on figures the investment bank disclosed when it reported third-quarter financial results last week.
``The firm should be worth something even after the troubled assets are taken out at a massive discount because Lehman has a good franchise,'' said Corne Biemans, a Boston- based senior portfolio manager at Fortis Investments, which oversees about $200 billion. ``There are distressed asset buyers who should be interested in this stuff at such serious haircuts.''
Lehman's mortgage-related assets have been marked down to between 29 cents and 85 cents on the dollar. Reducing valuations further to between 5 cents on the dollar for collateralized debt obligations and 35 cents for European mortgages would result in $21 billion of further writedowns. Shareholders' equity was $28 billion at the end of firm's fiscal quarter in August.
To contact the reporters on this story: Ben Livesey in London at blivesey@bloomberg.net; Yalman Onaran in New York at yonaran@bloomberg.net. Last Updated: September 14, 2008 13:36 EDT
By Ben Livesey and Yalman Onaran
Sept. 14 (Bloomberg) -- Barclays Plc, the U.K.'s third- biggest bank, said it abandoned talks to buy Lehman Brothers Holdings Inc., contending it couldn't obtain guarantees to protect against potential losses at the U.S. securities firm.
Barclays, which had emerged as a leading candidate to acquire all or parts of Lehman, pulled out
amid a third day of emergency negotiations led by the U.S. Treasury and Federal Reserve, Leigh Bruce, a spokesman for the London-based bank said in a phone interview today.
The U.S. government is racing to find a solution for the faltering investment bank before markets open tomorrow, two people familiar with the situation said. Barclays walked away because it couldn't get guarantees from the government or agree on a private-sector deal to mitigate Lehman's potential losses, Bruce said.
Wall Street executives arrived at the New York Federal Reserve building in lower Manhattan this morning to discuss a rescue plan, including Citigroup Inc. Chief Executive Officer Vikram Pandit and Robert Wolf, chairman for the Americas at UBS AG. JPMorgan Chase & Co. sent CEO Jamie Dimon, Investment Bank Co-CEO Steven Black and General Counsel Stephen Cutler.
Barclays's takeover approach depended sealing off losses from Lehman's mortgage-related holdings, according to people familiar with the talks. Bank of America Corp., the biggest U.S. consumer bank, also is among the potential bidders for New York- based Lehman, which has lost 94 percent of its market value this year after record losses from investments tied to mortgages.
Barclays Writedowns
``The solution is to force the merger of Lehman now, this weekend, with a big commercial bank,'' said Richard Bove, a Lutz, Florida-based analyst at Ladenburg Thalmann & Co.
Barclays, which has taken $7.6 billion of writedowns on its mortgage positions in the last four quarters, raised 4.5 billion pounds ($6.4 billion) in a share sale in July. The bank's 5 billion pounds of buyout loans and 12 billion pounds of commercial mortgages may spur further markdowns, Collins Stewart analyst Alex Potter said last week.
``Acquisitions are difficult for Barclays because of capital constraints,'' said Simon Willis, an analyst at NCB Stockbrokers Ltd. in London, who has a ``reduce'' rating on the London-based bank.
New York Fed President Timothy Geithner, 47, and U.S. Treasury Secretary Henry Paulson, 62, are pushing Wall Street to contribute money to a so-called bad bank that would assume at least some of Lehman's $50 billion of devalued real estate assets. That would make it easier for a buyer to take over the rest of the company while the assets are sold off.
Long-Term Capital
The approach is similar to one Lehman presented to investors last week, which the company said would cost $5 billion to $7 billion. The firm's mortgage-related assets have a face-value of about $74 billion before writedowns, based on figures the firm has reported. About another $10 billion of high-yield leveraged loans have been marked down to $7 billion during the past year, as market prices for the debt sank.
An arrangement involving the collaboration of Wall Street banks would be reminiscent of the rescue of hedge fund Long-Term Capital Management LP, which failed in 1998 as Russia defaulted on its debt, roiling global markets. Spurred by the New York Fed, securities firms including Lehman contributed cash to prop up LTCM.
Led by Chief Executive Officer Richard Fuld, Lehman may be forced to liquidate unless buyers step up for all or part of the 158-year-old company, Paulson and Geithner told the heads of Wall Street's biggest firms at a meeting Sept. 12. Paulson has said he's reluctant to use government money to rescue Lehman. Talks with the banks continued yesterday without producing an agreement.
Dimon Waves
Across the street from the New York Fed's stone façade in downtown Manhattan this morning, journalists and television cameras chronicled a procession of black town cars bearing bankers to the building.
