Although Wall Street is not New York's biggest employer, it is the city's economic anchor. Each financial-sector worker is believed to create as many as four other New York jobs, due to their high salaries.
Sounds like the state of New York better rethink how it diversifies its "job portfolio." Just like it's a bad idea to build an economy around bad debts, it's a bad idea to build a tax revenue stream and service job market around a relatively small group of wealthy and super-wealthy finance workers.
i assume Bill Gross and Pimco arn´t bragging about this.....
via FT Alphaville
Pimcos Bill Gross may have been lucky ($1.7bn lucky) when it comes to Fannie and Freddie. Will he be so lucky with his Lehman bonds?
CreditSights is saying holders of senior unsecured debt may get 60 - 80 cents to the dollar.
Societe Generales Ciaran OHagan sees it thusly:
Bond by bond, we can go thru LEH and see who holds what. See [below] who owns LEHMAN BROS HLDG LEH Float 11/09 using the PHDC1 function on Bloomberg. There are other tools giving yet more holdings (Mutuals, insurance etc are required to declare holdings, but may not be up to date).
Some 150bn+ outstanding of LEH bonds are owned by somebody, so the market is going to lose 93bn, assuming e.g. 40% recovery.
These losses look set to be widespread, hutting the public thru their mutual and pension funds, as the image attached illustrates. Clearly a disaster for public confidence, and it is early days yet.
The counterparty risk should be minimized (in theory communism works) by the netting that was put in place last night and the BoA purchase of Merrill. Now that the obvious 'who's next' target is off the table, the market might take a week or two to try and sort things out. Who knows though.
"Trades are contingent on a bankruptcy filing at or before 11:59 p.m. New York time, Sunday, Sept. 14, 2008," the ISDA said. "If there is no filing, the trades cease to exist."
It was the Bernanke Doctrine (think Bush doctrine, Sarah). Preemptive merger prior to short waveers taking down the next one.
Hey, that's pretty good--The Bernanke Doctrine: It is within my power to direct the merger of any entity or entities that, in the absence of said merger, would threaten the stability of the financial system.
BTW--you geniuses are forgetting about WaMu. Maybe next Friday? Or does the FDIC have the assets? Bove says it'll cost 40B plus.
The kid says, uh oh! Parent says, where you going? Kid says I got a lot of googling to do. Go back to sleep. I'll have some options for you at breakfast.
Looks like another exceptionally rough day for the t-bond bears.
I wonder if we can pump some of that $70 billion dollars into the market this morning and panic the shorts into sending the DOW in to positive territory.
Bloomberg has a story titled "AIG Falls After Failing to Give Plan to Save Rating," so I think its opportunity to give a plan this morning has come and gone.
And so the cheerleaders have started calling this 'the bottom'.
Shoved off the headlines now are how this (Lehman, Merrill, AIG, WaMu) does nothing to re-animate the ability of the expired 'consumer shopping' engine which is central to the US economy & GDP. Consumers remain mired in excessive HH debt amidst rising under-employment & unemployment.
It does not positively impact the 'housing correction' that Paulson is determined to stop.
So the DJIA & S&P may not fall proportionately to the size of the crisis that remains in the deflating asset prices (housing inclluded)and credit contraction crisis, & a recession longing to achieve a Roubini-esque 'L'-shape.
US remains in the 3rd earning of a long game.
NYSE Circuit Breakers
In response to the market breaks in October 1987 and October 1989 the New York Stock Exchange instituted circuit breakers to reduce volatility and promote investor confidence. By implementing a pause in trading, investors are given time to assimilate incoming information and the ability to make informed choices during periods of high market volatility.
Rule 80B
Effective April 15, 1998 the SEC approved amendments to Rule 80B (Trading Halts Due to Extraordinary Market Volatility) which revised the halt provisions and the circuit-breaker levels. The trigger levels for a market-wide trading halt were set at 10%, 20% and 30% of the DJIA, calculated at the beginning of each calendar quarter, using the average closing value of the DJIA for the prior month, thereby establishing specific point values for the quarter. Each trigger value is rounded to the nearest 50 points.
