Lehmans goes down, global banking in crisis

[hipipol]

Doubt its that tight - but they do have probs - their current weakness will push their cost of capital, reduce the deals they can take part in (credit committees will shit themselves when concidering the counterparty risk involved!!!!) but cant see em totally tanking over the next two days....two weeks at the current rate of panic is prob closer

 

[david dissadent]

He's a bit late no? Seeing as Bear Sterns has already gone.

And how many mid-sized banks have actually gone? None (discounting the potential Satander takeover of A&L)

I thought IndyMac was a midsided bank.

Edited to add: Wachovia and Washington Mutual are among the names most often mentioned as being in probable trouble from the big name banks.

 

[david dissadent]

Link

The bank of America deal for Lehman seems to be faltering.
The Journal reported many Wall Street traders met Saturday to weigh their options if Lehman is forced into liquidation. One unnamed trader said conditions in the credit default swap market and the short-term repo markets are more stable today than they were in March, when Bear Stearns nearly collapsed, but said that if Lehman is forced to liquidate, Monday could be a grim day for financial markets.

"Creative destruction" in action. We shall see how this story continues to unfold.

Edited to add: Wachovia and Washington Mutual are among the names most often mentioned as being in probable trouble from the big name banks.

Merril Lynch is now getting all the attention of the short sellers it would seem. The insurer AIG is also widely touted as struggling.

Who ever the next president of the US is going to have a rather more challanging job than the last one.

 

[TheHoodedClaw]

The insurer AIG is also widely touted as struggling.

That's not good. At all.

 

[Badgers]

AIG are planning a $20 billion asset sell-off.

The thing is who has the cash to keep buying up other failing companies assets?

 

[yield]

That's not good. At all.

Checking the links between the CIA and AIG is good fun.

Article here to give you a flavour of good old AIG.

AIG are planning a $20 billion asset sell-off.

The thing is who has the cash to keep buying up other failing companies assets?

Sovereign Wealth Funds?

 

[lights.out.london]

@bIO- read the story again, and other than Peston's lamentable forecasting record, I'd also suggest that piece is all puff...named quotes, sources? None of any value.

If the Fed let Lehmans go down, we're all fucked (see my bet ).

 

[TheHoodedClaw]

Checking the links between the CIA and AIG is good fun.

Article here to give you a flavour of good old AIG.

Oh I'm not claiming that they are any great company or anything, but it's depressing that an insurer - even more so a re-insurer - seems to have had trouble with the concept of "risk".

 

[yield]

Oh I'm not claiming that they are any great company or anything, but it's depressing that an insurer - even more so a re-insurer - seems to have had trouble with the concept of "risk".

True. Talk was, one again, of entering a new paradigm. Low interest rates, low inflation...

*gets out his copy of Charles Mackay's Extraordinary Popular Delusions*

It's not the End of the World™ though.

 

[david dissadent]

One person leaving the building said at least 100 people were gathered inside trying to settle the fate of Lehman, which has been staggered by its exposure to soured real-estate-related assets. By 5:15 pm, some Wall Street executives started to leave the New York Fed one at a time, getting in their cars inside a garage so they can't have their photos snapped.

With it unclear whether the gap between the federal government and potential buyers can be bridged, a second group at the New York Fed is focusing on the possibility that there might be no alternative to liquidating Lehman and winding down its operations in an orderly fashion.

On Saturday afternoon, the credit-trading heads of major investment banks gathered at the meeting to discuss how to deal with their exposures to Lehman in the intertwined credit-default-swap market. The lack of a central clearinghouse in this market means that dealers, hedge funds and others are directly facing each other in insurance-like contracts that are tied to trillions of dollars in debt instruments.

One person familiar with the matter said large dealers contemplated showing each other all of their credit default swap trades with Lehman. Disclosing their positions may enable dealers to find ways to offset their positions with each other wherever possible. Later in the day, some traders were told that Lehman -- with the help of Federal Reserve officials -- will try to figure out which of its counterparties have CDS trades that can be offset. Those counterparties would be informed of the offsetting positions, following which they can unwind their respective swaps with Lehman and concurrently enter into new swap contracts with each other. For example, if one dealer has bought a swap from Lehman and Lehman sold a similar swap to another bank, the two banks could agree to face each other directly.

Wall Street traders poured into their offices Saturday for emergency meetings to consider the actions they would take if Lehman is forced into liquidation. They broke into teams to evaluate their positions and exposure to Lehman in everything from energy trades to equity derivatives to credit,

link

The Masters of the Universe sound like they are not having a quiet weekend.

