September 14, 2008

Lehman Brothers failed tonight, and was not bailed out by the King of Moral Hazard Hank Paulson and the over-extended government. Good luck everyone.

OK, let's unwind this pig.

Where it stops, nobody knows.

50 comments:

lee said...

Good luck??

Last week u said get ready for a buying frenzy...Now good luck?

George and Dick's Legacy said...

Welcome to George and Dicks' New Depression.

8 years of dumb, crazy greed and looting.

What a Bushco Legacy of doom and failure. Enjoy it, George.

YOU earned IT.

Welcome to Hell, "My Friends" (sound familiar in an old, senile decrepit moose turd way?)

Natural Eyebrows said...

This is true Armagedddon. I've been a bubblehead since summer '05 at least, but I never thought it would get this bad. The thought of Merrill Lynch ceasing to exist as an independent firm is staggering.

todd palin said...

Get over it.Who gives a shit about lehman.Let the pos fail like they should.They took on too much riskIt will show the next bunch of wannabes what not do.Moral hazard is in play my friends.

holyschlitz said...

This is where the panic finally starts to set in. It has been a long time coming, but it looks like it might finally here. Get your popcorn and watch the show.

Afterthought said...

The average white hates blacks more than they love America, and are willing to endure any penury just so long as the penury of the backs is worse.

Anonymous said...

Man this is it everybody hold onnnnnnnnnnnnnnnnnnnnnnnnnnnn....

I hope it is the financial ruin of all the world banks and moneychangers.

We don't need them.

Go RON PAUL.

vanilla ice said...

Is this it? Do the markets finally fail and crash tomorrow and the people who deserve to feel some pain finally get it? Nope probably not. I bet the markets rally like last Monday.

Toby said...

They looked at the counter party risk and discovered that the foreign banks would take most of the hit, and not their buddies on Wall Street. Merrill won't survive as an independent and will merge with a real bank. Those that were counting on a federal bailout are getting spanked tonight.

vanilla ice said...

Bwahahahaha!!! This is better then any disaster movie.

vanilla ice said...

BoA just announced purchase of ML...

Where in the world do they get $44 billion dollars? Is BoA secret department of the Federal Reserve?

vanilla ice said...

Well I would have lost my $20 betting Lehman would get bailed out.

satan said...

Fed accepting equities as collateral - is it now the world largest pawnshop?

The Federal Reserve is expected to expand its lending facilities in the wake of the likely demise of Lehman Brothers, taking a wider array of securities, including equities, as collateral for its loans, say people familiar with the matter.

The moves, which potentially represent another landmark step in the Fed's efforts to address the deepening credit crisis, are expected to be temporary. They are meant to calm markets as they head into one of the most perilous trading environments in decades with Lehman's massive market positions on the verge of being unwound.

http://online.wsj.com/article/SB122143939332934501.html

BB said...

.

Well...Benny and the red inkjets are once again expanding the Fed's lending facilities, and NOW taking an even wider array of securities, including equities, as collateral for its loans!!!

This should do WONDERS for the dollar!!! I wonder where the backroom support for our currency will come from tomorrow!?!?

Here's the Fed statement:

-------------------------------

September 14, 2008, 9:35 pm
Fed’s Sunday Statement: Eligible Collateral Broadened

Here is the text of the Fed’s press release out late Sunday.

Release Date: September 14, 2008

For immediate release

The Federal Reserve Board on Sunday announced several initiatives to provide additional support to financial markets, including enhancements to its existing liquidity facilities.

“In close collaboration with the Treasury and the Securities and Exchange Commission, we have been in ongoing discussions with market participants, including through the weekend, to identify potential market vulnerabilities in the wake of an unwinding of a major financial institution and to consider appropriate official sector and private sector responses,” said Federal Reserve Board Chairman Ben S. Bernanke. “The steps we are announcing today, along with significant commitments from the private sector, are intended to mitigate the potential risks and disruptions to markets.”

“We have been and remain in close contact with other U.S. and international regulators, supervisory authorities, and central banks to monitor and share information on conditions in financial markets and firms around the world,” Chairman Bernanke said.

The collateral eligible to be pledged at the Primary Dealer Credit Facility (PDCF) has been broadened to closely match the types of collateral that can be pledged in the tri-party repo systems of the two major clearing banks. Previously, PDCF collateral had been limited to investment-grade debt securities.