The halt for a 10% decline would be one hour if it occurred before 2 p.m., and for 30 minutes if it occurred between 2 and 2:30, but would not halt trading at all after 2:30. The halt for a 20% decline would be two hours if it occurred before 1 p.m., and between 1 p.m. and 2 p.m. for one hour, and close the market for the rest of the day after 2 p.m. If the market declined by 30%, at any time, trading would be halted for the remainder of the day.
Under the previous Rule 80B trigger points (in effect since October 19, 1988) for a market-wide trading halt, a decline of 350 points in the DJIA would halt trading for 30 minutes and a drop of 550 points one hour. These trigger points were hit only once on October 27, 1997, when the DJIA was down 350 at 2:35 p.m. and 550 at 3:30, shutting the market for the remainder of the day.
The soundness of the American financial is based on much the same level of confident superiority which leads to many Americans simply dismissing peak oil.
Interestingly, reality cares nothing about confident superiority.
But then, anyone predicting the events of this weekend one year ago would have been confidently dismissed.
interestingly, Charlie Gasparino and John Corzine seem to get it.
the essential problem here is that we STILL are not seeing the firms delever. They continue to resort to their financial switcheroo balance sheet games.
it reminds me of a small child when they need to get a shot. They plead and cry and promise that they'll do it NEXT time. and some parents agree. And then the next time the child screams and cries and asks to do it NEXT time.
Same thing here. we keep buying time for the firms to delever, but most seem unwilling/unable to do it in a meaningful way.
HORRIBLE STAT ALERT: they threw out a number last night that said that Lehman delevered from 33x all the way down to 27x. WTF??? that's it? They had 6 months to come up with a plan.
to me it means either that they still have their head in the sand about the problem, or they are unable to do anything about it.
nah.... the excitement was last night. It's like a hurricane... everybody stays up to watch it blow through, but the aftermath always gets lower ratings.
That said, I don't think my fingers, my eyes, or my job can take another 1000 person day!
LEH was allowed to fail because there's no way to justify use of US taxpayer money to subsidize a major UK bank. MER was BAC's target from the beginning, so there was never a viable domestic takeout option for LEH. AIG is the definition of too big to fail, so look for the feds to drop the pretext of suddenly discovering moral hazard and come to the rescue. You have to think WM is dealt with in some form by the end of the week as well. I covered all of my the world is coming to an end trades this morning.
"Now I may be blind but I've read The Federal Reserve Act multiple times and nowhere do I see where equities can be taken to the window (or anywhere else for that matter) for Fed Credit. . .
"What's worse, this effectively makes The Fed a margin lender on the equity markets!
"Note carefully folks--this effectively makes The Fed LONG (that is, a "buyer") of STOCKS. What's even better is that they don't eat their own losses if there are any - they're yours! That's because The Federal Reserve Act says that the profits (or losses) from The Fed flow through to the Treasury (after operating expenses) which means that now, suddenly The Federal Government is potentially directly exposed to losses in the stock market!"
"Okay, bids out. What percentage loss on DJIA today?"
2% - there will be a "recovery" rally around lunch as everyone who knows what's going on falls asleep from sleep deprivation and the sheeple step in to take advantage of "buying opportunities".
As I understand it, AIG is not a banking institution, nor is it in any sense regulated by or subject to oversight by the Federal Reserve or the US Treasury.
If they require a bailout of some kind, they'll need to approach the Congress in much the same fashion as Chrysler did.
Of course, this may not matter given the current inflation of the Fed's purview. Their 'temporary' suspension of a part of the Federal Reserve Act this weekend says a great deal.
Yearning to Learn writes:
I want temporary suspension of my limitations as well.
Come on by my drive through kitchen window, snag a cocktail napkin and write your personal information down and we'll get an account started. We call it Volker's Bank, a Nevada LLC.
We promise to give you accurate statements on demand. If we ever make a mistake, we'll buy you a cup of coffee.
We're always open. Just put your deposits on the table with a note and we'll take real good care of them.
this mess isn't going to go away with 27x leverage
No kidding! They invested in derivatives and CDOs more volatile than equities. Not all, of course, much was into tamer stuff. All the same this matches or surpasses the leverage of the stock market investors in 1929 now that the real volatilities are emerging.