This must be one of the most high powered meetings in the world this year not to feature a head of government.

 

[david dissadent]

Barclays is apparently out. Guess the Fed or the government is going to have to bail out Lehman. We shall see what happens.

 

[lights.out.london]

I hope no-one is holding Lehman stock...

 

[claphamboy]

Another one bites the dust
Another one bites the dust
And another one gone, and another one gone
Another one bites the dust

 

[lights.out.london]

Another one bites the dust
Another one bites the dust
And another one gone, and another one gone
Another one bites the dust

The downside to all of this, is, as we saw with Northern Rock...it's easy to laugh at fat cat bankers, of which there are comparatively few. It's the trickle down effect on the rest of the economy... that's real and that's biting.

For every partner at Goldman Sachs, or director at Lehmans etc etc who sees their 'stake' diminish, there are hundreds, thousands of ordinary workers who lose their jobs [and struggle to find anything quickly], with no capital wealth to cushion them.

Not so funny when you think through the farther reaching consequences.

 

[claphamboy]

Believe me L.O.L I am not laughing - this whole situation is about to get a lot worst.

 

[zoltan]

Most people - who have not been involved - think of the city as some kind of pastiche of a late '80s Yuppie documentary - for the vast majority of workers - and they are still workers - are in the city as it beats killing yourself digguing up roads and it pays the mortgage - very few cane it every night on Champers and own Porsches.

for every master of the universe, there are maybe 100 others who do 9-5 ( or later ) as it pays better than Lidl and teh hours are regular - expanding global capital isnt really on the agenda for most people.

Whether you wear a £120 M&S suit each day or a dayglow bib, redundancy can still fuck you up

 

[lights.out.london]

Believe me L.O.L I am not laughing - this whole situation is about to get a lot worst.

I fear you could be right.

I have to say I'm surprised that we're in the state we're, erm, in.

The exposure to unsecured debts has been eye-watering for a decade or so (the things that have gone to make-up some CDO's and bonds eg overdrafts, student loans, retails loans, credit card debt). It was always gona be a house of cards when added to loose residential property lending terms and conditions. Hello! No-one see that juggernaut coming?

The UK govt's response to the whole affair has been incredibly slow and naive. Even worse, given we have 'prudent' Gordon the ex-Chancellor as PM.

Still. I'll carry on using Lehamns as a search site and ripping their best people out.

Thank you, Lehman Brothers.

Most people - who have not been involved - think of the city as some kind of pastiche of a late '80s Yuppie documentary - for the vast majority of workers - and they are still workers - are in the city as it beats killing yourself digguing up roads and it pays the mortgage - very few cane it every night on Champers and own Porsches.

for every master of the universe, there are maybe 100 others who do 9-5 ( or later ) as it pays better than Lidl and teh hours are regular - expanding global capital isnt really on the agenda for most people.

Whether you wear a £120 M&S suit each day or a dayglow bib, redundancy can still fuck you up

Right.

 

[newbie]

It was always gona be a house of cards when added to loose residential property lending terms and conditions. Hello! No-one see that juggernaut coming?

of course. those of us with zero technical knowledge of what the masters of the universe get up to knew that the wheels would fall off the boom, just as they have every previous boom. But how, and when, and what the effects would be... that, I fear, wasn't so easy to predict.

 

[FridgeMagnet]

Most people - who have not been involved - think of the city as some kind of pastiche of a late '80s Yuppie documentary - for the vast majority of workers - and they are still workers - are in the city as it beats killing yourself digguing up roads and it pays the mortgage - very few cane it every night on Champers and own Porsches.

for every master of the universe, there are maybe 100 others who do 9-5 ( or later ) as it pays better than Lidl and teh hours are regular - expanding global capital isnt really on the agenda for most people.

Whether you wear a £120 M&S suit each day or a dayglow bib, redundancy can still fuck you up

Well, yes, it isn't nice whoever you are, and the ratio is probably 1:1000 or more. However, if you've been on even 30-40K for a while and have savings, investments, experience and contacts, it fucks you up a lot less than if you don't have that insulation.

