Lehman Brothers

[dvcgirl]

Now, I'm not trying to panic anyone, but I just wanted to update anyone who many have accounts with Lehman Brothers.

Sometimes in a crisis like the one we're going through now, all that it takes is a series of rumors to get started that a particular bank is in trouble and it becomes a self-fulfilling prophecy. We saw this happen with Bear Stearns this past week. They were bailed out by the Fed using a set of rules that they hadn't used in 40 years. Prior to that, this scenario was used in 1930.

Rumors are flying now about Lehman Brothers....that they are the next to fall. They did receive a 2 Billion dollar credit line this week to try and quell the rumors, but the options are trading as though the market thinks that they are indeed next.

Here's a wall street journal blog on what is happening with Lehman

http://blogs.wsj.com/marketbeat/2008/03/14/four-at-four-gone-baby-gone/?mod=googlenews_wsj

 

[Kay7979]

I have heard the same. And in Bernanke's recent testimony before Congress he admitted that a number of bank failures were expected this year. In those cases, however, they are not likely to be major financial institutions.

 

[dvcgirl]

I have heard the same. And in Bernanke's recent testimony before Congress he admitted that a number of bank failures were expected this year. In those cases, however, they are not likely to be major financial institutions.

I would think that this has been a very, very busy weekend for the Fed and the Treasury....and many major banking institutions. I think that they know a heck of a lot more than they are telling us at this point. The only goal at this point is to avert a total meltdown.....and there are so many things that could trigger that at this point that I'm sure that they're coming up with several "just in case" scenarios...

 

[punkin]

I hope you are wrong. Lehman was always a much better financed bank than Bear and had better risk management. I am hoping that these are just rumors. The economy cannot afford major investment bank runs just now.

 

[dvcgirl]

I hope you are wrong. Lehman was always a much better financed bank than Bear and had better risk management. I am hoping that these are just rumors. The economy cannot afford major investment bank runs just now.

Options are trading like they'll fail....same as what was going on with Bear last week. Lehman was also up to their neck in subprime garbage loans.

Don't worry, they'll be deemed "too big to fail" like Bear.....the Fed will float them whatever they need and take their toxic loans as collateral. When those loans default, the taxpayer picks up to the tab.

They did manage to whittle together a 2 billion dollar line of credit from 40 lenders, but boy, when these things go down, they go *fast*.

Bear really and truly had an old fashioned run on their bank. The calls to close accounts had picked up to such a brisk pace by Thursday afternoon that they knew they needed serious help. And like I said, don't kid yourself....there's no risk to JPMorgan here....they're just a middleman.