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Aaron747
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Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 3:40 am

Scary times on Wall Street this week. Among the developments when markets in North America and Europe open Monday (Tokyo is closed today):

To be eligible for a bailout, firms must also demonstrate a particular genius for screwing up. Before it went bust, Bear Stearns had a monstrous $33 of debt for every dollar of capital, and hedge funds it owned destroyed hundreds of millions of dollars of clients' cash. It got a bailout. Lehman Brothers, which has taken painful measures to reduce its risk, is perversely less likely to get direct government help. "The worst Lehman can do is destroy the firm," said Barry Ritholtz, CEO of Wall Street research firm FusionIQ and author of the forthcoming Bailout Nation. "Bear Stearns, on the other hand, set up the firm so that if they screwed up, they could threaten the entire financial system." That may explain why Treasury Secretary Paulson has thus far resisted providing federal succor to Lehman.

We will have more on this tomorrow, but that is the unfortunate takeaway, and precisely what Moral Hazard means.


http://www.rgemonitor.com/emergingma...unday_without_a_bailout_how_novel_

BofA has announced an overnight deal to take over Merrill Lynch in a bargain-basement transaction (which doesn't leave us out of the woods yet since BofA's acquired Countrywide liabilities are as-yet unknown):

Bank of America Corp. reached a deal to acquire Merrill Lynch & Co. for about $44 billion, the Wall Street Journal reported, after shares of the third-biggest U.S. securities firm fell by more than 35 percent last week and smaller rival Lehman Brothers Holdings Inc. neared bankruptcy.

Generally analysis indicates this deal is better than a Lehman buyout but the CDS market being the nuthouse it is these days, who knows how this new portfolio looks by this time next year...

http://www.rgemonitor.com/us-monitor...578/merrill_-_bank_of_america_deal

With AIG looking to be rapidly reorganized and Washington Mutual still actively seeking buyers, a lot of changes are still coming before the end of the year. Any of you running numbers or forecasts for your own or other companies - now definitely isn't the time to be playing softball.
If you need someone to blame / throw a rock in the air / you'll hit someone guilty
 
Flighty
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 4:06 am

I was very disappointed with the Bear Stearns pansy pants treatment earlier this summer. We are still witnessing the fallout from the idiotic bail-out of Bear Stearns' creditors.

One thing seems sure; Lehman won't get federal inputs. As well it shouldn't. Sometimes when people can't run a proper business, they must close it... this is one of those times for certain bankers.
 
Derico
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 4:10 am

From what I'm hearing in the latest article reports tonight, the US banking system is near bust now, home prices are not falling anymore they are collapsing, unemployment shot up nearly 1% point in three months, and the car, airline, manufacturing industries are near bankrupt, retail consumer sales are falling of the cliff and stores are closing all over the place.

Is the United States economy imploding ???
My internet was not shut down, the internet has shut me down
 
Mikey711MN
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 4:36 am

Is this the official thread for the Lehman bankruptcy* discussion and the fallout in world markets this week**?

Just checking,
-Mike

* just announced
** maybe not, but the DJIA will open down 3% (ouch!)
I plan on living forever. So far, so good...
 
Flighty
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 4:42 am



Quoting Derico (Reply 2):
Is the United States economy imploding ???

I really doubt it. The media has said the US economy is in terrible shape for about 12 months now, largely due to populist sentiment regarding gas prices.

Ironically, gas prices are high because the world economy is strong, not weak. We are demanding more fuel than ever (we earthlings) because our economy is stronger than ever. This includes Russia, China, Brazil, etc. There is more wealth there (and in India) than ever before.

But gas prices are central to the American psyche. We have dominated world oil markets since the beginning, over 120 years ago. Now that is slipping away.

Despite our negative attitude however (and the housing / mortgage corrections and healing events, which are necessary consequences of past errors), our economy was still growing strongly at a 3.0% pace for Q2 2008, which is far from recession territory.

Very smart people now believe the US is headed for recession a full 12 months after those statements first began. The US economy is a large boat to change course. But so far these pessimists have been stymied by the world's overall robust condition and the US's continuing perch as a high technology, high management talent country.

If you read the news closely, it looks like the US is collapsing. If you take 10 steps back and look at the world, you'll see the US can't collapse. Several of our banks may fail. This is sad for the shareholders. But we are a huge country and the world still wants our products.

My outlook is positive. The rain that is falling is much deserved and will nourish us in the future. It is a big world and we are still good players in many industries from top to bottom. These crises are healthy. They show gravity does work. What goes around _does_ come around. 1+1 _does_ equal 2. Even in securities risk analysis. This isn't bad news; it's something we can build on.
 
N174UA
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 5:13 am



Quoting Flighty (Reply 4):
Ironically, gas prices are high because the world economy is strong, not weak. We are demanding more fuel than ever (we earthlings) because our economy is stronger than ever. This includes Russia, China, Brazil, etc. There is more wealth there (and in India) than ever before.