The collateral for the Term Securities Lending Facility (TSLF) also has been expanded; eligible collateral for Schedule 2 auctions will now include all investment-grade debt securities. Previously, only Treasury securities, agency securities, and AAA-rated mortgage-backed and asset-backed securities could be pledged.

These changes represent a significant broadening in the collateral accepted under both programs and should enhance the effectiveness of these facilities in supporting the liquidity of primary dealers and financial markets more generally.

Also, Schedule 2 TSLF auctions will be conducted each week; previously, Schedule 2 auctions had been conducted every two weeks. In addition, the amounts offered under Schedule 2 auctions will be increased to a total of $150 billion, from a total of $125 billion. Amounts offered in Schedule 1 auctions will remain at a total of $50 billion. Thus, the total amount offered in the TSLF program will rise to $200 billion from $175 billion.

The Board also adopted an interim final rule that provides a temporary exception to the limitations in section 23A of the Federal Reserve Act. It allows all insured depository institutions to provide liquidity to their affiliates for assets typically funded in the tri-party repo market. This exception expires on January 30, 2009, unless extended by the Board, and is subject to various conditions to promote safety and soundness.

Source: Federal Reserve

-------------------------------

Anonymous said...

I'm betting that at 11:58pm est., Hank or
bernanke will blink.
1 min. before Fuld actually files bankruptcy.
note that it ain't over till the last papers are signed so this could go on tomorrow. AFAIK, even a bankruptcy filing can be withdrawn.

Batman said...

I'm predicting a fun week. We have Ike panic probably getting oil a bit jittery, Lehman too smelly for even the foulest gravediggers to touch, and a Fed meeting Tuesday.

The boyz over in the gulf states are gonna have to cough up a lot more cash to keep the lipstick from washing off the pig this week. Watch that dollar fakeout rally hit the mat hard...

robert said...

vanilla ice said...
Is this it? Do the markets finally fail and crash tomorrow and the people who deserve to feel some pain finally get it? Nope probably not. I bet the markets rally like last Monday.


Actually, I half heartedly expect the same. A few billion in write offs….and the market rallies. A few more banks fail…..and inexplicably, the market rallies.

Each time these things happen, the market thinks “this is the worst it can get, the turn around is here, buynoworforeverbepricedout” (funny how greed works).

Of course, a few more days pass and another lender starts to stagger, that’s when the market tanks and the cycle repeats.

But, this goes back to Moral Hazard. The banks/lenders/market expect to be bailed out…..just as in the past. When they do not get the hand out, we may just now see the ramifications.

Frank@Scottsdale-Sucks.com said...

This is a fine example of why I've always had a strong disdain for Wall Street. It's full of people who are out to get rich without actually creating or producing anything. Bunch of "get-rich-quick" schemers.

Moral hazard, anyone?

Now it's confirmed that a vote for the Dems is a vote for the Reps, and vice-versa. Whomever inherits this mess will take 100% of the blame and will not be reelected.

Maybe I'll vote for Obama after all so I can sit back and watch that dishonest unethical excuse of a human being take the heat.

keith said...

Get ready for the Fed to cut rates on Tuesday...

Deflation is here

Anonymous said...

oh, and Merrill has been acquired by bofa. AIG is begging the fed for money.....

the Sh*t will really hit the fan when AIG goes under.

Anonymous said...

Get ready for the Fed to cut rates on Tuesday...

--------------------------------

why wait till tuesday? Lets start monday morning off with a rate cut.

Anonymous said...

i know that this is the wrong blog for this but hillary is about to crack 4 on intrade! i bought at 3.....

Owner Earnings said...

The Financials Took The Bait

First Step: Reduce lending standards.

Second Step: Lower the interest rate.

Third Step: Wait for the companies to load up their balance sheet with loans.

Fourth Step: Buy put LEAPS on the most vulnerable financial companies.

Fifth Step: Collect the $ as the LEAPS expire.

Illuminati

keith said...

Here's Bernanke and his plan.

Me thinks he's losing control.

http://biz.yahoo.com/cnnm/080914/091408_fed_statement.html

Anonymous said...

No Barclays Bid?

By Jim Cramer

Now that we know there is no Barclays bid, should we just presume no bid? Sure seems that way. Without a buyer of Lehman Brothers(LEH Quote - Cramer on LEH - Stock Picks) we will have chaos and dislocation, and whatever firms have provided financing to Lehman will have to take hits larger than they possibly can, and we will see what happens when a major owner of mortgages goes under.