Pandit arrived at 7:50 a.m. wearing a light gray jacket and pink open-collar dress shirt. At about 9 a.m., the New York Fed police began directing the cars into a garage, where they could drop off passengers outside of the view of the press. When JPMorgan CEO Dimon's car arrived at 9:05 a.m., it was detained briefly for a security check. Dimon, visible through the tinted window, waved to reporters.
At about 11:30 a.m., five delivery-men arrived at the Fed building with carts of sandwiches, as the talks continued.
Barclays President Robert Diamond, 57, was leading a team to review Lehman's books and gauge the level of guarantees the bank would need to cover potential losses, the people said. Diamond had the backing of his board, the people said.
KDB, Goldman
Lehman CEO Fuld, who participated in the Long-Term Capital talks and built Lehman into the biggest U.S. underwriter of mortgage securities during his four decades at the investment bank, was pushed toward a forced sale this past week after talks about a cash infusion from Korea Development Bank ended, eroding investor confidence and the company's market value.
In addition to Pandit and Dimon, the government met Sept. 12 with CEOs including Morgan Stanley's John Mack, Goldman Sachs Group Inc.'s Lloyd Blankfein, Merrill Lynch & Co.'s John Thain and Credit Suisse Group AG's Brady Dougan, according to the people, who asked not to be identified because the gathering was private.
Robert Kelly, CEO of Bank of New York Mellon Corp., UBS's Wolf, and Christopher Cox, chairman of the U.S. Securities and Exchange Commission, also participated, the people said. Bank of America CEO Kenneth Lewis didn't attend because his company is a potential bidder for Lehman, one person said.
Helping lead the discussion was Kendrick Wilson, a former Goldman executive whom Paulson tapped last month as an adviser.
Bear Stearns Legacy
HSBC Holdings Plc, Europe's largest bank by market value, is also considering a bid for Lehman, the Wall Street Journal reported yesterday, without saying where it got the information. Goldman, the largest securities firm, is interested in Lehman's real-estate portfolio, the Journal said.
HSBC spokesman Richard Lindsay said the company doesn't comment on market speculation. Goldman spokesman Lucas van Praag also declined to comment.
Paulson, the former chairman of Goldman, doesn't want to put up money to help fund any Lehman acquisition, a person familiar with his thinking said Sept. 12.
Unlike when the Fed committed $29 billion to help JPMorgan take over Bear Stearns Cos. in March, Lehman has access to a lending facility for brokers that would permit an orderly process for unwinding the firm, the person said.
Paulson stepped in last week to guarantee the debt and mortgage-backed securities of home-loan financing companies Fannie Mae and Freddie Mac.
Bankruptcy Counsel
If the government's resistance to fund the purchase lowers the price offered for Lehman, Fuld could balk as well, said Brad Hintz, an analyst at Sanford C. Bernstein & Co.
``We might have a Mexican standoff, with two guys holding guns to each others' heads but nobody firing,'' Hintz said.
Lehman hired the New York law firm Weil, Gotshal & Manges LLP to advise the company on a potential bankruptcy filing, the Journal reported yesterday, without saying where it got the information.
The government is pushing for a quick resolution because Paulson is concerned panic may spread to other financial institutions, Ladenburg Thalmann's Bove said. American International Group Inc., the largest U.S. insurer, and Seattle- based lender Washington Mutual Inc. each plummeted in New York trading last week on speculation about their financial health.
AIG may move up plans to raise capital or sell assets after the shares plunged 46 percent, according to a person familiar with the company. WaMu, which fell 36 percent, may sell parts of its nationwide bank-branch network to raise cash, according to L. William Seidman, a former chairman of the Federal Deposit Insurance Corp.
Asset Write-Offs
A Lehman sale may be possible without government backing, an analysis of Lehman's distressed mortgage assets shows. In a worst-case scenario -- with the assets discounted more deeply than in recent distressed sales -- a buyer could write off almost half of Lehman's mortgage holdings and still have $7 billion of equity left in the company, based on figures the investment bank disclosed when it reported third-quarter financial results last week.
``The firm should be worth something even after the troubled assets are taken out at a massive discount because Lehman has a good franchise,'' said Corne Biemans, a Boston- based senior portfolio manager at Fortis Investments, which oversees about $200 billion. ``There are distressed asset buyers who should be interested in this stuff at such serious haircuts.''
Lehman's mortgage-related assets have been marked down to between 29 cents and 85 cents on the dollar. Reducing valuations further to between 5 cents on the dollar for collateralized debt obligations and 35 cents for European mortgages would result in $21 billion of further writedowns. Shareholders' equity was $28 billion at the end of firm's fiscal quarter in August.