Oil is back below $100 (as I type this) and will continue south. Our economy started the descent towards a slowdown/recession, and now the rest of the world is following us. We'll hit bottom first, and start back up, and the rest ofthe world will follow. The credit crunch and the crisis that has ensued affects major banking centers worldwide.

Quoting Flighty (Reply 4):
My outlook is positive. The rain that is falling is much deserved and will nourish us in the future. It is a big world and we are still good players in many industries from top to bottom. These crises are healthy. They show gravity does work. What goes around _does_ come around. 1+1 _does_ equal 2. Even in securities risk analysis. This isn't bad news; it's something we can build on.

It's a great lesson to draw from, when we look back on it in a few years....Maybe...although, the Long Term Capital Management (LTCM) fiasco that occurred 10 years ago is very similar to the storylineat Bear Stearns, the big difference being that Bear was acquired, and LTCM collapsed.

I compare it to a major forest fire...bad now, but ultimately healthy in the long run. Big banks took big risks...the concept of risk/reward at hand...and those who are willing to take those risks must either a.) accept the possibility of failure when things go bad or b.) diversify well enough to mitigate those risks.
 
LOT767-300ER
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 5:20 am

Speaking of the devil. Lehman Bros just filed for bankrupcy..and Bank of America is buying Merril Lynch. Amazing really how fast this happened.
 
Elite
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 5:25 am

This came as a pretty big shock to me. I know people working in both banks and to me these are big, stable investment banks . . . the stock market is not going to do well tomorrow on Monday.
 
WunalaYann
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 5:30 am



Quoting Flighty (Reply 4):
My outlook is positive. The rain that is falling is much deserved and will nourish us in the future. It is a big world and we are still good players in many industries from top to bottom. These crises are healthy. They show gravity does work. What goes around _does_ come around. 1+1 _does_ equal 2. Even in securities risk analysis.

I share your view.

Quoting Flighty (Reply 4):
This isn't bad news; it's something we can build on.

And I certainly hope this time we DO learn from our mistakes.
 
baroque
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 5:59 am



Quoting Aaron747 (Thread starter):
Scary times on Wall Street this week.

Nice to know that a.net can support a serious topic - as well!

Quoting Flighty (Reply 1):
I was very disappointed with the Bear Stearns pansy pants treatment earlier this summer. We are still witnessing the fallout from the idiotic bail-out of Bear Stearns' creditors.

Hmmm. Just because the BS rescue does not seem to have solved many problems does not mean that a filing for protection will go any better.

Quoting Derico (Reply 2):
Is the United States economy imploding ???

How about the attributed Chinese statement about the French revolution, too early to tell!

Quoting Flighty (Reply 4):
If you read the news closely, it looks like the US is collapsing. If you take 10 steps back and look at the world, you'll see the US can't collapse. Several of our banks may fail. This is sad for the shareholders. But we are a huge country and the world still wants our products.

There is a great case for that. And presumably all the folk who have sold out of the Aus market big time, taking our dollar down about 18% in about a month take that view. There is another view, which is that the US cannot support its debt - mind you, not too many countries can once you go away from Japan, China, Taiwan and S Korea.

Quoting WunalaYann (Reply 8):
And I certainly hope this time we DO learn from our mistakes.

Well yes, except:
1. That does not provide a solution to the Great Credit Mistake - the GCM? and
2. There are few indications that we will now not proceed to make a large one.

Remember after the 1987 crash, then after half the Aus banks nearly went belly up in the early 90s, our banks would never ever again take on risky loans. Ahem!

You must have your optimists specs on today Wunala, still and all, probably desirable as the realist specs are likely to cause one to reach for the razor.
 
WunalaYann
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 6:12 am



Quoting Baroque (Reply 9):
Remember after the 1987 crash, then after half the Aus banks nearly went belly up in the early 90s, our banks would never ever again take on risky loans. Ahem!

Indeed. But I was under the impression that we had somehow exhausted the amount of "last resort" sophistication in terms of spreading and sharing the risk among market players. In other words, I thought that we could not create any more fancy financial products to bail out risk takers. Considering everyone is impacted by the packaging of small (or not-so-small) bits of subprime loans, I would think that everyone would take extra safety measures from now on.

But as you said:

Quoting Baroque (Reply 9):
You must have your optimists specs on today Wunala, still and all, probably desirable as the realist specs are likely to cause one to reach for the razor.

I remain a realist leaning on the optimistic side of things...