As AIG goes,so goes the Dow. The rating agencys have swung from overly optimistic to overly pessimistic. If AIG is downgraded, then hedgies will fold their cards-once that happens the whole system collapses. No trust, no equity, no stock market.
AIG has subsidiaries that operate in the financial markets just like an investment bank. They have collateral acceptable to the Fed, so it's not much of a stretch to give them access to the Fed window. This wouldn't be the same as a bailout of Chrysler.
Let's say I have a very different understanding of AIG's business function, and that I'm not likely to confuse the AIG conglomerate with a banking institution.
Years ago I worked for a company in Houston Texas that was acquired by AIG. A lot of decent people worked there. They're having a tough time of it, between Ike and this. I'm sure an awful lot of retirement savings have gone down the drain, and they're having to boil their water before they drink it, to boot.
Maybe Mayor Bloomberg should declare a daylight hours curfew on Manhattan south of Central Park.
CR gets a hat tip for work done last night. I'm operating on coffee this morning, without having to make any decisions, all in, all short. I see a nap in my future.
«this may not matter given the current inflation of the Fed's purview. Their 'temporary' suspension of a part of the Federal Reserve Act this weekend says a great deal.»
Well, soon we'll read that because of the need to protect America from financial terrorists, the SEC can have people shorting the stockmarket taken off their offices and flown to Guantanamo or some friendly country.
Thanks to the guy who posted the Karl Denninger quote:
«What's worse, this effectively makes The Fed a margin lender on the equity markets! suddenly The Federal Government is potentially directly exposed to losses in the stock market!"»
We can easily imagine various market participants using their Lehman shareholdings as collateral for Fed lending. No, I am not joking.
This whole mess is due to a colossal credit explosion starting in 1995; The Big Picture guy posted this extremely revealing graph of stocks purchases on margin over time:
and this guy (a gold bug of all things, but even crazy people are sometimes right) thinks it was all caused by a rule change that effectively nullified the reserve requirements:
http://www.signallake.com/innovation/FedReserve1995.pdf
«The key event that happened around 1995 is that the fractional reserve ratio was not only lowered, it was effectively eliminated entirely. You read that right. The net result of changes during that period is that banks are not required to back assets which largely correspond to M3 or "broad money'' with cash reserves. As a consequence, banks can effectively create money without limitation. I know that sounds hard to believe, but let's look at the facts.»
"My parents are with AIG!"
"Your parents are criminals."
parent does, but not its subsidiaries? what are the subsidiaries stock tickers?
Well, CR you were right about the lack of sleep!
On Sept 17, 1998, LTCM phoned NY Fed President McDonough.
Were 10-year swaps written to bailout LTCM behind this weeks major final collapse? Lehman was a major investor in LTCM.
Conspiracy theorists want to know.
BOOM
Although Wall Street is not New York's biggest employer, it is the city's economic anchor. Each financial-sector worker is believed to create as many as four other New York jobs, due to their high salaries.
Sounds like the state of New York better rethink how it diversifies its "job portfolio." Just like it's a bad idea to build an economy around bad debts, it's a bad idea to build a tax revenue stream and service job market around a relatively small group of wealthy and super-wealthy finance workers.
I believe the subsidiaries do not have stock tickers because they are not publicly traded. (They are wholly- or majority- owned by the parent.)
The subsidiaries are assets of the parent and will presumably be sold off to satisfy debts and/or be seized by creditors.
Or just left alone while the company "restructures" itself back to "profitability".
Depends on what the bankruptcy court decides to do...
Almost 10 years to the day from the NY Fed backdoor bailout of LTCM.
Coincidence, or conspiracy?
Lehman = old news!
Countdown to AIG implosion... 10... 9...
And where is that Lehman counterparties list?
Moin from Germany,
i assume Bill Gross and Pimco arn´t bragging about this.....
via FT Alphaville
Pimcos Bill Gross may have been lucky ($1.7bn lucky) when it comes to Fannie and Freddie. Will he be so lucky with his Lehman bonds?
