There is a special CNBC program on Lehman tonight, 8-10 PM New York Time.

>

Holy Shit! Latest

Update:

Merrill Board voting on $29 per share all stock deal, according to WSJ;

NYTimes says says Lehman Bankruptcy filing imminent;

U.S. Stock Futures Tumble on Lehman Bankruptcy (Bloomberg)

Greenspan: Other big U.S. finance firms may fail (Reuters) 

~~~

WSJ now says that For Lehman, Liquidation Seems the Most Likely Scenario (WSJ.com)

Lehman_liquidation_3

First, we have the two major buyers unable to come up with a deal:

Barclays Walks from Lehman Deal; Likelihood for Transaction Narrows  (WSJ)

Bank of America Said to Walk Away From Talks to Buy Lehman  (Bloomberg)

See also Hurricane Fuld Lashes NYC.

And in a surprising twist, BofA not only walked away from Lehman, they walked into the arms of Merrill Lynch: Bank of America, Merrill Lynch In Merger Talks. NYT Dealbook reports a possible $38 Billion deal, at $25-30 (Friday close $17.05).

BofA scorecard: First, they horrifically overpaid for Countrywide. Now they want Merrill. (Some people never learn).  If they just wait a day, they could probably pick up Merrill for significantly less money, based on Lehman’s likely loss. Its an all stock deal, but MER stock may fall more than BofA’s.

On an unrelated note, AIG is planning a Major Restructuring, Sale of Aircraft-Leasing Business.

We are now on bankruptcy watch, with the midnight hour as the key line in the sand. The Wall Street open Monday in the event of a Lehman failure will be wild:

Wall Street Prepares for Potential Lehman Bankruptcy
(Bloomberg)

"The fate of Lehman Brothers Holdings Inc.’s darkened early Sunday
afternoon with Barclays PLC, the sole remaining bidder for the
158-year-old Wall Street firm, telling federal regulators that it is
walking away from a transaction, people familiar with the matter say.

The situation was rapidly evolving, and it’s possible Barclays or
another bidder would emerge to save Lehman before markets opened
Monday. But with the government balking at putting any taxpayer money
at risk for Lehman, the likelihood of a transaction was dimming. That
would leave an orderly liquidation as the most likely scenario, a dramatic outcome for a once-powerful firm."

 

And then there’s this Likelihood for Transaction Narrows  (WSJ)

The fate of Lehman Brothers Holdings Inc.’s darkened early Sunday afternoon after Barclays PLC, the sole remaining bidder for the 158-year-old Wall Street firm, told federal regulators that it is walking away from a transaction, people familiar with the matter say.

With Barclays ending talks and the government balking at putting any taxpayer money at risk for Lehman, the likelihood of a transaction was dimming. That would leave an orderly liquidation as the most likely scenario, a dramatic outcome for a once-powerful firm.

Lastly, we have the swaps and derivatives producing this statement on Lehman, holding a special Sunday session in anticipation of a Lehman bankruptcy filing: 

"ISDA confirms a netting trading session will take place between 2 pm and 4 pm New York time for OTC derivatives. Product classes involved are credit, equity, rates, FX and commodity derivatives. The purpose of this session is to reduce risk associated with a potential Lehman Brothers Holding Inc. bankruptcy filing. Trades are contingent on a bankruptcy filing at or before 11:59 pm New York time, Sunday, September 14, 2008. If there is no filing, the trades cease to exist. These trades are subject to a protocol which is being distributed by ISDA (International Swaps and Derivatives Association). Traders should execute the protocol and return to ISDA.”   (Full statement here)

Tomorrow is going to be very, very interesting day . . .

Category: Bailouts, Corporate Management, Credit

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

126 Responses to “Lehman Brothers Liquidation Likely”

  1. Unsympathetic says:

    The current Wall Street CEO’s approached CFC, BSC, FNM, & FRE as “stand alone” issues and only gave the briefest of laughable jawboning lip-service to knock-on effects.

    These are desperate, greedy, unprincipled people who haven’t earned an ounce of our trust. Screw them all.

    How does a rescue not tank the rescuers after the initial pop?

    2009 is going to make 2008 look like Mary Poppins.

  2. Chief Tomahawk says:

    I’m ready for the rollout of FusionIQ v. 2.0…. could really need the help navigating the seas to come…..

  3. John(2) says:

    Unsympathetic | Sep 14, 2008 4:14:43 PM

    Unfortunately it’s also going to screw a lot of people on Main Street who have mutual funds, IRA’s, 401k’s, not to mention the job losses on the street and downstream. You could be one of them. The day is not yet over.

  4. Michael M says:

    http://online.wsj.com/article/SB122142278543033525.html?mod=googlenews_wsj

    Bank of America, Merrill Lynch In Merger Talks

    By MATTHEW KARNITSCHNIG, SUSANNE CRAIG and DENNIS K. BERMAN
    September 14, 2008 4:08 p.m.

    Bank of America and Merrill Lynch & Co. Inc. are in merger discussions, according to people familiar with the matter.

    The talks come amid a Wall Street scramble to sort out a potential liquidation of Lehman Brothers Holdings Inc.