Lehman owns hard-to-value assets and it borrows a lot of money to finance that inventory. We don't know who is lending to it, but theoretically, the Federal Reserve could lend the new entity the money it needs for a disorderly -- not orderly -- liquidation. (You would only get an orderly one with a real buyer.)

Obviously anyone owning mortgages takes a hit tomorrow with no buyer for Lehman. But how big a hit?

I think the missing element here is that Lehman was the worst mortgage lender among the majors. (Of course no one was worse than the Novastar/Fremont stooges, but they were not majors.)

Because as public sightseers we have no idea what Lehman really owns, we know right now that it must be pretty toxic. The perception is that we have a huge game of chicken going on here where the government is holding out the disruption of the banking system and the terrible hits the remaining banks will take vs. a smooth and orderly hit if the banks buy the whole shebang.

I think the banks are willing to take their chances because the real problems with Lehman are in Europe, not here, and they would rather pick up the Lehman assets without having to pay anything for them.

It's really hard to figure out how bad this will be, and I know there are tons of so-called counterparty risks, but I think, in the end, with no deal the market gets hit hard for a couple of days, the bears try to break Merrill(MER Quote - Cramer on MER - Stock Picks), AIG(AIG Quote - Cramer on AIG - Stock Picks) (I hope there's some plan there, but I don't know.) and Citigroup(C Quote - Cramer on C - Stock Picks), and then there's really no one else left that's in big trouble right now. Washington Mutual(WM Quote - Cramer on WM - Stock Picks)? Hard to break it from this level.

It's a fluid situation. I will try to update with scenarios when we know more.

One thing's for certain though. If Barclays had bid, we would have been up gigantically, especially because it's looking like crude oil prices are down a bunch.

Not going to happen.

http://www.thestreet.com/story/10437242/1/lehman-doesnt-pose-systemic-risk.html?puc=googlefi&cm_ven=GOOGLEFI&cm_cat=FREE&cm_ite=NA

Anonymous said...

From Keith's Yahoo article on what Bernake is saying (last paragraph):

The Board also adopted an interim final rule that provides a temporary exception to the limitations in section 23A of the Federal Reserve Act. It allows all insured depository institutions to provide liquidity to their affiliates for assets typically funded in the tri-party repo market. This exception expires on January 30, 2009, unless extended by the Board, and is subject to various conditions to promote safety and soundness.

Ummm....isn't the Federal Reserve Act an ACT OF CONGRESS??? If the Federal Reserve has the power to amend and exclude portions of the Act in which created it, aren't they operating with unlimited authority?? Wake up Congress, I mean, who is running this motherfucker???

--miltfreidman

tater said...

You can bet that this will mean even less money for banks to actually lend to customers. So, the banks will continue to rape its' depositors with puny interest rate returns on deposits.

The Fed rape continues.... They've already torn the shirt off the taxpayer's back. They're going to scalp us next.

Anonymous said...

How convenient that Paulson and Bernanke picked the Asian holidays, on Monday, in China, Hong Kong, Japan, and Korea, to blow the lead off Lehman and Merril. Those two have more respect for Asia than Americans. Stinky Zionists!

Asia has Paulson in the pocket!

Don't be surprise if PPT turns the market positive on Monday. Of course it will be positive in Asia on Tuesday.

It's all rigged!

But don't worry sheeple because the system and the corrupt media are convincing you that Obama will save you. So you'll be happy with your new put-in-place-by-shady-groups POTUS, and they'll fleece you again while you celebrate. Can't you see all that right in front of you, bunch of sheep?

Anonymous said...

Let me remind you that Fannie Mae and Freddie Mac were created and ran by the Democratic party. And that their bailout will cost more than the wars in Iraq and Afghanistan.

Anonymous said...

I'm so happy all those crooked coke snorters from Wall Street will lose their jobs. I hope they become homeless. Time to celebrate!

Yeah, I want to see how New York will justify that rip-off cost of living, when Wall Street and the state are both bankrupt.

Die financial scumbags die!

Anonymous said...

The average white hates blacks, asians, indians ,jews, arabs, nature and logic, more than they love America, and are willing to endure any penury just so long as the penury of the blacks is worse.

Anonymous said...

The average white hates blacks, asians, indians ,jews, arabs, nature and logic, more than they love America, and are willing to endure any penury just so long as the penury of the blacks is worse.