To contact the reporters on this story: Ben Livesey in London at blivesey@bloomberg.net; Yalman Onaran in New York at yonaran@bloomberg.net. Last Updated: September 14, 2008 13:36 EDT
AP source: Barclays pulls out of Lehman talksSunday
da Yahoo Finance
September 14, 2:13 pm ET
Person with knowledge of Lehman talks tells AP that Barclays has pulled out of negotiations
LONDON (AP) -- Barclays PLC has pulled out of talks to buy parts of Lehman Brothers Holdings Inc., according to a person at the British bank with knowledge of the negotiations. The move complicates efforts to find a buyer for Lehman and save it from collapse.
The person, who spoke on condition of anonymity, citing company policy, said the decsion was "very unlikely" to change.
The person said that while Lehman was attractive, the investment bank did not meet what he described as Barclay's stringent requirements.
U.S. government officials and top Wall Street bankers are trying to sell Lehman and avert a collapse that could severely disrupt global markets.
September 14, 2:13 pm ET
Person with knowledge of Lehman talks tells AP that Barclays has pulled out of negotiations
LONDON (AP) -- Barclays PLC has pulled out of talks to buy parts of Lehman Brothers Holdings Inc., according to a person at the British bank with knowledge of the negotiations. The move complicates efforts to find a buyer for Lehman and save it from collapse.
The person, who spoke on condition of anonymity, citing company policy, said the decsion was "very unlikely" to change.
The person said that while Lehman was attractive, the investment bank did not meet what he described as Barclay's stringent requirements.
U.S. government officials and top Wall Street bankers are trying to sell Lehman and avert a collapse that could severely disrupt global markets.
Greenspan: Tough decisions await in Lehman case
Sunday September 14, 11:10 am ET
Alan Greenspan sees difficult decisions ahead in trying to arrange rescue of Lehman Brothers
WASHINGTON (AP) -- Without offering a recommendation, former Federal Reserve Chairman Alan Greenspan said Sunday the government faces tough choices as it tries to help arrange a rescue of Lehman Brothers without using public money.
He cautioned that more major U.S. financial institutions may fail in the future, but the government should not protect them all.
The weight of the housing and credit crises, he added, "is in the process of outstripping anything I've seen" and has yet to run its course. "It will continue to be a corrosive force until the price of homes in the United States stabilizes," perhaps next year, he said.
The immediate challenge for the Bush administration is resolving the fate of Lehman Brothers. Global fears intensified over the weekend that Lehman's collapse would stagger markets and undercut confidence in the U.S. financial system. The field of possible buyers has narrowed; how to finance the rescue was the key issue.
Germany's finance minister appealed for a resolution before Asian markets opened Monday, and more discussions involving officials from the Federal Reserve and Treasury Department were expected.
"They're trying to do it in a different manner" than the Bear Stearns model, Greenspan noted. The Fed in March agreed to provide a loan of nearly $29 billion as part of JPMorgan Chase & Co.'s takeover of the firm.
"The reason is obvious from seeing the effect of the bailout of Bear Stearns. When Bear Stearns was bailed out, it drew a line under that level of firm, implying that anything that was larger than that firm was capable of getting federal assistance," Greenspan said in a broadcast interview.
But, he said, "if you generalize that, it is very clear that that is an unsustainable situation in the financial markets." The government cannot set a floor below these firms, Greenspan said.
Asked what would happen if the government cannot find a way to reach a deal on Lehman without public money, Greenspan said, "They have to make a very decision as to whether or not they allow it to liquidate or they support it. And those are very difficult decisions."
He would not make a recommendation about what to do.
"I don't know enough of what is going on. I would have to have very detailed information of what's on the Lehman Brothers balance sheet ... and what the repercussions would be with any particular solution," he said.
The government has acted aggressively in taking over the struggling mortgage companies Fannie Mae and Freddie Mac in addition to the Bear Stearns rescue. The fallout from risky investments is dragging down companies such as American International Group Inc., the world's largest insurer, and Washington Mutual Inc., the nation's biggest savings bank.
"Let's recognize that this is a once-in- a-half-century, probably once-in-a-century type of event" -- the worst "by far" in his career, Greenspan said.
"There's no question that this is in the process of outstripping anything I've seen, and it still is not resolved and it still has a way to go. And indeed, it will continue to be a corrosive force until the price of homes in the United States stabilizes. That will induce a series of events around the globe which will stabilize the system," he added.
His best guess for that happening in early in 2009.
With more financial companies under stress, Greenspan said he suspects more institutions will fail.
"But in and of itself that does not need to be a problem. It depends on how it is handled and how the liquidations take place. And indeed we shouldn't try to protect every single institution. The ordinary course of financial change has winners and losers," he said.
