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

To: Rolla Coasta who wrote (39817)	9/12/2008 6:03:51 AM
From: TobagoJack	Read Replies (1) \| Respond to of 220310

dunno just in in-tray Hedgie mentioned that Lehman staff told deal coming in next 48 hours…many think B of A will do deal even if present from Fed is not as kind as JPM’s Published: September 11 2008 15:19 \| Last updated: September 11 2008 22:41 Do you hear that sucking sound? It is the market whirlpool swallowing not one, but two, large US banks. Lehman Brothers and Washington Mutual, both now with market capitalisations of less than $4bn against their peaks of about $45bn, are in the grip of the vortex. The time for regulators to prepare the lifeboats is approaching. For Lehman, the problem is one of confidence rather than capital. The bank still commands some loyalty from counterparties. A ratings downgrade could change that. Dick Fuld was late to absorb the severity of the bank’s crisis but replacing him now scarcely changes that. Rumours of a Lehman sale to a rival at least preserve hopes for a lifebelt flung by a peer, doubtless on onerous terms. Washington Mutual’s predicament is perhaps even more testing. Traders are demanding upfront payment to insure the thrift’s debt – dire straits in the credit default swap market. The bank’s new boss is racing to find a rescuer, with banking regulators already involved. TPG, at least, has a vested interest in the banks survival. Other buyers would surely demand the same federal aid JPMorgan Chase received when it bought Bear Stearns. That episode also spawned an emergency funding mechanism for troubled investment banks. Plugging into federal life support would be to admit defeat. The spreads on Lehman’s credit default swaps, vastly elevated but short of all-out crisis levels, suggest the bank could muddle through, funded through the Fed’s facility. But the value in so-called “core Lehman” would be further degraded in the process. Any expectation of official assistance on the part of would-be rescuers means the authorities will have to be involved in a sale of either or both banks – an obligation of their own making. It will be another busy weekend