If Lehman goes under, what would happen to the US financial markets? I think its kind of sad to see 186 years of success vanish just like that, but since most of the posters are from the States, do you guys have any worries or fears regarding the potential/impending collapse? on a side note, thank god I didnt take up an offer with Lehman
Well, they definitely can't afford to bail this one out ... they have to let it fail. What's weird is that the market support seems to be holding in the face of what seems to be almost an certain collapse of LEH, although financials are getting pounded. I don't know what to make of it, but I hope it means that my prediction of a double bottom is in fact coming to pass.
I'm more concerned about Washington Mutual at this point. A failure of WAMU will send shock waves through the industry. Recent credit default swap prices indicate there is an 85% chance of Washington Mutual failing in the next 5 years.
Heh, 5 years is being generous. I think the bank is already on freaking life support. WaMu stock is worth what these days, $3? Woohoo indeed. I see those stupid ads on TV and I think ... the LAST place on earth I would want to open any kind of account right now is WaMu. One day you're signing forms, the next day you're standing in line waiting for the FDIC to reimburse your deposits. You're right though, a failure of WaMu would surely cause the market to break support ... we could see the S&P 500 seek out that dreaded low of 1175.
Investors confidence is at an all time low, I wont be surprised if Merrills goes under either Is the election going to have a huge bearing on the financial market over there in the states?
well it's starting to look like if LEH goes under then AIG will go under as well due to the credit default swaps. i know the govt has said they won't backstop a LEH buyout but they may have to.
AIG is in free-fall already as well, down 28% today. I just don't see how the government can afford to backstop another bailout. Not only are the budget implications scary to think about, but the damage to treasury debt ratings could be catastrophic for the system. They have to sit back and let this one play out. Hopefully Lehman finds a buyer.
I work one block away from Lehman's HQ. When I came out of the subway today, there were 4 satellite trucks parked right next to it with cameras pointed. The vultures are circling. As for Lehman vs. Bear Stearns.... well... Lehman can only hope it would be the next Bear Stearns in that somebody would buy them. Is there a JP Morgan out there?
Consider that JPM still needed help from the government to secure collateral before they could buy BSC. LEH is obviously attractive from a price standpoint, but the problem is finding someone willing to take on that risk, and we're a long ways removed from February. It's that much more difficult to find someone willing to take on LEH's mess at *this* stage of the credit crisis game.
so jpm is in talks to by wamu and a consortium of buyers is in talks to buy different parts of leh. we shall wait and see...
I'm really impressed by JPM. They have been, by far and large, the winner (if you can call them that) through this crisis. Apparently someone in the bank figured out as early as 2006 that the credit bubble was going to burst and they started to cut all their subprime holdings way ahead of time. They even went as far as to bet against the credit bubble and made a killing off it. And now after all this is said and done they likely will have acquired both BSC and WaMu for pennies on the dollar. There are some geniuses running that bank, and they're making their bosses very, very, very rich.
Goldman did the same. They took short positions on sub prime and also won big. Goldman still has the best and brightest imo. BTW, why were you demoted to Rookie status?
Apparently my friend from JP said that there were no specific procedures in place at the time, thier position was merely because they didnt get into subprime fast enough, hence they thought it wouldn't be profitable to pursue subprime since the first mover advantage is lost All in all a blessing in disguise. Goldmans no doubt predicted, they are the smartest in banking by far
Was never really clear to me, but I remember I was disgruntled with the whole thing and decided to take a hiatus from CF for several months. I only returned to active posting again recently.
Yeah, mad props to Goldman as well, in fact they're pretty much the only institution that went through the whole thing somewhat unscathed. The article I read about JPM says that somebody at JPM saw bad things happening with subprime and felt that the bubble was eventually going to burst. I don't know if they got into the game late, but it did specifically mention that they made the decision as early as 2006 to divest most of their subprime assets, and that they also went ahead and went short and won big. I call JPM the winner though because they were able to use their position to swallow up BSC and it looks like they're positioned again to acquire a major competitor in WaMu without having to break much of a sweat.
You might be right robbie http://biz.yahoo.com/ap/080912/lehman_meeting.html Emergency meeting held to discuss Lehman Brothers By Martin Crutsinger Federal officials meet with financial institutions to discuss Lehman Brothers WASHINGTON (AP) -- 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. The meeting, which was attended by Treasury Secretary Henry Paulson, was held at the offices of New York Federal Reserve Bank president Timothy Geithner. The meeting was confirmed by Fed spokeswoman Michelle Smith. Smith refused to disclose what financial institutions participated in the meeting or whether the group had reached any conclusion over how to resolve the crisis facing Lehman Brothers. She said that in addition to Paulson and Geithner, Christopher Cox, the chairman of the Securities and Exchange Commission, was in attendance for the discussions. The private sector participants were described by Smith only as "senior representatives of major financial institutions." However, the Wall Street Journal reported on its website that this group included Morgan Stanley chief executive John Mack and Merrill Lynch chief executive John Thain among others. Earlier in the day a person familiar with Paulson's thinking said that the treasury secretary was opposed to the use of any government money to bail Lehman Brothers out of its financial difficulties. Lehman Brothers, the nation's No. 4 investment bank, was racing to find a buyer two days after it laid out a restructuring plan it said would raise badly needed money it lost on bad bets in real estate holdings. The person, who spoke on condition of anonymity because of the sensitivity of negotiations, said Paulson believes the Lehman situation is different in two critical aspects from the government-assisted rescue of Bear Stearns back in March. This person said that Paulson believed that financial markets have been aware for some time of the difficulties facing Lehman and have had time to prepare and the Fed is now allowing investment banks in need of emergency loans to borrow directly from the Fed just as commercial banks can do
Lehman has already lost alot of its clients, whoever buys it needs to realise that they are not going to get the pre-subprime revenue stream from LB. Plus, the Feds can only do so much, I am pretty sure it cant help every single financial institution that is about to go under Similar problem in Australia here too with Babcock and Brown the second largest Australian investment bank on the verge of collapse.
