Did someone inside the beltway dislike Lehman Brothers?
At last our elected officials have realized that putting separate band-aids on separate bullet wounds ‘¦ one at a time, could not stop the bleeding. Now that there is discussion of a RTC – Resolution Trust Corporation‘esq – a government owned company that would buy the assets that banks and brokers don’t want, there is hope.
BTW’¦ for all you folks – ordinary taxpayers who think you’re getting screwed, you won’t. Those assets that the government buys will be sold later on to private equity players for a handsome profit, which comes back to the tax payer in the form of lowering the debt., This RTC Corp could likely be funded by hundreds of millions of dollars – i mean a huge sum of money.
But this post isn’t really about what the government is now going to do after major firms like Merrill Lynch merged with Bank of America and Bear Stearns was rescued by JPM. No this post is about how Lehman Brothers – one of the best firms on Wall Street had the ultimate ‘˜bear raid’ put upon them in the form of several creditors pulling their lines of credit forcing the company into bankruptcy. And then’¦ the Government says’¦ sorry – we can’t help YOU.
Then only a week later they help AIG. What gives? Does someone inside the beltway dislike Lehman Brothers? To me what happened to Lehman Brothers stinks!
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Walter Schubert, a third generation member of the New York Stock Exchange is the Founder and CEO of GFN.com: The Gay Financial Network.
Photo credit: stock.xchng.
Walter, I’m with you. These piecemeal “solutions” have no logic behind them. And then the executive branch wants Congress to approve a $700 billion bail out without any form over Congressional oversight? Umm, does anyone else think this is a TERRIBLE idea? Isn’t deregulation what got us into this mess in the first place?
Well maybe! It is unreasonable to expect the government (citizens taxes) to provide a backstop for every wall street business. It probably does seem unfair that Lehman’s got the short stick — but isn’t also true that government heavy handedness put Arthur Andersen under? That was equally capricious — a different story admittedly — but I have a tough time feeling sorry for anyone at Lehman at this point.
I never got invited to any of the earnings celebration parties — but it seems that I will have privilege of paying off the debt.
In response to the earlier comment — it is absolutely true that the “free-market” policies of the Bush reign have gotten us here. Where has the oversight of these markets been? Not much discussion of that right now!
Walter, I work in a Financial Services company and thankfully I have no more hair to pull out… This “panic” has been horrible! And you are right – Lehman was screwed. They were one of the biggest players of Credit Default Swaps and other Alternate Investments, but they were the the counterparties to the ones who are now reaping the ill-gotten rewards. Since the short-selling rules and bailout talk occured DAYS after Lehman filed for bankruptcy, someone should have stepped in to “reverse time” for them and dissolve the Barclay’s vulture-like takeover of the firm.
Walter: New York magazine argued it was a case of poor leadership despite the appearance of government favorites. Here is their comparison of the varied outcomes of Lehman Brothers vs. Merrill Lynch:
Food for thought!
Folks, thanks for your replies, all of which have merit. I’ve been on Wall Street for over 30 years, was on the trading floor of the NYSE during the crash of 1987, and todays crisis is not one that is gong to be solved by a monetary bailout alone. That’s only part of the solution. This is a real crisis of confidence in the system. This legistlation needs to be enacted quickly, and then that money needs to be put to work by an individual of impeccable character. I’d like to dig up FDR and bring him back as president.
Re Lehman… Fuld made some terrible mistakes for sure. His bluff was called. He had a weak hand – but it wasn’t a hand that should have put them out of business. That’s where I have a problem with the way they were treated, and the way the governement stood by and let them go out. The government should have come in the same way they did in the case of Bear Stearns and AIG etc and put some support behind lehman enough for them to have the time to find a buyer or a partner.
I’d like to know who the creditors were that pulled their lines on Lehman, and what there relationship was with the short sellers? If there’s a connection, someones going to jail.