CreditSights is saying holders of senior unsecured debt may get 60 - 80 cents to the dollar.
Societe Generales Ciaran OHagan sees it thusly:
Bond by bond, we can go thru LEH and see who holds what. See [below] who owns LEHMAN BROS HLDG LEH Float 11/09 using the PHDC1 function on Bloomberg. There are other tools giving yet more holdings (Mutuals, insurance etc are required to declare holdings, but may not be up to date).
Some 150bn+ outstanding of LEH bonds are owned by somebody, so the market is going to lose 93bn, assuming e.g. 40% recovery.
These losses look set to be widespread, hutting the public thru their mutual and pension funds, as the image attached illustrates. Clearly a disaster for public confidence, and it is early days yet.
$613 billion is a pretty big number.
I thought AIG was announcing their restructuring this morning. I expect a stunning write down ... and much more.
Best to all.
So... anyone out there hiring?
The counterparty risk should be minimized (in theory communism works) by the netting that was put in place last night and the BoA purchase of Merrill. Now that the obvious 'who's next' target is off the table, the market might take a week or two to try and sort things out. Who knows though.
Mark to market begins. Theories on how all the holders of this garbage use creative accounting to CYA?????
Comrades,
Wow, that was some head fake. We were whatching LEH, when it MER that got the save.
This is just rather huge.
Nostrovia,
daveNYC --
I do not think so; the netting session is null and void, I believe.
Bloomberg article
"Trades are contingent on a bankruptcy filing at or before 11:59 p.m. New York time, Sunday, Sept. 14, 2008," the ISDA said. "If there is no filing, the trades cease to exist."
$631 billion is mind boggling..
I'm taking the morning off to try and do some unwinding of my own today...
Should the markets open with so much news that is insider-only information?
AIG is off about 50% in premarket trading. This is going to be wild.
Best Wishes.
Hey America's Mayor Rudi, it looks like a whole new crop of Squeegemen will be working in New York City soon.
"...in theory communism works..."
No... it's all that vodka that just makes it look like it works.
CR, it is a first to hear you talk about things being 'wild' lol
CNBC guest just used the phrase "buying opportunity".
Is there a "CNBC drinking game"?
Comrade ac,
In teory everything works. Because in theory, we get to set the parameters.
Reality is a different thing.
Nostrovia,
It was the Bernanke Doctrine (think Bush doctrine, Sarah). Preemptive merger prior to short waveers taking down the next one.
Hey, that's pretty good--The Bernanke Doctrine: It is within my power to direct the merger of any entity or entities that, in the absence of said merger, would threaten the stability of the financial system.
BTW--you geniuses are forgetting about WaMu. Maybe next Friday? Or does the FDIC have the assets? Bove says it'll cost 40B plus.
Got my lead underwear on, lead umbrella up, and Rick Santelli on the boob tube....
Priceless!
What happens to the kid in the AIG commerical that cant sleep and then his parents say "we have AIG" and he goes back to bed...
Anyone listening to the BAC/MER call?
I'm trying to figure out why MER is diving relative to BAC.
Volker the Viking, No one is forgetting about WaMu - we just have a few other companies to watch today!
Best Wishes.
What happens to the kid in the AIG commerical that cant sleep and then his parents say "we have AIG" and he goes back to bed...
Screaming nightmares, wets the bed, files for emancipation on grounds of child abuse in the morning.
The kid says, uh oh! Parent says, where you going? Kid says I got a lot of googling to do. Go back to sleep. I'll have some options for you at breakfast.
Looks like another exceptionally rough day for the t-bond bears.
I wonder if we can pump some of that $70 billion dollars into the market this morning and panic the shorts into sending the DOW in to positive territory.
CFC gone, Bear gone, LEH gone, MER gone, WAMU and AIG teetering, Fan/Fred bailed out, but the house of cards is still standing.
At some point there will be a straw that breaks the camel's back. Any bets on who/what it'll be?
anyone is gonna say it?
At some point there will be a straw that breaks the camel's back. Any bets on who/what it'll be?