 Smile
 
Derico
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 6:16 am

Sorry maybe I didn't make myself clear, by imploding I mean like a rotting from the inside, as opposed to a meltdown like Russia, Korea, or Argentina had some years back. The latter affects the population severely and immediately... An economic ''implosion'' is far more insidious, quieter, and slower, but drags on and on and on and eventually affects the entire population's living standard ...
My internet was not shut down, the internet has shut me down
 
TUNisia
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 6:35 am



Quoting Derico (Reply 11):
Sorry maybe I didn't make myself clear, by imploding I mean like a rotting from the inside, as opposed to a meltdown like Russia, Korea, or Argentina had some years back. The latter affects the population severely and immediately... An economic ''implosion'' is far more insidious, quieter, and slower, but drags on and on and on and eventually affects the entire population's living standard ...

The problem is that most Americans want to make something from nothing. They want easy money. Not money that was earned with sweat which meant that you had something to show for it at the end of the day.

I feel that if the US embarked on a mission of large scale nationwide public works projects that we'd at least start the ball rolling in the right direction.
Someday the sun will shine down on me in some faraway place - Mahalia Jackson
 
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Aaron747
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 7:11 am

Quoting TUNisia (Reply 12):

I feel that if the US embarked on a mission of large scale nationwide public works projects that we'd at least start the ball rolling in the right direction.

Only if they were necessary and viable projects. The reason the Japanese national debt is so large is a tremendous run-up of infrastructure spending since the late 70s that was twice the amount necessary for a mature economy with a slowing population growth rate. The stated purpose was economic stimulus but now all Japanese know it was to keep construction conglomerates actively donating to the majority party. Trillions and trillions of yen and thousands of kilometers of toll highways to sparsely populated agricultural hamlets later, it's too late.

Good op-ed today from Krugman on why these are scary times indeed, for all the realists out there:

http://www.nytimes.com/2008/09/15/opinion/15krugman.html

[Edited 2008-09-15 00:19:11]
If you need someone to blame / throw a rock in the air / you'll hit someone guilty
 
QANTAS077
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 7:31 am

hows the Bank of America fairing? I heard they're in so-so shape too...

http://www.news.com.au/business/story/0,27753,24346651-31037,00.html

Greenspan thinks that more institutions will fall.
 
TUNisia
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 7:43 am



Quoting Aaron747 (Reply 13):
Only if they were necessary and viable projects.

Have you driven on any US highways lately? Main roads? They are in terrible shape for the most part. My home state of Rhode Island has the majority of its bridges in a state of disrepair.

Amtrak needs more trains and more rails. People want high-speed trains, and light rail.
Someday the sun will shine down on me in some faraway place - Mahalia Jackson
 
bill142
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 9:03 am



Quoting TUNisia (Reply 15):

Have you driven on any US highways lately? Main roads? They are in terrible shape for the most part. My home state of Rhode Island has the majority of its bridges in a state of disrepair.

I guess that's bound to happen when you spend more time and effort policing the world rather than focusing inwards on the issues at hand.
 
MadameConcorde
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 9:17 am



Quoting QANTAS077 (Reply 14):

http://www.news.com.au/business/story/0,27753,24346651-31037,00.html

Greenspan thinks that more institutions will fall.

It looks unavoidable. We will have to follow the opening of the New York Stock Exchange.

I do not think the E.U. is in much better shape. We are heading toward very unsettled times.

Think of the Butterfly effect...
http://en.wikipedia.org/wiki/Chaos_theory
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baroque
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 10:24 am



Quoting WunalaYann (Reply 10):
I remain a realist leaning on the optimistic side of things...



Quoting Aaron747 (Reply 13):
Good op-ed today from Krugman on why these are scary times indeed, for all the realists out there:

http://www.nytimes.com/2008/09/15/op....html

Yikes indeed. And so here we are, with Mr. Paulson apparently feeling that playing Russian roulette with the U.S. financial system was his best option. Yikes.

Quoting QANTAS077 (Reply 14):

http://www.news.com.au/business/story/0,27753,24346651-31037,00.html

Greenspan thinks that more institutions will fall.

I think if I had had a role the size of Greenspan's in getting to wherever we are now I would at the least look a tad embarrassed.

I tried to divine if he had forgotten about The Depression of the 20-30s, or thought this was worse, but not worse than that at the end of the 19th century. Then I decided I did not particularly want to worry about more of Greenspan. Might it not be a pity that Krugman was not been occupying AGs position for however long it was?

Whatever the failure of Lehman means it reversed the fall in the Aus $ so the flight to the USD seems to have stopped rather abruptly but I noted that the Euro, GBP and Yen all rose against the USD more.

Also a bit mixed was that while gold rose, oil was steady or lower. If the great rise in oil was due to a weak dollar you would have expected it to move as much as gold in % terms.

Any offers as to the next institutions to fail?

I look forward to detailed economic analyses by all of the candidates for the US election!
 
ltbewr
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 10:48 am

After the tech stock bust in 2000-2001, a lot of money shifted to real estate based investments. Then you had a volatile mix of greed by borrowers, the leaders of banks and investment companies who bet on riskier and potentially higher return investments like in home mortgages and a decline since 1980 in regulation of the financial services industry. That decline in regulation was in part due to lobbying and bribing/campaign contributions by those financial institutions on pelicans. Now 100,000+ good paying jobs are gone in the collasping financial services industry by the end of the year and greater concentration of that industry by fewer companies.

