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Reply #46: Is it all over? Is tomorrow the crash? Lehman Heads Toward Brink as Barclays Ends Talks [View All]

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Pale Blue Dot Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Sep-14-08 02:01 PM
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46. Is it all over? Is tomorrow the crash? Lehman Heads Toward Brink as Barclays Ends Talks
Unable to find a savior, the troubled investment bank Lehman Brothers appeared headed toward liquidation on Sunday, in what would be one of the biggest failures in Wall Street history.

The fate of Lehman hung in the balance as Federal Reserve officials and the leaders of major financial institutions continued to gather in emergency meetings on Sunday trying to complete a plan to rescue the stricken bank.

But Barclays, considered the leading contender to buy all or part of Lehman, said Sunday that it could not reach a deal without financial support from the federal government or other banks, making a liquidation more likely.

The leading proposal had been to divide Lehman into two entities, a good bank and a bad bank. Under that scenario, Barclays would have bought the parts of Lehman that have been performing well, while a group of 10 to 15 Wall Street companies would agree to absorb losses from the banks troubled assets, according to two people briefed on the proposal. Taxpayer money would not be included in such a deal, they said.

But that plan fell apart on Sunday, making it likely that Lehman would be forced to liquidate.

http://www.nytimes.com/2008/09/15/business/15lehman.htm...

From Roubini:
If Lehman does not find a buyer over the weekend and the counterparties of Lehman withdraw their credit lines on Monday (as they all will in the absence of a deal) you will have not only a collapse of Lehman but also the beginning of a run on the other independent broker dealers (Merrill Lynch first but also in sequence Goldman Sachs and Morgan Stanley and possibly even those broker dealers that are part of a larger commercial bank, I.e. JP Morgan and Citigroup). Then this run would lead to a massive systemic meltdown of the financial system. That is the reason why the Fed has convened in emergency meetings the heads of all major Wall Street firms on Friday and again today to convince them not to pull the plug on Lehman and maintain their exposure to this distressed broker dealer.
http://angrybear.blogspot.com/2008/09/roubini-and-bail-...


So... is that it? :scared:
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