Alan Greenspan sees difficult decisions ahead in trying to arrange rescue of Lehman Brothers
WASHINGTON (AP) -- Without offering a recommendation, former Federal Reserve Chairman Alan Greenspan said Sunday the government faces tough choices as it tries to help arrange a rescue of Lehman Brothers without using public money.
He cautioned that more major U.S. financial institutions may fail in the future, but the government should not protect them all.
The weight of the housing and credit crises, he added, "is in the process of outstripping anything I've seen" and has yet to run its course. "It will continue to be a corrosive force until the price of homes in the United States stabilizes," perhaps next year, he said.
The immediate challenge for the Bush administration is resolving the fate of Lehman Brothers. Global fears intensified over the weekend that Lehman's collapse would stagger markets and undercut confidence in the U.S. financial system. The field of possible buyers has narrowed; how to finance the rescue was the key issue.
Germany's finance minister appealed for a resolution before Asian markets opened Monday, and more discussions involving officials from the Federal Reserve and Treasury Department were expected.
"They're trying to do it in a different manner" than the Bear Stearns model, Greenspan noted. The Fed in March agreed to provide a loan of nearly $29 billion as part of JPMorgan Chase & Co.'s takeover of the firm.
"The reason is obvious from seeing the effect of the bailout of Bear Stearns. When Bear Stearns was bailed out, it drew a line under that level of firm, implying that anything that was larger than that firm was capable of getting federal assistance," Greenspan said in a broadcast interview.
But, he said, "if you generalize that, it is very clear that that is an unsustainable situation in the financial markets." The government cannot set a floor below these firms, Greenspan said.
Asked what would happen if the government cannot find a way to reach a deal on Lehman without public money, Greenspan said, "They have to make a very decision as to whether or not they allow it to liquidate or they support it. And those are very difficult decisions."
He would not make a recommendation about what to do.
"I don't know enough of what is going on. I would have to have very detailed information of what's on the Lehman Brothers balance sheet ... and what the repercussions would be with any particular solution," he said.
The government has acted aggressively in taking over the struggling mortgage companies Fannie Mae and Freddie Mac in addition to the Bear Stearns rescue. The fallout from risky investments is dragging down companies such as American International Group Inc., the world's largest insurer, and Washington Mutual Inc., the nation's biggest savings bank.
"Let's recognize that this is a once-in- a-half-century, probably once-in-a-century type of event" -- the worst "by far" in his career, Greenspan said.
"There's no question that this is in the process of outstripping anything I've seen, and it still is not resolved and it still has a way to go. And indeed, it will continue to be a corrosive force until the price of homes in the United States stabilizes. That will induce a series of events around the globe which will stabilize the system," he added.
His best guess for that happening in early in 2009.
With more financial companies under stress, Greenspan said he suspects more institutions will fail.
"But in and of itself that does not need to be a problem. It depends on how it is handled and how the liquidations take place. And indeed we shouldn't try to protect every single institution. The ordinary course of financial change has winners and losers," he said.
Too big to bail out
da TheStreet.com, 14/09/08
[...]
"The policy of 'too big to fail' crossed over into 'too big to bail out,' once we allowed the massive housing bubble to occur," says Bill Fleckenstein, president of Fleckenstein Capital, a short-seller who believes the possibility of a full-blown depression cannot be overlooked, as the government takes on more and more debt.
"The possibility is non-trivial that that is the outcome," he says.
[...]
The cost of insuring against $10 million worth of U.S. government debt jumped from $18,000 to $22,000 last week, as measured by the credit default swaps market, indicating investors see a greater risk of what was once unthinkable: the U.S. government defaulting on its debt.
[...]
Ladenburg Thalmann analyst Richard Bove wrote in a research note Friday that BofA is the most likely buyer for Lehman. If a buyer does not emerge for Lehman, however, the government will have to choose between taking over another failed institution, lending to it indefinitely in the midst of a panic, or letting it fail.
Many fear this last option would send shockwaves throughout the global financial system, as Lehman has untold obligations to institutions around the world, mostly through the credit default swaps market, where parties bet on and insure against debt defaults by large institutional borrowers.
A default by Lehman would create a "huge unknown" according to RealMoney contributor and Cavanaugh Capital Management managing director Tom Graff, as many institutions that thought they had insured against various liabilities suddenly had to take those risks back on their books.
"I don't think that's going to be acceptable to the Treasury," Graff says.
[...]
[...]
"The policy of 'too big to fail' crossed over into 'too big to bail out,' once we allowed the massive housing bubble to occur," says Bill Fleckenstein, president of Fleckenstein Capital, a short-seller who believes the possibility of a full-blown depression cannot be overlooked, as the government takes on more and more debt.