We need to put back in some re-regulation of financial markets and changes in corporate taxation to discourage excessive risk.
We need to put into jails and strip the cash wealth of leaders of these companies to offset the monies lost by everyone.
We need to get the lobbing industry under better control and regulation, including placing more responsibility and risk on those corporate leaders rather than government bailout programs.
We need to take a look at at curbing the greed and fraud by borrowers, especially by speculators in property and commodities including much higher short-term capital gains rates for excessive rates of short-term returns, flipping properties and the like.
Most of all, Americans may have to face a reality that there are limits and a need to curb greed, consumerism and shipping off good paying jobs overseas.
 
Beaucaire
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 11:45 am

Something is profoundly wrong in the system !
The financial markets going bust and berserk do impact increasingly those who have no dealings with them - brave solid families or individuals that never subscribed any bad loan or who never defaultet on payments.But indirectly thay have to pay the bills as well,since governments will be asked to intervene with tax-money to save un-solid private banks or investment houses.
The fuse does not work - actually there is no fuse in the system !
If I own stock of a rock-sold company who is not at all involved in real-estate or troublesome financial investments- that share-price is directly negatively affected by the rotten Wallstreet-gangs, that nobody evers dares to bust !
The rules have to change drastically and fast- otherwise the current system based exclusively on free market dynamics will collaps permanently.
Please respect animals - don't eat them...
 
CPDC10-30
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 11:57 am

I really hope that this is the end of government bailouts of banks. Everytime the state intervenes, the problem is only diverted and prolonged, but will never go away. We all need to grin and bear a year or two of a bad economy to make up for the unprecedented booms of the past 17 years.

I have lost some money on banks like many others, but I think we all have to realise that the markets need time to cull the dead wood and move on. We can't keep pushing for small short term gains.
 
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Aaron747
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 12:53 pm



Quoting Beaucaire (Reply 20):
The rules have to change drastically and fast- otherwise the current system based exclusively on free market dynamics will collaps permanently.

There are a lot of good regulations already in place - the problem is selective enforcement and successful lobbying. It has been interesting to note over the last few months that SEC oversight of the CDS market has tightened since the big boys started complaining about their game being played against them by little boys in the market. The rules need to apply to everyone, without leaving the titans above the fray, as it were.

The free market itself still works given the chance - the hedge funds and sovereign funds that will be cleaning out the markets over the next couple weeks as AIG and others get served with what they deserve are evidence enough of that. The only negative in the whole thing is every one of these corporate behemoths have thousands of employees who have been, well, just doing their jobs. Now they're down and out.
If you need someone to blame / throw a rock in the air / you'll hit someone guilty
 
oly720man
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 12:56 pm



Quoting Baroque (Reply 18):
Any offers as to the next institutions to fail?

From a thread on Civ Av, AIG the insurance (ex-)giant and owners of ILFC.
wheat and dairy can screw up your brain
 
SQ325
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 1:10 pm

This crisis could change the entire lifestyle in the U.S. spending money you don' t have may be difficult in the future!
We should fear a collapse of the US Economy which would be desaster for the entire world.
 
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Pellegrine
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 1:55 pm

This sh** is ridiculous. I really don't understand these people. Fuld, Paulson, Thain... If Fuld new they'd be filing BK this morning, why did he just start these pathetic efforts to sell parts of LEH to KDB/MUFJ/Barclays/BOA only 2 weeks ago? LEH has assets worth $8-12B easy. Neuberger Berman, the commercial RE hello! The poor losers here are the stockholders (as always), and the poor, poor employees. The writing was on the wall months ago, especially after the BS fiasco, I simply don't believe nothing could be done in the 6 months since BS. Fuld was in denial, and a leader in denial is a ticking time bomb. The good news for the financial system here is that ML has been bought by BOA, but wow, I'm in shock, who would have EVER thought ML would need to sell itself to anyone. This is a soap opera.
oh boy, here we go!!!
 
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fbgdavidson
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 2:01 pm



Quoting Derico (Reply 2):
Is the United States economy imploding ???

A friend of the family was CEO of large European energy company until a couple of years ago and is still very involved in the energy sector. I saw him last month and we were talking about financial world markets, oil prices and the like.

His philosophy is that 'empires' rise and fall no different from thousands of year ago and he believes that with the US losing control on the price of oil (something it is so dependent on) that the US's dominant position in the global economy will fall. In its place the Arabian Gulf states and tiger economies will develop becoming as influential as the US has been for the last hundred years or so. The US and any other economies strongly relient upon it will over time roll back to being second world countries!

It sounded a bit wacky when I heard it but makes perfect sense to me.