Uhhh... Peak Oil?
FLL Renter,
My bet is Wachovia will be the straw.
ok, I will say it.
Bloomberg has a story titled "AIG Falls After Failing to Give Plan to Save Rating," so I think its opportunity to give a plan this morning has come and gone.
BoA combined firm will break even in 2010... so i guess that means they skirted the coming defaults of option arms, alt-a and other loans.
Kick it down the line. Our kids are gonna hate us.
US bank has now run about 20 commericals on CNBC...maybe they are in trouble.
Don't those ad monkeys at US Banks know that "Blue Skies" is the seminal Great Depression anthem??
Here I am sitting in Australia. Late night coming up as I go market watching again.
I won't lie - I feel a sort of excitement about this trading day. Maybe I belong to Slytherin house?
Just like AIG. Arrogant. They are just going to give everyone the big middle finger.
And so the cheerleaders have started calling this 'the bottom'.
Shoved off the headlines now are how this (Lehman, Merrill, AIG, WaMu) does nothing to re-animate the ability of the expired 'consumer shopping' engine which is central to the US economy & GDP. Consumers remain mired in excessive HH debt amidst rising under-employment & unemployment.
It does not positively impact the 'housing correction' that Paulson is determined to stop.
So the DJIA & S&P may not fall proportionately to the size of the crisis that remains in the deflating asset prices (housing inclluded)and credit contraction crisis, & a recession longing to achieve a Roubini-esque 'L'-shape.
US remains in the 3rd earning of a long game.
I second the Wachovia pick. As the California housing market goes, so goes Wachovia. I don't see any way they survive intact.
karelian writes:
Don't those ad monkeys at US Banks know that "Blue Skies" is the seminal Great Depression anthem??
YouTube - Pink Floyd - Goodbye Blue Sky
hat tip to R. Newman
Human kindess is overflowing
And I think it's going to rain pianos today....
Um, my real-time screen is showing 13-week T-bill yielding 0.74%.
Can anybody confirm/deny?
The Ted Spread
is now at 2.01, up 0.66 on the day.
For what ? Alcohol and other mind altering substances .
Nemo writes:
CNBC guest just used the phrase "buying opportunity".
Is there a "CNBC drinking game"?
Nemo | Homepage | 09.15.08 - 8:24 am | #
European banks and insurers taking a serious pounding:
UBS -12,41%
SOCIETE GENERALE -9,24%
RBS -10,54%
HSBC Hldg -3,17%
DEUTSCHE BANK -7,24%
DEUTSCHE POSTBANK -6,23%
CREDIT SUISSE -6,65%
CNP ASSURANCES -3,40%
BNP PARIBAS -8,35%
BARCLAYS -12,13%
BANCO SANTANDER -3,79%
AXA -10,40%
CREDIT AGRICOLE -10,91%
NATIXIS -11,17%
FORTIS -12,32%
DEXIA -8,63%
KBC -4,97%
UBS may not make it at this rate.
For the financial world, today is like 9-11. There will be shocked people watching the news all day.
URGENT MESSAGE
Yearning to Learn is STILL a willing counterparty to Lehman across all businesses.
Is this the day Soc Gen predicted a week ago or so??
Comrades,
Bloom TV BoA down 12+%?!
Whoa nelly.
Nostrovia,
Good morning all. I posted this in the night owl thread. NYSE Circuit Breakers Rules:
http://www.nyse.com/press/circuit_breakers.html
NYSE Circuit Breakers
In response to the market breaks in October 1987 and October 1989 the New York Stock Exchange instituted circuit breakers to reduce volatility and promote investor confidence. By implementing a pause in trading, investors are given time to assimilate incoming information and the ability to make informed choices during periods of high market volatility.
Rule 80B
Effective April 15, 1998 the SEC approved amendments to Rule 80B (Trading Halts Due to Extraordinary Market Volatility) which revised the halt provisions and the circuit-breaker levels. The trigger levels for a market-wide trading halt were set at 10%, 20% and 30% of the DJIA, calculated at the beginning of each calendar quarter, using the average closing value of the DJIA for the prior month, thereby establishing specific point values for the quarter. Each trigger value is rounded to the nearest 50 points.