 

[zoltan]

It should have been 1000:1. my typo error

I cant gloat over anyne getting das boot is what Im saying, but you would hope that a decnt city wage for a long timewould make the consequeness of redundancy less immediate

ETA: I managed to get my lot a years salary pretty much when it went tits up, but that was under threat of a highly embarrasing court case.The City does have more cash swilling about that most other areas

 

[david dissadent]

Lehman have appointed a law firm to look at going chapter 7 bankrupt**. The Fed is in one hell of an ugly position. If it bails out Lehman then the queue of follow up bailouts will be long and ugly. If it doesnt and it Lehman does go bankrupt it will likely create financial shocks that will take a long time to recover from.

Ugly, ugly ugly. I wonder what the legalities on the fed* buying Lehman are, or the government nationalising it.

*The Federal Reserve is technicaly a private company and not part of the government.

**edited to add, this ofcourse may be a negotiation ploy to jog people into action, or just caution but clearly this is a very real problem.

 

[zoltan]

I would not be surprised if Lehmans was alloed to go under, I really wouldnt - the US is on very shaky ground ethically with mass bailouts and some argue that this is natural and to be expected - trimming the fat so to speak

The CD market is experiencing what most other products have been through at one time or another - Remember the Salomon Bonds situation or the Winchester commodities / copperfingers fraud of a few year back - the greed and abilty to make money hand over fist on these products with pretty much zero regulation in the name of capital has once again come along and bit the players on the arse

 

[newbie]

I cant gloat over anyne getting das boot is what Im saying, but you would hope that a decnt city wage for a long timewould make the consequeness of redundancy less immediate

if it's the case that these people have been creaming good salaries betting with other people's money, then grabbing huge bonuses when they bet right, I'm not going to shed too many tears if they get hurt as well as the rest of us now it's all going wrong.

the vindictive side of me wants to claw back every penny of those bonuses, every single penny of the golden hellos and even more golden handshakes.

they are responsible and they should pay

 

[zoltan]

if it's the case that these people have been creaming good salaries betting with other people's money, then grabbing huge bonuses when they bet right, I'm not going to shed too many tears if they get hurt as well as the rest of us now it's all going wrong.

the vindictive side of me wants to claw back every penny of those bonuses, every single penny of the golden hellos and even more golden handshakes.

they are responsible and they should pay

again, the Golden hellos/handshakes/ huge bonus are really not the norm for the vast majority of people who effectively perform admin fucntions in support of the big boys


Shoudl the staff of Comet be vilified when they annouce closures of say 30% of their shops ? after all, they have been making money out of the same consumer boom with the Fat TV's and suchlike ?

Most people are trying to make a living, doing the most convenient work possible for the highest returns possible - the amounts are in soem ways irelevant -this isnt a defence of the system , but an understnding of how to survive best in the system , rather than change it - not everyone is an activist - most want to pootle along doing the least efort possible - the City can supply that need

 

[newbie]

decisions made by the staff at Comet won't result in people all across the world losing their homes and jobs. People who work in the city are not free of all responsibility for the consequences of what they have done for their own personal greed. Because, let's face it, it's only the most ruthlessly greedy who go anywhere near the place.

 

[david dissadent]

they are responsible and they should pay

If its blame you are looking for you should start with the voters in the UK and US who have consistantly voted for well presented fluff on the right and left, over serious fiscal conservative (the right) or social reformers (the left).

People choose where they get there news from and most choose infotainment about celebrities and hordes of imigrants over more fact heavy, neutrally balanced sources.

 

[bi0boy]

@bIO- read the story again, and other than Peston's lamentable forecasting record, I'd also suggest that piece is all puff...named quotes, sources? None of any value.

Well it seems like you were wrong on this one.

Another one to watch tomorrow morning

 

[newbie]

so the people in the city are not responsible? it's the staff at Comet and the voters and people who're into infotainment and well, anybody else except the ones who did the actual gambling with other people's money.

 

[bi0boy]

If its blame you are looking for you should start with the voters in the UK and US who have consistantly voted for well presented fluff on the right and left, over serious fiscal conservative (the right) or social reformers (the left).

Ken Clarke wouldn't have let this happen would he?

 

[zoltan]

decisions made by the staff at Comet won't result in people all across the world losing their homes and jobs. People who work in the city are not free of all responsibility for the consequences of what they have done for their own personal greed. Because, let's face it, it's only the most ruthlessly greedy who go anywhere near the place.

sorry , but thats not the case- the vast majority of city employees have as much say in how the company works as do the employees of comet - they are still workers and an admin job in a bank is just another admin job, albeit likely higher paid - IME , its not just the greedy who do it, but it is an arena where the truly greedy can potentially make a mark - most cant be arsed