Quoting CPDC10-30 (Reply 21):
I really hope that this is the end of government bailouts of banks. Everytime the state intervenes, the problem is only diverted and prolonged, but will never go away. We all need to grin and bear a year or two of a bad economy to make up for the unprecedented booms of the past 17 years.

Indeed. Sometimes the ramifications of shoddy financial practices needs to be dealt with immediately. Let the unhealthy and badly managed institutions die, and let the survival of the fittest.
"My first job was selling doors, door to door, that's a tough job innit" - Bill Bailey
 
QANTAS077
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 2:02 pm

will AIG survive the month? they've shed 50% in the first 30mins of trading!
 
baroque
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 2:10 pm



Quoting Oly720man (Reply 23):

Quoting Baroque (Reply 18):
Any offers as to the next institutions to fail?

From a thread on Civ Av, AIG the insurance (ex-)giant and owners of ILFC.

That is interesting as well as depressing. The forecast here tonight is that some of the recent takeovers involving "Private Equity" could unravel soon.

It was already clear that had Allco been able to swallow Qantas last year, Qantas would have been bled to death to staunch the Allco financial wounds.

Quoting SQ325 (Reply 24):
This crisis could change the entire lifestyle in the U.S. spending money you don' t have may be difficult in the future!
We should fear a collapse of the US Economy which would be disaster for the entire world.

We do, we do! Both copper and aluminium fell dramatically today. So not only the banks now.

Quoting Aaron747 (Reply 22):
The free market itself still works given the chance - the hedge funds and sovereign funds that will be cleaning out the markets over the next couple weeks as AIG and others get served with what they deserve are evidence enough of that.

I suppose you could consider this (that is the past 13 months) as working Aaron!! Then again some might consider it as breaking down.

Perhaps the question should be "are the excesses of the free market we have had for the past 8 years tolerable?"

And perhaps the answer in a year or so might be different from the one given now.

For a transcript of an interesting interview on Lateline

http://www.abc.net.au/lateline/

Not there yet, but in about 6 hours it should be there. One guy who served under the Clinton administration and a SMH financial analyst. Too complex to try to precis, but some discussion of what measures might be needed to "sort matters out".

Listening to them talking about how the financial rescues are being done takes me back to that John Bird and John Fortune video on the unemployed black man in a string vest. It appears the same happy packaging is still going on, only now the "parcels" are being passed to the Reserve Bank and extend down to the bottom of investment grade. Those ratings travesties are going to be the death of the definition of the word "investment".
 
Dougloid
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 2:29 pm



the video's crappy but the soundtrack says it all
If you believe in coincidence, you haven't looked close enough-Joe Leaphorn
 
DfwRevolution
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 2:33 pm



Quoting Derico (Reply 2):
Is the United States economy imploding ???

No  Yeah sure

Quoting SQ325 (Reply 24):
This crisis could change the entire lifestyle in the U.S. spending money you don' t have may be difficult in the future! We should fear a collapse of the US Economy which would be desaster for the entire world.

No, and no. This is certainly the worst financial crisis in the U.S. since the Great Depression, but the fundamentals of the U.S. economy are still (believe it or not) stronger than other major economies in Europe and Asia. The next few quarters/years will not be painless, but the U.S. economy is nowhere close to failure (in what I assume it the most extreme definition of the word).  Yeah sure

Quoting Fbgdavidson (Reply 26):
The US and any other economies strongly relient upon it will over time roll back to being second world countries!

Wow, tell him to keep dreaming.

Quoting Fbgdavidson (Reply 26):
His philosophy is that 'empires' rise and fall no different from thousands of year ago and he believes that with the US losing control on the price of oil (something it is so dependent on) that the US's dominant position in the global economy will fall. In its place the Arabian Gulf states and tiger economies will develop becoming as influential as the US has been for the last hundred years or so.

The U.S. hasn't had control over the price of oil since what, 1950? 1960? Yet the last 40-50 years has seen sustained economic growth and prosperity that is unrivaled in world history. The fundamentals of the United States are still excellent: great infastructure, easy access to both skilled and unskilled labor, pro-business environment, stable democratic tradition, and respectable raw materials/natural resources.

We're entering a recession but it isn't the first, nor the last. To draw an analogy to the hurricane that just whomped by home state, tropical cyclones usually gain strength by first weakening and then forming a new eyewall. I think the same can be said for economic recession. IMO, an occasional recession flushes out the dead weight from an economy and provides the necessary perspective to update regulatory oversight and other policies that may have become obsolete since the last cycle.
I have a three post per topic limit. You're welcome to have the last word.
 
oly720man
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 2:38 pm



Quoting QANTAS077 (Reply 27):
will AIG survive the month? they've shed 50% in the first 30mins of trading!

Looks like they did a dead cat at $5.82 and are now floating around $6.50-$7.

Quoting Baroque (Reply 28):
Perhaps the question should be "are the excesses of the free market we have had for the past 8 years tolerable?"