Why don't you whine about it in a rap song, so you can use the proceeds from CD and ringtone sales to buy $1k Cristal bottles at VIP rooms (with white hos) and $3k rims for you pimped-up Escalade, and some P-Diddy sweatshirts to look flyyyy.

whahhhh wahhhhh wahhhh...it's all the white men's fault...wahhhhhhh

Frank@Scottsdale-Sucks.com said...

I'm so happy all those crooked coke snorters from Wall Street will lose their jobs. I hope they become homeless. Time to celebrate!

Yeah, I want to see how New York will justify that rip-off cost of living, when Wall Street and the state are both bankrupt.


I'm with you on that, my friend.

Anonymous said...

"The average white hates blacks, asians, indians ,jews, arabs, nature and logic, more than they love America, and are willing to endure any penury just so long as the penury of the blacks is worse."

Shut the F*CK UP!

Anonymous said...

Here's Bernanke and his plan.

Me thinks he's losing control.

http://biz.yahoo.com/cnnm/080914/091408_fed_statement


Damn, I tried to read that statement, but it expired and yahoo said its no longer available.

Keith, If your browser still has a copy of it in your temporary internet files... could you please post it for all of us to read?

Thank you.

**********************************
//////
Sunday September 14, 10:07 pm ET


Release Date: September 14, 2008 For immediate release
The Federal Reserve Board on Sunday announced several initiatives to provide additional support to financial markets, including enhancements to its existing liquidity facilities.



"In close collaboration with the Treasury and the Securities and Exchange Commission, we have been in ongoing discussions with market participants, including through the weekend, to identify potential market vulnerabilities in the wake of an unwinding of a major financial institution and to consider appropriate official sector and private sector responses," said Federal Reserve Board Chairman Ben S. Bernanke. "The steps we are announcing today, along with significant commitments from the private sector, are intended to mitigate the potential risks and disruptions to markets."

"We have been and remain in close contact with other U.S. and international regulators, supervisory authorities, and central banks to monitor and share information on conditions in financial markets and firms around the world," Chairman Bernanke said.

The collateral eligible to be pledged at the Primary Dealer Credit Facility (PDCF) has been broadened to closely match the types of collateral that can be pledged in the tri-party repo systems of the two major clearing banks. Previously, PDCF collateral had been limited to investment-grade debt securities.

The collateral for the Term Securities Lending Facility (TSLF) also has been expanded; eligible collateral for Schedule 2 auctions will now include all investment-grade debt securities. Previously, only Treasury securities, agency securities, and AAA-rated mortgage-backed and asset-backed securities could be pledged.

These changes represent a significant broadening in the collateral accepted under both programs and should enhance the effectiveness of these facilities in supporting the liquidity of primary dealers and financial markets more generally.

Also, Schedule 2 TSLF auctions will be conducted each week; previously, Schedule 2 auctions had been conducted every two weeks. In addition, the amounts offered under Schedule 2 auctions will be increased to a total of $150 billion, from a total of $125 billion. Amounts offered in Schedule 1 auctions will remain at a total of $50 billion. Thus, the total amount offered in the TSLF program will rise to $200 billion from $175 billion.

The Board also adopted an interim final rule that provides a temporary exception to the limitations in section 23A of the Federal Reserve Act. It allows all insured depository institutions to provide liquidity to their affiliates for assets typically funded in the tri-party repo market. This exception expires on January 30, 2009, unless extended by the Board, and is subject to various conditions to promote safety and soundness.

Chris said...

This is an article that provides another great snapshot into how clueless the average American thinks.

http://tinyurl.com/696264

**************************

"The last hours, minutes really, of one the world's largest investment banks make for a pretty unusual spectacle.

I'm standing outside Lehman Brothers headquarters on 7th Ave and 50th street in New York City watching Lehman Brothers die.

Employees, some in suits, others in casual clothes, are filing out with all they can carry as time runs out.

They are walking down the sidewalk past police barricades as scores of New Yorkers and tourists gawk, some asking, "Which star is coming out?" - not knowing what's going on."

**************************

Anonymous said...

This just in:
The Federal Reserve on Monday expanded its options for collateral to include toilet paper.

vanilla ice said...

"Get ready for the Fed to cut rates on Tuesday..."

The greatest example of moral hazard.

Anonymous said...

Note to (soon-to-be-ex) Lehman employees: if it isn't bolted down and can be sold on ebay, TAKE IT!

