Originally Posted By leemac So it is looking increasingly likely that Lehman Brothers, the fourth largest investment bank, will fold on Monday unless one of the two rescue bids can be approved. It looks like Barclays PLC, the fourth largest UK bank (but with significant investment banking capabilities itself through its very successful Barclays Capital division) are prepared to walk without government guarantees and BoA doesn't look like it has the capital to meet the requirements to absorb Lehman. The weakness of all of the other players (except for JP Morgan Chase and Goldman Sachs) means that the availability of potential buyers is slim. Both WaMu and AIG have their own issues - AIG needs to raise between $30-40bn to shore up its balance sheet if the ratings agencies reduce its credit worthiness on Monday (as anticipated). WaMu is breaching its FDIC requirements. The government refused to let the smaller Bear Stearns fail back in March - virtually giving the bank away to JP Morgan Chase (the cash that Stearns had virtually covered the purchase price) so my question is whether the government should allow any of these three financial titans to fail or rescue them.
Originally Posted By Kar2oonMan This close to an election, no way does the government not bail them out. That would be too much of an "October surprise". So, the party calling for fiscal restraint and smaller government will again put the taxpayers on the hook for the billions it will take to prop these institutions up without batting an eye.
Originally Posted By leemac ^^ According to the news that hit the wires in the last hour Barclays pulled out because it couldn't get guarantees from either other Wall Street banks or the government to cover Lehman's existing obligations: <a href="http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/09/lehman_barclays_walks.html#commentsanchor" target="_blank">http://www.bbc.co.uk/blogs/the...tsanchor</a>
Originally Posted By Sport Goofy << This close to an election, no way does the government not bail them out. >> I would have said the same thing before the Freddie and Fannie takeover. I think the federal government has bitten off more than it can chew, and there are serious concerns that the Chinese and Saudis will start selling their interest in the U.S. debt markets if the Fed continues to bail out these banks as though there is no consequence to that action. The problem with government bailouts is that our government is just as bankrupt as the banks they are bailing out. Having just assumed $1.5T in Fannie and Freddie debt, the stakes were really raised beyond the government's ability to participate much longer -- particularly with investment banks. We still have to worry about FDIC insured banks that will be going under in the months ahead.
Originally Posted By leemac BBC News is reporting that Lehman is preparing for a Chapter 11 filing: <a href="http://news.bbc.co.uk/1/hi/business/7615712.stm" target="_blank">http://news.bbc.co.uk/1/hi/bus...5712.stm</a>
Originally Posted By Mr X Woah. I'm so surprised. (er..not) Wow, seeing Lee in WorldEvents...is this yet another sign of the apocalypse or something?
Originally Posted By leemac Reuters is also reporting that Merrill Lynch is history too - BoA are negotiating a takeover. This is an unprecedented moment in history if we lose to blue chip banks on the same day.
Originally Posted By leemac <<Wow, seeing Lee in WorldEvents...is this yet another sign of the apocalypse or something? >> LOL. I was going to mention that - I think this is my first (and only) ever topic in WE. I'm very very worried about our banking system - two investment banks tanking has the potential to take down our entire banking system.
Originally Posted By gadzuux Care to engage in any fingerpointing, lee? That's kinda what we do around here.
Originally Posted By mawnck >>Care to engage in any fingerpointing, lee? That's kinda what we do around here. << Choose carefully ....
Originally Posted By leemac LOL. Personally I blame the banks for chasing short-term profits on complex securitizations that they didn't fully understand. I have no sympathy for the banks except for the employees that were not connected to these high-risk products. I know how much my company pays for investment banking services and they can't have their cake and eat it - milking massive bonuses on risky products. I always felt that Stearns should have been allowed to fail - the system could have handled that. Lehman is too big to fail - it will impact markets globally. I don't relish the position that all of the employees of Lehman, WaMu, AIG and Merrills are currently in. I had to live through the failure of my first employer - Andersen - when my member firm in the UK had had nothing to do with Enron and Worldcom. It was devastating for me. My thoughts are with the general employees who are wondering whether they have a job to go to on Monday.
Originally Posted By Mr X If one gets the bailout, I'd guess the rally will be huge. Both or none, perhaps a significant drop. Both because there will be panic that "the system is failing!", none is obvious.
Originally Posted By Sport Goofy The real scary question here is how fast will the other dominoes fall after this? Citi has been rumored to be on the ropes for a year now, but the Saudis have kept dumping money there to keep it afloat. How long will that last? Will China and Saudis continue to lose money in the U.S. financial sector just to keep it from total destruction?
Originally Posted By leemac The futures markets have slipped massively tonight - expect most major markets to open and fall hard and fast. Asia opens shortly. Hold on to your hats - it is going to be a bumpy ride.
Originally Posted By leemac NY Times and Reuters are both now reporting that Lehman will file for bankruptcy Monday morning and liquidate. A sad day for a bank with over 150 years of history.
Originally Posted By leemac And it looks like AIG will fail if they can't firesale assets on Monday - it will all hinge on the ability to sell its aircraft leasing business. If there are no takers then AIG will be insolvent.
Originally Posted By DyGDisney >>WaMu is breaching its FDIC requirements.<< What exactly does this mean? I mean seriously, should I close my account out there? This is scary stuff!
