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Photograph of Lehman Brothers employees leaving the Midtown office yesterday--after emptying their offices--by David Karp/AP
The financial industry's worst weekend ended on these notes: Lehman Brothers filed for bankruptcy, after being unable to find a buyer; Bank of America, previously interested in Lehman Brothers (but didn't want to buy it without government protection) decided to buy Merrill Lynch for $50 billion; and there's concern AIG and Washington Mutual will fall next. The financial markets are expected to be in tumultuous territory, and a banking analyst told USA Today, "We are in a hysteria."
Despite filing for Chapter 11 protection, Lehman has still hopes to sell its broker-dealer operations, according to CNBC. Some important figures: Lehman has $613 billion in debt, which, per Bloomberg News, "surpasses Drexel Burnham Lambert's failure in 1990." It also lost 94% of its stock value over the past year.
A trading session was opened between 2 p.m. and 6 p.m. yesterday, The Wall Street Journal reports, "to ease fears...The idea was to allow firms to try to unwind their derivatives transactions with Lehman by finding other parties to step into Lehman's shoes." However, one trader said, "People were screaming at each other over the phone, asking: How can this work?"
Merrill Lynch, which has lost 68% of its stock value over the past 12 months, ended Friday with a $17.05/share price; Bank of America is buying it at $29/share. This turns Bank of America, the biggest retail bank, into a behemoth; a portfolio manager told Bloomberg News, "If Bank of America can put a fence around the bad assets, that retail distribution is a powerhouse. The Merrill Lynch combination makes more sense than a Lehman deal.'' However, a placement firm executive warned, "B of A is known for making big cuts. They go in and thin it out."
Also of note:
- To deal with the credit shortage, ten banks-- Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Merrill Lynch, Morgan Stanley, and UBS--agreed to each put $7 billion into a "collateralized borrowing facility."
- AIG is looking for raise cash--if its credit rating is downgraded to the point where "counterparties [can] withdraw capital from their contracts with the company," the firm will "survive for only 48 hours to 72 hours," a source tells the Times.
- The Fed will expand its lending facilities.
- Now there are just two NY-based securities firms--Morgan Stanley and Goldman Sachs.
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Why were those Lehman employees cleaning out their desks last night? Had they already been laid off? Or were they trying to get the jump on security and taking files, rolodexes, etc. before Monday morning?
I am unsure, but the general tone may be that the building will be locked down, and they won't be able to get their shoes, photos, personal belongings.
Please do not assume that the action is some motivation to "take our rolodex and steal documents".
I would assume the goal is simply that people want to take their own things, as they may not have access to them for a while otherwise.
There goes more of the economy! The stock market is going to be fun today.
Going up:
Unemployment
credit card rates
inflation
tax rates
fear
crime
Going down:
House values
401ks
the U.S. dollar
tax revenues
hope
safety
Jen, second sentence should read "BofA didn't want to buy Lehman 'without'government protection"
lapdancers are rightly concerned about this situation
Schadenfreude, corporate finance bitches.
Can someone please explain the ramifications of these developments?
Does anyone else feel the sense of impending doom?
the fall of the empire people, you're living it.
Time to start handing out some jail sentences to the stuffed suits. Until then, nothing will change.
Does anyone else feel the sense of impending doom?
As Omar from the Wire would say..."I feel you"
Thy look like college kids clearing out of the dorm for summer...but this is Wall Street? Why is America so pervasively infantile?
They...they.
Oh man .... another bomb scare at the CUNY dorm?
Can someone please explain the ramifications of these developments?
Its the end of $90k millionaires.
Sooo.. is there a list of banks that AREN'T in trouble? I'm thinking about bailing out on WaMu..
this should have happened months ago. Everyone knew that the economy was going to burst. EVERYBODY!!! They've been saying that it was in a bubble for the last 5 years. A selloff is good for the economy actually. It's a reset. The Dow's volume should have been at 10000 and the 13000 was smoke and mirrors. The thing is that the bubble should have deflated slowly but because of erosion in consumer confidence it caused a panic and now the air is shooting out of it. They tried to plug it up with begging to the government but there is no more money for them so the US told them to take a hike. All my fat cat friends who work in the finance industry are shitting bricks right now. It's funny that even though they are the most well off they are probably the most stressed. That's what egoistic relative deprivation does to your ass.
I hope thier 401Ks were diversified.
12# - Their clothing seems highly appropriate considering it was on a Sunday afternoon in humid 90 degree weather.
"Sooo.. is there a list of banks that AREN'T in trouble? I'm thinking about bailing out on WaMu.."
I think that may be a little premature, but who knows right? If you want a solid bank, check out HSBC. They are the biggest bank least affected by this mess. Hell Citibank is loosing money but I doubt they'll go under anytime soon.
Goldman seems to be bucking the trend. They saw this coming a mile away.
While I certainly don't wish ill on these average employee people (Losing your job sucks. I save that vitriol for the CEO's and crooks at the top who get million dollar severances) I can't help but hope that this sends a crystal clear fucking message that you are not playing with Monopoly money here. And Uncle Sam is not going to bail you out after you've played 3 card monte with someone else's money!
#19 -
Not the point. Suprised?
Surprise...surprised!! god damn fuckit, i'll never type again.
Market's tumbling already. This is bad...
ehh it's only down 250 right now which is actually pretty good. I thought it would go down over 400.