The halt for a 10% decline would be one hour if it occurred before 2 p.m., and for 30 minutes if it occurred between 2 and 2:30, but would not halt trading at all after 2:30. The halt for a 20% decline would be two hours if it occurred before 1 p.m., and between 1 p.m. and 2 p.m. for one hour, and close the market for the rest of the day after 2 p.m. If the market declined by 30%, at any time, trading would be halted for the remainder of the day.
Under the previous Rule 80B trigger points (in effect since October 19, 1988) for a market-wide trading halt, a decline of 350 points in the DJIA would halt trading for 30 minutes and a drop of 550 points one hour. These trigger points were hit only once on October 27, 1997, when the DJIA was down 350 at 2:35 p.m. and 550 at 3:30, shutting the market for the remainder of the day.
13-week T-Bill
Rate cut soon. Very soon. I wonder if they even wait for tomorrow's meeting...
I think BAC goes to the low 20's very soo
GS takes over LEH commodities specialist unit, the shadow moves closer.
Maybe they cut at 6:29 pacific...just before they give AIG $50 billion..dont be surprised if that happens
Hey America's Mayor Rudi, it looks like a whole new crop of Squeegemen will be working in New York City soon.
Yeah, but it's perrier on the windshield.
Welcome back Misean.
The soundness of the American financial is based on much the same level of confident superiority which leads to many Americans simply dismissing peak oil.
Interestingly, reality cares nothing about confident superiority.
But then, anyone predicting the events of this weekend one year ago would have been confidently dismissed.
going to hit 1000 visitors today?
interestingly, Charlie Gasparino and John Corzine seem to get it.
the essential problem here is that we STILL are not seeing the firms delever. They continue to resort to their financial switcheroo balance sheet games.
it reminds me of a small child when they need to get a shot. They plead and cry and promise that they'll do it NEXT time. and some parents agree. And then the next time the child screams and cries and asks to do it NEXT time.
Same thing here. we keep buying time for the firms to delever, but most seem unwilling/unable to do it in a meaningful way.
HORRIBLE STAT ALERT: they threw out a number last night that said that Lehman delevered from 33x all the way down to 27x. WTF??? that's it? They had 6 months to come up with a plan.
to me it means either that they still have their head in the sand about the problem, or they are unable to do anything about it.
Okay, bids out. What percentage loss on DJIA today?
So Long and Thanks for all the fish...
YouTube - So Long and Thanks for all the Fish
I'm not saying, but there may not be a loss at all. And fairly confident that no pause will be needed.
I want some, whatever it is they're feeding them.
The local fishwrapper has not one word about Lehman, B of A or Merrill.
YTL, 33x to 27x in 6 months is a very big delever. More than 3% of assets per month sold into a declining market by a very big player.
going to hit 1000 visitors today?
nah.... the excitement was last night. It's like a hurricane... everybody stays up to watch it blow through, but the aftermath always gets lower ratings.
That said, I don't think my fingers, my eyes, or my job can take another 1000 person day!
One Salient Oversight writes:
Okay, bids out. What percentage loss on DJIA today?
Exhaling deeply... 5% loss. My armies will be mobilising for the final battle.
Okay, bids out. What percentage loss on DJIA today?
The Fed cuts a half point before the opening bell and the DJIA ends up 75 points on the day
YTL, 33x to 27x in 6 months is a very big delever
that's unfortunate. going back to my last post, this means they are unable to do anything.
this mess isn't going to go away with 27x leverage. I've heard 4-10x leverage being the "magic stability number" (made up phrase)
El Presidente Busho is going to address the public about the financial markets at 11:10am.
I'm gonna go buy some more canned food now...
AIG down 60% - wow
I said a few days ago this was one to watch. It truely is a cotter pin in the financials.
But heh it is an insurer, may they rot in hell and take a few of their kind w/ them.
A 50 basis point cut would transfer the panic to the forex markets.