"The possibility is non-trivial that that is the outcome," he says.
[...]
The cost of insuring against $10 million worth of U.S. government debt jumped from $18,000 to $22,000 last week, as measured by the credit default swaps market, indicating investors see a greater risk of what was once unthinkable: the U.S. government defaulting on its debt.
[...]
Ladenburg Thalmann analyst Richard Bove wrote in a research note Friday that BofA is the most likely buyer for Lehman. If a buyer does not emerge for Lehman, however, the government will have to choose between taking over another failed institution, lending to it indefinitely in the midst of a panic, or letting it fail.
Many fear this last option would send shockwaves throughout the global financial system, as Lehman has untold obligations to institutions around the world, mostly through the credit default swaps market, where parties bet on and insure against debt defaults by large institutional borrowers.
A default by Lehman would create a "huge unknown" according to RealMoney contributor and Cavanaugh Capital Management managing director Tom Graff, as many institutions that thought they had insured against various liabilities suddenly had to take those risks back on their books.
"I don't think that's going to be acceptable to the Treasury," Graff says.
[...]
Feds, Wall Street race to try to save Lehman
da Yahoo Finance - Sunday September 14, 5:15 am ET
NEW YORK (AP) -- The field of possible buyers for Lehman Brothers narrowed Saturday, but the parties involved in the discussions over the wounded investment bank's future were at loggerheads over how to finance the rescue.
[...]
He said the investment banks were angling for the government to provide some money, as it did when it helped JPMorgan Chase & Co. buy Bear Stearns in March, because they would get little to nothing in return for their help.
The government has drawn a line in the sand over using taxpayer money to help rescue Lehman Brothers, however.
[...]
Citigroup Inc.'s Vikram Pandit, JPMorgan Chase & Co.'s Jamie Dimon, Morgan Stanley's John Mack, Goldman Sachs Group Inc.'s Lloyd Blankfein, and Merrill Lynch & Co.'s John Thain were among the chief executives at the meeting.
[...]
AIG, the world's largest insurer, and WaMu, the nation's biggest savings bank, have taken steep losses during the past year from risky investments. Investors, worried they do not have enough cash on their balance sheets to withstand further hits, unloaded their shares on Friday.
[...]
Lehman Brothers and AIG are the top priorities, said the investment banking officials. WaMu insisted Friday it has adequate capital to fund its operations even as it announced another multibillion dollar write-down on bad mortgage loans.
WaMu has 76 percent of its deposits insured by the Federal Deposit Insurance Corp., an independent agency created by Congress to insure deposits in banks and thrifts up to at least $100,000. AIG has lost more than $18 billion over the last three quarters due to investments tied to subprime mortgages.
[...]
Government officials want to avoid a Bear Stearns-like bailout; the Fed in March agreed to provide a loan of nearly $29 billion as part of JPMorgan Chase & Co.'s takeover of the firm. Unlike Bear, Lehman can go directly to the Fed to draw emergency loans if it needs a quick source of ready cash. In recent weeks, though, there's been no indication that Lehman has done so.
Bear's sudden meltdown led the Fed to engage in its broadest use of lending powers since the 1930s. Fearful that other firms could be in jeopardy, the Fed temporarily opened its emergency lending program to investment firms, a privilege that for years was granted only to commercial banks, which are subject to tighter regulation.
Those actions -- along with the Bush administration's take over of mortgage giants Fannie Mae and Freddie Mac just last week -- have spurred concerns that taxpayers could be on the hook for billions of dollars and companies will be encouraged to take on extra risks because they believe the government will come to their aid.
Paulson and Bernanke, however, have said they needed to help Bear Stearns and Fannie Mae and Freddie Mac to avert a financial calamity that would devastate the national economy.
Lehman's Fuld is currently a member of the New York Fed's board of directors.
NEW YORK (AP) -- The field of possible buyers for Lehman Brothers narrowed Saturday, but the parties involved in the discussions over the wounded investment bank's future were at loggerheads over how to finance the rescue.
[...]
He said the investment banks were angling for the government to provide some money, as it did when it helped JPMorgan Chase & Co. buy Bear Stearns in March, because they would get little to nothing in return for their help.
The government has drawn a line in the sand over using taxpayer money to help rescue Lehman Brothers, however.
[...]
Citigroup Inc.'s Vikram Pandit, JPMorgan Chase & Co.'s Jamie Dimon, Morgan Stanley's John Mack, Goldman Sachs Group Inc.'s Lloyd Blankfein, and Merrill Lynch & Co.'s John Thain were among the chief executives at the meeting.
[...]
AIG, the world's largest insurer, and WaMu, the nation's biggest savings bank, have taken steep losses during the past year from risky investments. Investors, worried they do not have enough cash on their balance sheets to withstand further hits, unloaded their shares on Friday.