AIG is looking for raise cash
You know AIG, i can probably float you like $100 this week, and another $50 next week... i just need it back before the end of the month cuz that's when rent's due and i'm also already in trouble with ConEd for missing a bill this summer. Want to meet me at the Spring Lounge for a quick beer and i'll give it to you then? lemme know.
I lol'd at the pictures of the people walking out I wish I was there I'd be holding some money asking the wimenz for lap dances, hey that manhattan apartment of theirs ain't gonna pay itself when the rent is due.
How come so many of those men are dressed like infantile college kids. Shorts, slippers, and baggy clothes with frumpy bodies. I see "Man Babies". Blech!
Its the weekend Monkey. Cut them some slack. If I just lost my job and I had to go clean out my shit on a weekend, I'd waltz in wearing Pajamas.
#16 you should get your money from WaMu ASAP. They long have been on a short list of banks that have more debt than assets and is the only national bank listed as risky.
#30- isn't wamu fdic insured for 100000 on each account? If I only had 10000 in the account would I need to withdraw that now?
who are these people? and why are they going to their offices on a sunday night? what do you mean these people? payback's a bitch.
@32
I agree referring to them as people insults those of us who are actually people.
Yes, payback is a bitch too bad there not gonna have a hard time finding a new job, makes me mad that they get away with this crap.
They most definitely will have a hard time finding a job and most of them live beyond their means because they always figured the money would keep rolling in. This is what greed gets you, suckers! Hahaha!!!!
I wrote a couple of months ago that a lot of pain was coming down the pike, but people wouldn't listen.
Hmm. If WaMu is going under, maybe I should go and max out my WaMu Visa.
they'll try to get a job doing what they've been doing but find out that dudes from bear stearns and other companies that went down are in front of the queue. Then they'll try to get a cut in pay but find that the pay is way too low. At the end of the day, they are accustomed to extravagance and they will have to suck it up.
Hmm. If WaMu is going under, maybe I should go and max out my WaMu Visa.
Do you plan on filing for bankruptcy, too? Otherwise, your debt remains an asset to WaMu.
as I understand it, if you have less than 100k in a FDIC bank, you're covered by the Fed, at least until the Fed collapses. Which I wouldn't be surprised at, all things considered.
Eurodollars. Blue Horseshoe says "buy Eurodollars."
People are outside the building, staring up at it as though it's on fire.
You're fine because the Fed can always fire up the presses, which isn't a good thing. But the FDIC has called for more money from the Fed, which is also not a good thing and shows the impending doom.
HOST:
Ladies and Gentlemen, once again, the Republicans.
[Republicans play third song]
[final commercial break]
[Back for goodbyes/credits/a depression that rivals 1929]
can somebody please explain why that douche-bag is making a peace sign and holding up the Lehman sign? is that guy trying to tell us that the latest round of wall street layoffs have no interest in class war?
i'm awfully confused.
Republican ideals (true Republican ideals) would've prevented this. You can thank Slick Willy, Greenspan, and Helicopter Ben for this.
So where have your "true Republicans" been the last eight years? Certainly not in the White House.
Well I was talking about Congress, but, yes, they're not in the WH, either.
true republican ideals = blaming slick willy for the last 8 years
Thats the funniest thing I've heard all day
Fritzdecat,
While the banks are culpable, who lets them spend wildly? The Fed. They're the real problem, and until we recognize this, we'll keep having these bubbles and their eventually bursts.
We should've gone through this post-NASDAQ but Alan kept pumping money in through artificially low federal funds rates.
How is it funny? What's funny and upsetting is when we're not accepted the cold, hard truth. We're almost all in denial, but things are going to continue to get worse.
Hows it funny... You blaming slick Willy for the past eight years when maybe you might acknowledge the damage done by Dubyanomics.
Borrowing Billions from the Chinese to fight the waste of a War in Iraq, Tax breaks when we should be paying down the debt.
Yeah where are the real conservatives? If Nixon was here he would be spinning in circles at the current Idocracy.
The housing bubble has nothing to do with Iraq. Of course I don't believe in our foreign policy of the war, but this is undoubtedly because of the low federal funds rate in the post-NASDAQ years. You can pretend it's Bush's fault, and Lord knows I have issues with him, but it's simply not. He postponed this as long as he could be allowing the easy monetary policy to continue, but it had to come.
Borrowing from the Chinese for Iraq is an utter non-sequitur. That's going to create a new bubble, but more than likely is what's going to eventually bring us to our knees. I'm reading about a possible cut to the interest rates. What? What we need is to jack it up, and go through the hurt now. Unfortunately, it's an election year.
To deny this bubble as being Clinton and Greenspan's fault is naive and overlooks the facts.
Does it even matter at this point? We're never paying down our debt or shrinking our trade deficit. We're just going to continue to print and tax until we're insolvent and China has the purchasing power. Obama, McCain...neither will change it. Better buy up precious metals while they're relatively cheap.
Lehman may be sold to Barclays today. I'm surprised the Eurovultures aren't more prolific in the skies above Midtown. Where's Fortis and Dexia? Doesn't BNP Paribas want some of this tasty carrion? Must Jamie Dimon sit alone at this banquet?
Chips you seem to change your tone I thought this was all about Real Republicans with you
"Obama, McCain...neither will change it."
MCCAIN WILL DEFINITELY MAKE IT WORSE
on the positive side this is just like a giant Forest fire...Sure theres financial ruin but after a while new green shoots will appear
had to happen no matter who is to blame
Seems like street crime could make a big comeback and perhaps could be a decent way to earn a living for the next few years....