LEH was allowed to fail because there's no way to justify use of US taxpayer money to subsidize a major UK bank. MER was BAC's target from the beginning, so there was never a viable domestic takeout option for LEH. AIG is the definition of too big to fail, so look for the feds to drop the pretext of suddenly discovering moral hazard and come to the rescue. You have to think WM is dealt with in some form by the end of the week as well. I covered all of my the world is coming to an end trades this morning.
Karl Denninger is not amused:
"Now I may be blind but I've read The Federal Reserve Act multiple times and nowhere do I see where equities can be taken to the window (or anywhere else for that matter) for Fed Credit. . .
"What's worse, this effectively makes The Fed a margin lender on the equity markets!
"Note carefully folks--this effectively makes The Fed LONG (that is, a "buyer") of STOCKS. What's even better is that they don't eat their own losses if there are any - they're yours! That's because The Federal Reserve Act says that the profits (or losses) from The Fed flow through to the Treasury (after operating expenses) which means that now, suddenly The Federal Government is potentially directly exposed to losses in the stock market!"
"El Presidente Busho"
The chimp has utterly no clue and everybody in the world knows it.
"El Presidente Busho"
The chimp has utterly no clue and everybody in the world knows it.
You shouldn't insult chimps like that.
El Cliffo
Informative post, thanks.
Who is Karl Denninger?
I say, congrats, Hank, for sticking by your guns and not explicitly saving LEH.
Yes, opening the Fed window broadly is a back-door attempt at a save.
But, you did not put the taxpayers on the line directly.
Thank you.
Oh, you may want to help the Bush boys at LEH polish up their resumes.
"Okay, bids out. What percentage loss on DJIA today?"
I'm say'in 3-4%.
Geez, I can't open the Bloomberg URL. Methinks too many people are trying to access it.
"Okay, bids out. What percentage loss on DJIA today?"
2% - there will be a "recovery" rally around lunch as everyone who knows what's going on falls asleep from sleep deprivation and the sheeple step in to take advantage of "buying opportunities".
Lots of big liquidity measures going on today.
If only liquidity were the problem!
Turbo,
As I understand it, AIG is not a banking institution, nor is it in any sense regulated by or subject to oversight by the Federal Reserve or the US Treasury.
If they require a bailout of some kind, they'll need to approach the Congress in much the same fashion as Chrysler did.
Of course, this may not matter given the current inflation of the Fed's purview. Their 'temporary' suspension of a part of the Federal Reserve Act this weekend says a great deal.
I want temporary suspension of my limitations as well.
it is a crisis after all. and I am a willing counterparty to Lehman.
Yearning to Learn writes:
I want temporary suspension of my limitations as well.
Come on by my drive through kitchen window, snag a cocktail napkin and write your personal information down and we'll get an account started. We call it Volker's Bank, a Nevada LLC.
We promise to give you accurate statements on demand. If we ever make a mistake, we'll buy you a cup of coffee.
We're always open. Just put your deposits on the table with a note and we'll take real good care of them.
If AIG can go to the Fed, can I?
"Hey Ben, why dontcha get in your 'copter and drop some monetary stimulus my way?"
Let me put that a little more bluntly.
A Senate worthy of its antecedents would be in session now. And the Fed would be brought to sharply to heel.
This is a second offense.
5% if the glods are merciful.
No... it's all that vodka that just makes it look like it works.
Actually it's a Simpsons quote. Ah well.
this mess isn't going to go away with 27x leverage
No kidding! They invested in derivatives and CDOs more volatile than equities. Not all, of course, much was into tamer stuff. All the same this matches or surpasses the leverage of the stock market investors in 1929 now that the real volatilities are emerging.
Greenspin was predicting a horrible economy for the next few years. Does anybody get blamed for anything, anymore.
Hey, Alan,You're The Man!
What about UBS? Is it going down? What does that mean for my daughters college fund?
As AIG goes,so goes the Dow. The rating agencys have swung from overly optimistic to overly pessimistic. If AIG is downgraded, then hedgies will fold their cards-once that happens the whole system collapses. No trust, no equity, no stock market.
Close? 3% or 10%.