[...]
Lehman Brothers and AIG are the top priorities, said the investment banking officials. WaMu insisted Friday it has adequate capital to fund its operations even as it announced another multibillion dollar write-down on bad mortgage loans.
WaMu has 76 percent of its deposits insured by the Federal Deposit Insurance Corp., an independent agency created by Congress to insure deposits in banks and thrifts up to at least $100,000. AIG has lost more than $18 billion over the last three quarters due to investments tied to subprime mortgages.
[...]
Government officials want to avoid a Bear Stearns-like bailout; the Fed in March agreed to provide a loan of nearly $29 billion as part of JPMorgan Chase & Co.'s takeover of the firm. Unlike Bear, Lehman can go directly to the Fed to draw emergency loans if it needs a quick source of ready cash. In recent weeks, though, there's been no indication that Lehman has done so.
Bear's sudden meltdown led the Fed to engage in its broadest use of lending powers since the 1930s. Fearful that other firms could be in jeopardy, the Fed temporarily opened its emergency lending program to investment firms, a privilege that for years was granted only to commercial banks, which are subject to tighter regulation.
Those actions -- along with the Bush administration's take over of mortgage giants Fannie Mae and Freddie Mac just last week -- have spurred concerns that taxpayers could be on the hook for billions of dollars and companies will be encouraged to take on extra risks because they believe the government will come to their aid.
Paulson and Bernanke, however, have said they needed to help Bear Stearns and Fannie Mae and Freddie Mac to avert a financial calamity that would devastate the national economy.
Lehman's Fuld is currently a member of the New York Fed's board of directors.
Germany urges US to find Lehman Brothers solution
da Yahoo Finance - Saturday September 13, 9:23 am ET
Germany urges US to find solution for Lehman Brothers crisis before Asian markets reopen
NICE, France (AP) -- Germany called on U.S. authorities Saturday to find a solution for crisis-hit bank Lehman Brothers before Asian markets reopen for trading early Monday.
U.S. officials have so far talked down a government rescue for the country's fourth-largest investment bank, which is racing to find a buyer to raise badly needed money it lost on bad bets on real estate holdings.
Finance Minister Peer Steinbrueck -- who manages the EU's largest economy -- told reporters that "the news that is coming out of the U.S. is bad," confirming that financial markets are still suffering sharply from a credit crisis that started last year.
Observers who had prematurely spoken of "a light at the end of the tunnel" now had to make sure that they weren't facing an oncoming train, he warned.
"We expect that a solution will be put forward before Asian markets open on Monday," Steinbrueck said on the sidelines of an EU finance ministers' meeting in Nice.
The Federal Reserve Bank of New York held an emergency meeting Friday night with top Washington policymakers and major financial institutions to discuss the future of Lehman Brothers.
Analysts say other financial firms may swallow portions of Lehman's investment banking or bond trading business. Considering the firm's deep financial problems, riskier assets like its mortgage and real-estate portfolios could be sold for just pennies on the dollar.
On Friday, Lehman's stock closed at $3.65 -- an all-time low and down nearly 95 percent from its 52-week high of $67.73 as investors grew more convinced that Lehman may be auctioned at fire-sale prices. The stock's plunge was a humiliating beating for the 158-year-old investment bank, one of Wall Street's oldest firms.
Germany urges US to find solution for Lehman Brothers crisis before Asian markets reopen
NICE, France (AP) -- Germany called on U.S. authorities Saturday to find a solution for crisis-hit bank Lehman Brothers before Asian markets reopen for trading early Monday.
U.S. officials have so far talked down a government rescue for the country's fourth-largest investment bank, which is racing to find a buyer to raise badly needed money it lost on bad bets on real estate holdings.
Finance Minister Peer Steinbrueck -- who manages the EU's largest economy -- told reporters that "the news that is coming out of the U.S. is bad," confirming that financial markets are still suffering sharply from a credit crisis that started last year.
Observers who had prematurely spoken of "a light at the end of the tunnel" now had to make sure that they weren't facing an oncoming train, he warned.
"We expect that a solution will be put forward before Asian markets open on Monday," Steinbrueck said on the sidelines of an EU finance ministers' meeting in Nice.
The Federal Reserve Bank of New York held an emergency meeting Friday night with top Washington policymakers and major financial institutions to discuss the future of Lehman Brothers.
Analysts say other financial firms may swallow portions of Lehman's investment banking or bond trading business. Considering the firm's deep financial problems, riskier assets like its mortgage and real-estate portfolios could be sold for just pennies on the dollar.