It seems that the free market only has situations such as this to get its house in order and then forget the lesson and repeat the process every few decades. It's not as if it likes being told what to do.

http://en.wikipedia.org/wiki/Great_Depression_in_the_United_States


Many economists agree with Will Divey's argument that blames the length of the depression (but not its cause) on an unwillingness by the Federal Reserve System to help banks avoid runs on their deposits. The traditional explanation of a combination of high consumer and business debt, ill-regulated markets that permitted malfeasance by banks and investors, growing wealth inequality, and natural disasters such as the Dust Bowl and 1926 Miami Hurricane creating a downward economic spiral of reduced spending and production are also offered as alternative explanations.


Debt, dodgy dealing and natural disasters.... back to square 1?
wheat and dairy can screw up your brain
 
baroque
Posts: 12302
Joined: Thu Apr 27, 2006 2:15 pm

RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 2:53 pm



Quoting Oly720man (Reply 31):
Debt, dodgy dealing and natural disasters.... back to square 1?

"Back to square one" would be better than "go back three spaces" and landing on Mayfair with a hotel - and that might be very close to what it will turn out to be. Except we seem to have been staying in the Mayfair hotel for 8 years and now need to pay the bill???
 
Derico
Posts: 4317
Joined: Mon Dec 20, 1999 9:14 am

RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 2:57 pm



Quoting DfwRevolution (Reply 30):
IMO, an occasional recession flushes out the dead weight from an economy and provides the necessary perspective to update regulatory oversight and other policies that may have become obsolete since the last cycle.

The only thing I would say is that 3 of the 5 American investment banks that were famous worldwide are now gone, they survived even the Depression... that doesn't sound normal to me.

I agree with you on the economic growth of the 50 years, but I really think that the economic growth of the US since the mid 90s till now was quasi-fictitious and based onballooning consumer spending through debt and financial and investment gimmicks of bubble inflating assets (tech, real estate, and commodities), and now there's nothing else to inflate and the soufle is collapsing.
My internet was not shut down, the internet has shut me down
 
Dougloid
Posts: 7248
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 3:13 pm



Quoting Baroque (Reply 32):
"Back to square one" would be better than "go back three spaces" and landing on Mayfair with a hotel - and that might be very close to what it will turn out to be.

These "is this the death spiral of the American project?" threads seem to emerge with depressing regularity here.

Back a couple years ago on this very forum when people were crowing that the rise of the loonie meant that the dollar was forever doomed, one fellow whose name escapes me was chortling that this meant the yanqui dollar was in "a turd filled toilet" from which it presumably never would emerge.

I had to inform him, of course, that when that particular turd filled toilet overflowed, it would be all over his Toronto living room floor as well as everywhere else. I think that recent events prove the proposition-if any part of the world's economy is truly globalized, it is the money business because it can be sent from anywhere to anywhere with the click of a mouse. Money knows no national boundaries, it is no respecter of persons, and it has no loyalty

To paraphrase Vince Lombardi, "Money isn't everything-it's the ONLY thing."

In this respect, the world economy resembles nothing so much as a large urban apartment house that's been converted to condominiums. The residents are nominally unrelated but in reality they're all stuck with each other's bad decisions and the structural defects built into the building, including dodgy wiring and snarky, poorly designed plumbing where the contractors who built it have fled the territory.

And when the upstairs neighbor's turd filled toilet overflows it ends up being everyone's problem whether they like it or not.

That's really the takehome, too, and it is of a one with Omar Khayyam's 'moving finger'.

The Moving Finger writes; and, having writ,
Moves on: nor all your Piety nor Wit
Shall lure it back to cancel half a Line,
Nor all your Tears wash out a Word of it.

Right, wrong and blame are more or less after the fact reactions of people who are involved in a car accident.
If you believe in coincidence, you haven't looked close enough-Joe Leaphorn
 
QANTAS077
Posts: 5196
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 3:18 pm

Quoting Baroque (Reply 28):
For a transcript of an interesting interview on Lateline

just saw that interview...seems the Fed is now issuing bonds in exchange for assets, in other words the govt is keeping these companies alive. fucking crazy...

Quote:
Looks like they did a dead cat at $5.82 and are now floating around $6.50-$7.

they've just dropped below the $5.50 mark...AIG that is.

[Edited 2008-09-15 08:33:10]

[Edited 2008-09-15 08:38:42]
 
Dougloid
Posts: 7248
Joined: Tue Jul 05, 2005 2:44 am

RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 3:46 pm



Quoting QANTAS077 (Reply 35):
just saw that interview...seems the Fed is now issuing bonds in exchange for assets, in other words the govt is keeping these companies alive.