Re Mer + BAC,
deal was for 0.8595 shares of BAC for each share of MER.
Current quote
BAC= 28.5
MER= 21.77
0.8595 * 28.5 = 24.49575
Someone thinks this deal is going to fall apart.
AIG has subsidiaries that operate in the financial markets just like an investment bank. They have collateral acceptable to the Fed, so it's not much of a stretch to give them access to the Fed window. This wouldn't be the same as a bailout of Chrysler.
T minus 1 minute
I guess we know , now, who LEH's major counter was/is.....
Not a a coincidence MER got taken out at the same time.
Cioa
MS
LEH trading pre-market at 28-cents (and dropping). Market cap now below $200 mil.
Wilshire 5000 is down 1% in two minutes. 200 more minutes to go.
Today my economic advisor Donald Luskin wrote an article in WaPo explaining that "things today just aren't that bad."
You're "A NATION OF EXAGGERATORS" and you should "Quit Doling Out That Bad-Economy Line"!
So quit yer whining people! Everything's fine.
I'm John McCain and I approve this message.
Quit Doling Out That Bad-Economy Line - washingtonpost.com
CR, you must be exhausted.
Great coverage.
Many thanks.
Seeing Luskin hanging limp from a lamppost might be one of the upcoming highlights of existence.
Let's say I have a very different understanding of AIG's business function, and that I'm not likely to confuse the AIG conglomerate with a banking institution.
The Bloomberg headline displays a rare simplicity and truthfulness
"Lehman Files for Record Bankruptcy, Victim of Meltdown Firm Helped Create "
Years ago I worked for a company in Houston Texas that was acquired by AIG. A lot of decent people worked there. They're having a tough time of it, between Ike and this. I'm sure an awful lot of retirement savings have gone down the drain, and they're having to boil their water before they drink it, to boot.
Maybe Mayor Bloomberg should declare a daylight hours curfew on Manhattan south of Central Park.
CR gets a hat tip for work done last night. I'm operating on coffee this morning, without having to make any decisions, all in, all short. I see a nap in my future.
@Lefty's
If you're all in--better take some of your product home. Some to get you to sleep, and some for when Wall Street sneaks up on you...
Wall Street doesn't sneak up, it comes with a bat, a gun, napalm and big dogs. I have my stops set.
«this may not matter given the current inflation of the Fed's purview. Their 'temporary' suspension of a part of the Federal Reserve Act this weekend says a great deal.»
Well, soon we'll read that because of the need to protect America from financial terrorists, the SEC can have people shorting the stockmarket taken off their offices and flown to Guantanamo or some friendly country.
Thanks to the guy who posted the Karl Denninger quote:
«What's worse, this effectively makes The Fed a margin lender on the equity markets! suddenly The Federal Government is potentially directly exposed to losses in the stock market!"»
We can easily imagine various market participants using their Lehman shareholdings as collateral for Fed lending. No, I am not joking.
This whole mess is due to a colossal credit explosion starting in 1995; The Big Picture guy posted this extremely revealing graph of stocks purchases on margin over time:
http://bigpicture.typepad.com/comments/2007/10/margin-debt-gro.html
and this guy (a gold bug of all things, but even crazy people are sometimes right) thinks it was all caused by a rule change that effectively nullified the reserve requirements:
http://www.signallake.com/innovation/FedReserve1995.pdf
«The key event that happened around 1995 is that the fractional reserve ratio was not only lowered, it was effectively eliminated entirely. You read that right. The net result of changes during that period is that banks are not required to back assets which largely correspond to M3 or "broad money'' with cash reserves. As a consequence, banks can effectively create money without limitation. I know that sounds hard to believe, but let's look at the facts.»
Why is anyone commenting here - important news now on CNN -
'O.J. Simpson arrives for 'bad sequel' robbery trial'
OJ IS IN THE HOUSE -
This isn't real, is it? Or was only someone like Dr. Gonzo able to deal with the rat bastards?
OJ - more powerful than a hurricane, physical or financial.
Or maybe now would be a good time real Palin bikini shots?
I'm not up to this - maybe Lefty's has some kava-kava in stock.