On Friday, Lehman's stock closed at $3.65 -- an all-time low and down nearly 95 percent from its 52-week high of $67.73 as investors grew more convinced that Lehman may be auctioned at fire-sale prices. The stock's plunge was a humiliating beating for the 158-year-old investment bank, one of Wall Street's oldest firms.
Economic damage from Ike may be less than feared
Da Yahoo Finance - 14 settembre 2008
Economic damage from Ike may be less than feared
Sunday September 14, 12:34 am ET By David Koenig and Ellen Simon, AP Business Writers
Ike's impact to economy not as bad as feared, though damages could top an estimated $8 billion
A small change in Hurricane Ike's course just before it crashed into the Texas coast Saturday may have spared the state and the nation from significantly worse economic damage.
The center of the storm appeared to miss the vital concentration of oil and petrochemical refineries in the Houston area, and the surge of water rolling into the nation's second-largest port was also weaker than predicted.
If the eye of that storm had been as much as 20 miles east, we would have a lot more havoc and damage than we did," said Chris Johnson, a senior vice president at commercial property insurer FM Global.
Much of the region's industrial recovery will depend on how quickly power companies can restore electricity; that, in turn, will depend on how quickly the utilities can get employees back to work.
Gas prices leaped overnight throughout the East Coast -- to nearly $5 a gallon in some place -- because much of its fuel comes via pipeline from the Gulf Coast, where wholesale prices had been climbing in recent days. Motorists are likely to pay more for weeks, or until the power can be restored to big refineries in Louisiana and Texas.
Moreover, workers whose skills are needed to kick-start the local economy are busy dealing with personal hardships.
"I received a call from one of my employees, who was evacuated to San Antonio. He was just informed that his house was totally destroyed," said Bill Reid, the CEO of Ohmstede, which builds and repairs refineries.
Reid, who lives in Kemah, Texas, about 35 miles south of Houston, said his town was without power and water, and still had 15 feet of flooding.
The region's tourism industry also took a blow, as Ike pummeled the popular barrier island town of Galveston. A nightclub -- perched on a pier over Galveston Bay -- that once featured Frank Sinatra and Bob Hope was reduced to sticks.
On the mainland, the storm's impact on businesses looked much milder than its toll on individuals. A huge number of homes were destroyed, roads were impassable and there was no electricity or water service for thousands as of Saturday evening. It may take days to determine how many people were killed by Ike.
The port of Houston, the nation's second-largest, was without power Saturday but expects to reopen Monday morning if power is restored and the Coast Guard finds no obstacles in the shipping lanes. Some empty cargo containers were blown about, but not too far.
"All the terminals did very well and we had only very minor damage, like fencing being blown down," said port spokeswoman Argentina James.
Wal-Mart Stores Inc. reopened seven stores near Corpus Christi on Saturday. Another 130 stores remained closed, said Greg Rossiter, a company spokesman.
Office buildings in downtown Houston were damaged, but it could have been worse.
"It appears that, at least from our facility and operations standpoint, the impact is a little less than we did anticipate," said Mike Smid, chief executive of trucking company YRC North America, which runs Yellow and Roadway lines. The company evacuated its 900 employees ahead of the storm.
Preliminary estimates put the damage at $8 billion or more, but a precise accounting of the storm's wrath was far from complete.
"It will be some time before we have any damage estimates," said Mike Siemienas, a spokesman for Allstate Corp.
Last week, Risk Management Solutions Inc. revised its initial industry loss estimate for Gustav, now ranging from $2.5 billion to $4.5 billion, down from an estimated range between $4 billion and $10 billion in damage.
Shell Oil said Saturday that crews would fly over oil rigs in the Gulf of Mexico over the weekend to assess damage. The U.S. subsidiary of Royal Dutch Shell PLC said it could take days to weeks before full production could resume at its facilities.
Valero Energy Corp. spokesman Bill Day said crews would soon get in to inspect refineries in Houston and Texas City, which remained shut down. Both, plus another refinery in Port Arthur, lost power in the storm, he said.
Windows were ripped out of office buildings in downtown Houston. At the 75-story JPMorganChase tower, the tallest building in Texas, curtains could be seen flapping in the breeze and glass shards littered the streets below.
Power was out in much of Houston, although the lights stayed on in the city's huge medical center, a sprawling complex with about a dozen hospitals that attract patients from around the world.
Flights in and out of Houston's two major airports were suspended on Friday and not likely to resume until Sunday. Southwest Airlines shut down flights at Dallas Love Field, its home airport, for several hours Saturday as Dallas -- 240 miles north of Houston -- was expected to take a glancing blow from Ike.
Air service to smaller cities in Texas, including Corpus Christi and Harlingen, was also disrupted.