It was a pretty well done piece. I think your interpretation may be a little severe. It's more like what FDIC does, which is provides a backstop for depositors when a financial institution fails, as they do from time to time. The idea is to stop a run on the bank that drives them under-which is what's been going on with the investment houses.

the real question is, what would you or I do differently and how would you or I deal with the consequences. I think that the thinking is that it is far better to try and keep Humpty Dumpty sitting on his wall rather than trying to pick up the pieces.

The question of what the ultimate outcome is, is really unknowable.
If you believe in coincidence, you haven't looked close enough-Joe Leaphorn
 
baroque
Posts: 12302
Joined: Thu Apr 27, 2006 2:15 pm

RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 3:46 pm



Quoting QANTAS077 (Reply 35):
Quoting Baroque (Reply 28):
For a transcript of an interesting interview on Lateline

just saw that interview...seems the Fed is now issuing bonds in exchange for assets, in other words the govt is keeping these companies alive. fucking crazy...

We are getting closer to a transcript:

http://www.abc.net.au/lateline/content/2008/s2365255.htm

Now has a summary.

Ambassador Derek Shearer, who is a professor at Occidental University in Los Angeles and Fairfax columnist Michael West join Tony Jones to discuss the implications of Lehman Brothers declaring bankruptcy.

But the transcript has yet to be posted.

I want to see exactly what he said about the bond exchange. I worked out that those selling the "bits of paper" could convert the Fed's payment to cash, but I was not clear what the Fed was getting. My limited comprehension suggested to me that the return to the Fed might be far more risky than its contributions to the FMs. They guy from Fairfax in the interview seemed to have an excellent grasp not only of what was going on, but what would come next. I hope that his comments appear in the transcript.

Note:
Anyone rejoicing in the demise of any country's currency (even Zimbabwe's) is mad. Observing that any given currency is under or over valued is a different matter but rejoicing in the demise of a currency is plain mad. It can destroy a country and failed countries are even worse news than failed currencies. Here endeth the lesson for today.
 
QANTAS077
Posts: 5196
Joined: Wed Jan 14, 2004 5:08 pm

RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 3:49 pm

Quoting Baroque (Reply 36):

I want to see exactly what he said about the bond exchange. I worked out that those selling the "bits of paper" could convert the Fed's payment to cash, but I was not clear what the Fed was getting.

fed gets assets of "value" and the boys on Wall St get bonds which they convert into cash...AIG is getting the absolute shit kicked out of it as I type this..its now down to $4.77.

just heard that its all over for AIG, can't get the $40 billion to stay afloat.

[Edited 2008-09-15 08:55:52]
 
oly720man
Posts: 5813
Joined: Fri May 21, 2004 7:13 am

RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 4:02 pm



Quoting QANTAS077 (Reply 38):
just heard that its all over for AIG

So when do they suspend? $4ish at the minute up from $3.50.
wheat and dairy can screw up your brain
 
QANTAS077
Posts: 5196
Joined: Wed Jan 14, 2004 5:08 pm

RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 4:06 pm



Quoting Oly720man (Reply 39):
So when do they suspend? $4ish at the minute up from $3.50.

still trying to work out a deal but they've rejected one so far and there is talk that Buffet might make a pitch, but its not looking good for them.
 
Dougloid
Posts: 7248
Joined: Tue Jul 05, 2005 2:44 am

RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 4:16 pm



Quoting QANTAS077 (Reply 40):


Quoting Oly720man (Reply 39):
So when do they suspend? $4ish at the minute up from $3.50.

still trying to work out a deal but they've rejected one so far and there is talk that Buffet might make a pitch, but its not looking good for them.

Interesting stuff. I haven't seen anything show up on google news but usually I am the last to know.

There's a good set of articles over on BBC News that are worth looking over.

http://news.bbc.co.uk/2/hi/business/7523234.stm

Perhaps we should revive the famous old headline in Variety:

Wall Street Lays an Egg
If you believe in coincidence, you haven't looked close enough-Joe Leaphorn
 
QANTAS077
Posts: 5196
Joined: Wed Jan 14, 2004 5:08 pm

RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 4:20 pm



Quoting Dougloid (Reply 41):
Interesting stuff. I haven't seen anything show up on google news but usually I am the last to know.

was probably a little pre-mature of me, but its certainly not raised the $40 billion it needs to stay afloat. its definitely in a rough position.

btw the info I got on the $40 billion was from someone in the Dubai office.
 
baroque
Posts: 12302
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 4:37 pm



Quoting Dougloid (Reply 37):
Quoting QANTAS077 (Reply 35):
just saw that interview...seems the Fed is now issuing bonds in exchange for assets, in other words the govt is keeping these companies alive.

It was a pretty well done piece. I think your interpretation may be a little severe. It's more like what FDIC does, which is provides a backstop for depositors when a financial institution fails, as they do from time to time. The idea is to stop a run on the bank that drives them under-which is what's been going on with the investment houses.

The video they have up at present is not of the interview. Eventually there should be a transcript which is where Shearer and the other person interviewed explain in more detail what is being done.

