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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Rolla Coasta who wrote (35478)	6/5/2008 6:53:31 PM
From: TobagoJack	Read Replies (1) \| Respond to of 217754

This just in in-tray Player #1 Wrote: Wasn't this what happened during the last days of BSC? marketwatch.com Player #2 Wrote: that's exactly what happened with BSC. it quickly turned into a real run, but may not this time, since 'unnamed officials' are said to have hinted 'it can't happen with LEH' due to the Fed's new borrowing facilities. we'll see. (it begs the question , if its so easy, why wasn't it done that way with BSC?) Player #3 Wrote: No one here should know better than Jeff about LEH's situation, but I'm going to assume that he's precluded from speaking on the subject, so I'll put in my 2 cents FWIW IMO it is not an insignificant event that LEH has been using "its own" cash to buy back their shares here in a bid to hold up the price of the stock -- keep in mind that a lot of that cash materialized courtesy of the Fed taking back bad paper from them via TAF/TSLF, and it's not like anyone following the LEH saga doesn't know that, including the Fed -- which has probably made for some interesting discussions in high places about WTF LEH is doing For those who have not been following the script here, the story goes that even though LEH is buying stock back at below book, "book" is bullshit (no surprise there unless you've been on Jupiter), but LEH is about to announce another equity infusion of some substance and they need to support the common price until the deal vets. If they can't swing the new equity deal, many believe that there's going to have to be a shotgun wedding at a valuation south of book and therefore also south of market -- of course they will also need a dance partner, and JPM's already taken (one less chair out there), so you tell me who's going to step up to the plate on that one A lot of people consequently smell either major dilution or a takeunder, and that took the stock down earlier in the week. The price action today implies that an equity placement might actually be coming, so we shall see. Rumor also has it that the Fed for now is still letting LEH re-organize their own affairs, but there is a limit to the Fed's patience and they aren't about to let LEH sink the whole boat. IMO something major is going to have to happen this month before everyone tries to disappear for the summer, but that's just my own take Meanwhile, aside from the chronicles of LEH, I'm also waiting for BAC to alter but not pull the plug on the CFC acquisition, not that a revaluation should surprise anybody -- BAC has probably waited a sufficient time now to be able to play the "circumstances have materially changed" card, and it's hard to imagine they would ever close on the existing terms -- but I suppose dumber things have happened Player #4 Wrote: the merging of weak/failing financial institutions with (supposedly) strong ones has a very 1930ish air about it. in Europe the 30's banking crisis got into high gear with the failure of Austria's Creditanstalt-Bankverein , which had been preceded by precisely such a merger - in October 1929 Creditanstalt had taken over the Boden-Kreditanstalt, which had branches all over Europe and had suffered heavy losses - it was a 'rescue merger'. in order to sustain its financial position in the face of continuing losses stemming from the merger, Creditanstalt borrowed a lot of short term money, and when it became apparent that might be unable to meet those obligations resp. roll them over in 1931, a run on the bank ensued, leading to its collapse. because Creditanstalt was such a big player, its demise had immediate effects on banks all over Europe, precipitating a crisis in Germany's banking system that continued to spread all over the continent. in other words, we have a historical example here that it is not always a good idea to merge banks that are on the brink with healthy ones - it becomes problematic when in spite of intensive 'Gesundbeterei' the economy does not get better as quickly as everyone hopes. then you end up with your formerly healthy bank also in mortal trouble - and if it's big enough, as was the case with the Creditanstalt, then you can end up with the whole system crashing down around you. (a side note: Austria's central bank intervened heavily, inter alia via introduction of exchange controls, and promptly managed to make matters even worse).