AP Business Writers David Koenig reported from Dallas, with Ellen Simon in New York. Mark Williams in Bryan, Texas, and John Porretto in Houston contributed to this report.
Economic damage from Ike may be less than feared
Sunday September 14, 12:34 am ET By David Koenig and Ellen Simon, AP Business Writers
Ike's impact to economy not as bad as feared, though damages could top an estimated $8 billion
A small change in Hurricane Ike's course just before it crashed into the Texas coast Saturday may have spared the state and the nation from significantly worse economic damage.
The center of the storm appeared to miss the vital concentration of oil and petrochemical refineries in the Houston area, and the surge of water rolling into the nation's second-largest port was also weaker than predicted.
If the eye of that storm had been as much as 20 miles east, we would have a lot more havoc and damage than we did," said Chris Johnson, a senior vice president at commercial property insurer FM Global.
Much of the region's industrial recovery will depend on how quickly power companies can restore electricity; that, in turn, will depend on how quickly the utilities can get employees back to work.
Gas prices leaped overnight throughout the East Coast -- to nearly $5 a gallon in some place -- because much of its fuel comes via pipeline from the Gulf Coast, where wholesale prices had been climbing in recent days. Motorists are likely to pay more for weeks, or until the power can be restored to big refineries in Louisiana and Texas.
Moreover, workers whose skills are needed to kick-start the local economy are busy dealing with personal hardships.
"I received a call from one of my employees, who was evacuated to San Antonio. He was just informed that his house was totally destroyed," said Bill Reid, the CEO of Ohmstede, which builds and repairs refineries.
Reid, who lives in Kemah, Texas, about 35 miles south of Houston, said his town was without power and water, and still had 15 feet of flooding.
The region's tourism industry also took a blow, as Ike pummeled the popular barrier island town of Galveston. A nightclub -- perched on a pier over Galveston Bay -- that once featured Frank Sinatra and Bob Hope was reduced to sticks.
On the mainland, the storm's impact on businesses looked much milder than its toll on individuals. A huge number of homes were destroyed, roads were impassable and there was no electricity or water service for thousands as of Saturday evening. It may take days to determine how many people were killed by Ike.
The port of Houston, the nation's second-largest, was without power Saturday but expects to reopen Monday morning if power is restored and the Coast Guard finds no obstacles in the shipping lanes. Some empty cargo containers were blown about, but not too far.
"All the terminals did very well and we had only very minor damage, like fencing being blown down," said port spokeswoman Argentina James.
Wal-Mart Stores Inc. reopened seven stores near Corpus Christi on Saturday. Another 130 stores remained closed, said Greg Rossiter, a company spokesman.
Office buildings in downtown Houston were damaged, but it could have been worse.
"It appears that, at least from our facility and operations standpoint, the impact is a little less than we did anticipate," said Mike Smid, chief executive of trucking company YRC North America, which runs Yellow and Roadway lines. The company evacuated its 900 employees ahead of the storm.
Preliminary estimates put the damage at $8 billion or more, but a precise accounting of the storm's wrath was far from complete.
"It will be some time before we have any damage estimates," said Mike Siemienas, a spokesman for Allstate Corp.
Last week, Risk Management Solutions Inc. revised its initial industry loss estimate for Gustav, now ranging from $2.5 billion to $4.5 billion, down from an estimated range between $4 billion and $10 billion in damage.
Shell Oil said Saturday that crews would fly over oil rigs in the Gulf of Mexico over the weekend to assess damage. The U.S. subsidiary of Royal Dutch Shell PLC said it could take days to weeks before full production could resume at its facilities.
Valero Energy Corp. spokesman Bill Day said crews would soon get in to inspect refineries in Houston and Texas City, which remained shut down. Both, plus another refinery in Port Arthur, lost power in the storm, he said.
Windows were ripped out of office buildings in downtown Houston. At the 75-story JPMorganChase tower, the tallest building in Texas, curtains could be seen flapping in the breeze and glass shards littered the streets below.
Power was out in much of Houston, although the lights stayed on in the city's huge medical center, a sprawling complex with about a dozen hospitals that attract patients from around the world.
Flights in and out of Houston's two major airports were suspended on Friday and not likely to resume until Sunday. Southwest Airlines shut down flights at Dallas Love Field, its home airport, for several hours Saturday as Dallas -- 240 miles north of Houston -- was expected to take a glancing blow from Ike.
Air service to smaller cities in Texas, including Corpus Christi and Harlingen, was also disrupted.
AP Business Writers David Koenig reported from Dallas, with Ellen Simon in New York. Mark Williams in Bryan, Texas, and John Porretto in Houston contributed to this report.
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