...and then I hope you get screwed by PayPal as the icing on my cake.

SeattleMoose said...

True justice will prevail only when WallStreet CEOs and their ilk are reduced to street beggars....

emailers2 said...

REPUBLICAN DEREGULATION AND FINANCIAL INSOLVENCY
In 2004, the US SEC deregulated the leverage rules for investment banks. What had been regulated at 10-15 to 1, was eliminated. The investment banks then levered up to 30-1 and perhaps higher. When the crises broke, it was compounded by the high leverage. For every dollar lost, 30 dollars of leverage fell.

Next within the last few years the stock exchange eliminated the uptick rule. Again damaging the system.

To further encourage speculation in the markets taxes were lowered on capital gains. Many of the hedge fund managers now pay virtually no income tax by claiming that their earnings are in the form of a capital gain.

Instead of money creating production jobs in the economy, the tax benefit to the rich went into creating dividends and cap gains as they invested in the stock markets. History proves that these tax incentives always produce the same effect. Witness the tax structure before the Great Depression.

Again, the unregulated derivatives' market has helped create this mess. Instead of allowing Bear Sterns to file for bankruptcy it was bailed by the US taxpayer. All because it was too big to fail in part because of the counter party risk.

Also, the short sellers have run wild by trading naked shorts. Again, no regulation.

Hedge funds account for 40% of the market trades on any given day and yet they are not substantially regulated. Imagine the consequences of such action.

Profits of the few have overwhelmed the financial system created for the benefit of the many.

Next, the GAAP and FSAB have rules that encourage manipulation of assets on a company's balance sheet. A typical problem is company assets that are marked to model. That is computer model, not marked to market. Debts and investments can be moved off the books of a company in SIV or SPE. No transparency and certainly adverse accounting. When a crisis occurs, this too rapidly unwinds.

A company with what had appeared to be a strong balance sheet finds that mark to model was, in fact, based on little more than fantasy when these assets are sold into the market to raise capital. Thus, their ratio of assets to liabilities rapidly diminishes causing potential insolvency.

As the unwinding of the credit bubble continues, and it will, it may look like a Cat-5 Hurricane. Basel II will not settle or calm the markets. Strong regulation is needed.

We are now looking at a Cat-5 financial crises based on the Republican deregulation and free market principles. Corporate America has substituted debt and leverage for real earnings, and looks into the face of insolvency. The majority of America workers now face insolvency as their wages have stagnated and their consumption was fueled with debt. Debt was substituted for income.

Anonymous said...

yep the savers are due for a fed screwing again..............

Anonymous said...

hey bub ...i see houses in the sunbelt going 3 bd 2 bth 2 cg lot non asso for 65 to80 thousand in gentryifying areas..hope they stay that way. year 98 prices if new..................

Anonymous said...

course..theres a 15 percent property tax compounding yearly increase tacked onto them.................. sort of like govt worker pay increases ib their land grab communist scheme...............

Anonymous said...

knowing the quality of the cad....er...i must sday they will be here 39 tears down the line......

Anonymous said...

if leverage is at 30 to one .the houses are 30 times too expensive in relation to the bid power of my dollar banked purchace power....as idiots, with my money borrowed what the knew not the value of..........and used 30 dollars of debt dollars to bid against the dollar that as reserves in the fractional reserve bank, bank system deposited and allowed the creation of the 30 debt dollars and which i refused to continue but the fannie and freddy bailouts will supply the reserver in the fractional reserve system ......

Lost Cause said...

Deflation is bad for those who owe tons like the feds. Certainly they want inflation so that their pile of debt will seem tiny.

While I expected Bush & friends to loot the country on the way out, I did not expect this. This is worse than 9/11. Lehman owes $613 billion. They are simply leaving the table without paying the bill.

Anonymous said...

Have you ever noticed how rich people don't care about inflation and don't care about tax liabilities ?

Anonymous said...

Have you ever noticed how rich people don't care about inflation and don't care about tax liabilities ?

By rich you mean Oprah, Hollywood celebs, Jay Z, P-Diddy, the San Francisco elite, Beyonce, Ellen Degeneres, Pelosi, etc, right? Because those idiots know nothing about finance, all they do is take money from sheeple and whine of how life is so horrible from their multimillion dollar villas in Hawaii or Italy.

Anonymous said...

Note to Lehman employees:

Don't forget to pay your bills at the coke dealer and at the escort service.