Ian Verrender has a piece in the SMH about the next shoe to fall.

http://business.smh.com.au/business/...-private-equity-20080915-4h1g.html
From page 2 of that article:
It is the same reason our banks largely ignored the mammoth loans to the private-equity cowboys. And that brings us to another rather frightening scenario for the global financial system. So far all we've seen is the fallout from the collapse of the US property market. We are yet to witness the meltdown from the debt-fuelled US consumer boom and the huge credit-card debts that are attached to that.

But the private-equity boom from 2006 and 2007 is the real time bomb silently ticking away in the mind of every executive of a major bank. In those two years, inexperienced thirtysomethings with inflated egos and overblown salaries scoured the globe buying businesses about which they knew nothing, with borrowed money, at grossly inflated prices.

It was an unprecedented debt binge that drove global stockmarkets in those years, and the fallout has yet to impact on the banking system.

Figures compiled by Thomson Financial show that in the year to June 30 last year, private equity firms spent $US1.06 trillion snapping up businesses.

The idea was to gut them, load them up with debt and sell them into a booming stockmarket in 2009 and 2010 and repay the loans. That's never going to happen now.


If he is right, that could be another problem. Say a half of the trillion is a problem .......????
 
Alessandro
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 4:47 pm

UBS also suffer from the US housing crisis. No one is safe out there.
From New Yorqatar to Califarbia...
 
Dougloid
Posts: 7248
Joined: Tue Jul 05, 2005 2:44 am

RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 5:18 pm



Quoting QANTAS077 (Reply 42):
was probably a little pre-mature of me, but its certainly not raised the $40 billion it needs to stay afloat. its definitely in a rough position.

Rough as a cob as we say on the prairie. It doesn't look good for them. Their share value's taken a huge hit.

Quoting Baroque (Reply 43):
The idea was to gut them, load them up with debt and sell them into a booming stockmarket in 2009 and 2010 and repay the loans. That's never going to happen now.

If he is right, that could be another problem. Say a half of the trillion is a problem .......????

The credit card business is/was another way of creating money where there was none. In small to moderate doses liquidity is good for business but the tendency is to overdo it on the the Heinemann Rule principle that if some is good, five times as much is five times as good.

Don't forget the fact that Bank of America is prospering on the vigorish that they extract from people with credit cards.

After having been through that particular circle of hell, I can tell you that living beyond your means is a fool's game.
If you believe in coincidence, you haven't looked close enough-Joe Leaphorn
 
oly720man
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 6:02 pm

http://www.bloomberg.com/apps/news?p...601087&sid=aSZ0D0Xb6xzM&refer=home

Sept. 15 (Bloomberg) -- American International Group Inc., the largest U.S. insurer by assets, has been given special permission to access $20 billion of capital in its subsidiaries to free up liquidity, New York Governor David Paterson said.

The move ''is not a government bailout,'' Paterson said today at a New York City press conference. The arrangement allows AIG to make a bridge loan to itself, and the New York- based insurer remains ''extraordinarily solvent,'' he said.


Anyone with more financial know how than me explain how this'll work? Or more precicely, why did it have to get to the stage of the rope being around the neck before this (possible) financial escape came about?
wheat and dairy can screw up your brain
 
ME AVN FAN
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 6:17 pm



Quoting Alessandro (Reply 44):
UBS also suffer from the US housing crisis. No one is safe out there.

-
UBS suffered quite extremely, but in the meantime went out of that particular US real estate business, and had its leadership changed and hopefully is through the worst. Other Swiss banks also were hit but not to a comparable extent. The withdrawal of many foreign banks may have made the matter even worse in a way.
-
 
Derico
Posts: 4317
Joined: Mon Dec 20, 1999 9:14 am

RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 6:18 pm

From what I'm hearing the US central bank will accept stocks as collateral for banks to get loans from them.

That is absolutely unbelieavable and desperate, in fact I didn't believe the report until I researched it online.

Any country that did this would be excoriated by free market analysts as taking suicidal actions. Should that backfire, the central bank would be holding the bag for STOCKS from the entire private sector of the country, and most likely owe more than it would have in hard assets... Or what if that government needed cash and had mostly stocks it exchanged to prop up banks?

It would be forced to sell at massive losses on perhaps worthless paper. It would mean hyperinflation Zimwabwe style.
My internet was not shut down, the internet has shut me down
 
ME AVN FAN
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RE: Sunday Passes Without Lehman Bros. Bailout

Mon Sep 15, 2008 6:33 pm



Quoting Derico (Reply 48):
the US central bank will accept stocks as collateral for banks to get loans from them.

That is absolutely unbelieavable and desperate

Sure, but I think the Central bankers see this as a short-term stop-gap solution in order to re-stabilize the banking-sector and certainly hope that they can return these stocks to the banks in question. Otherwise, the USA will have quite a number of partially state owned banks.

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