    Bank of America had considered buying Lehman, but when those talks failed to result in a deal, BofA turned its attention to Merrill, which is considered a better fit for the bank.

    Much remains uncertain and conditions were fluid.
    ———

    Ah, just another…

    Sunday Bloody Sunday

    I cant believe the news today
    Oh, I can’t close my eyes and make it go away
    How long…
    How long must we sing this song?
    How long? how long…

    cause tonight…we can be as one
    Tonight…

  5. John(2) says:

    Merrill gets a lifeboat lined up. Makes sense. After all if LM goes down they would be next. Read Roubini this morning it’s exactly what he predicted, all the big brokerages and i banks would have to find partners.

  6. JustinTheSkeptic says:

    How does the market gestate this one? Is the shit going to hit the fan or the floor? I just don’t know anymore after all the b.s. us shorts have been through. Some way some how this has got to be a positive for the market!!! Fuck you bulls!

  7. brion says:

    “Tomorrow is going to be very, very interesting day…”

    “Bring it on!”
    -G.W. Numbnuts

  8. CNBC Sucks says:

    I will keep my fingers crossed, but thank goodness for just a little bit of restraint from Bazooka Hank. A little facade of a free market is good every now and then.

    Don’t expect any restraint next year when Treasury Secretary Dick Fuld bails everybody else out if economic and legal geniuses McCain and Palin win in November.

  9. Jim Haygood says:

    “Interesting?”

    I guess it depends on how you feel about two freight trains, each carrying a hundred carloads of dynamite, slamming together at 100 mph on a high trestle, and tumbling in a flaming fireball into an LNG plant.

    Oh wait, we’ve got circuit breakers to protect the “market.” No worries!

  10. VennData says:

    So Lehman’s estimate of their balance sheet doesn’t make sense to Barclay’s, B of A, JC Flowers, the Korean Development Bank, etc… but it does to Mr. Fuld. Is he still qualified to be called “The Smart Money?”

  11. VennData says:

    I love the smell of capitalism in the morning.

    I wonder what shade of white Wagoner of GM and Mulally of Ford, Cerberus, Nardelli, Snow et al are right now.

  12. Chief Tomahawk says:

    Not to nit pick, but shouldn’t the CNBC program go until midnight? That is the deadline afterall.

  13. Paul Jones says:

    The negotiations were probably going really well…

    …until Barclay’s asked to see the books!

  14. John(2) says:

    I’ve just spoken to a couple of street people who are wired and while not in full Chicken little mode they are a bit ambivalent about Hank baby. All the efforts to contain the damage of the past year could be thrown away if this goes south big time tomorrow.

  15. Winston Munn says:

    With the PDCF wide open to Primary Dealers, Lehman is still kaput. It only goes to show what those of us in the deflationary camp have been saying for the past year or so – the problem is not liquidity, but solvency.

    Interest rate adjustments cannot solve the problems of insolvency.

  16. BostonJoe says:

    Does anyone care to share educated guesses as to 1) what is the likely fallout for Wall Street tomorrow? and 2) what is the broader picture of damage that may be caused by a Lehman going bankrupt to 401Ks, smaller banks, insurers, etc.? I’m honestly interested and not all that well educated to understand what Monday may look like. Is it time to take advantage of being well-informed enough by reading this blog, and take a trip to the bank tomorrow morning before lines form? Or is that just crazy talk?

  17. pmorrisonfl says:

    I have a recurring nightmare. Picture the scene at the end of Planet of The Apes, where Charlton Heston gallops down a strange beach and comes upon the head of what he eventually recognizes as the Statue of Liberty. “We finally really did it. You maniacs! You blew it up!”.

    Except that in my dream, Lady Liberty is up to her chin in a sea of (hundred thousand?) dollar bills.

  18. JL says:

    I also have a question. Since the Fed appears unlikely to bail out Lehman’s, what are the odds that they will try to calm the market by lowering rates?

  19. km4 says:

    Ha just a little over 2 yrs ( when article was written ) and all the financial malfeasance from Wall St, The Fed, The Treasury and the Bush admin ( and what we get more of with McSame ) and this is closer to being true….

    The case for a global currency
    http://www.iht.com/articles/2006/08/03/opinion/edwade.php
    FRIDAY, AUGUST 4, 2006

    There is a rising tide of opposition around the world to America’s unilateral assertion of its national interests. But few realize that for the United States to become a more responsible country, the world economy needs to move from the current U.S. dollar standard to a global currency.

    U.S. dominance rests not only on military superiority and on the size and productivity of its economy, but also on the fact that most international transactions are denominated in U.S. dollars and more than 60 percent of world foreign exchange reserves are held in U.S.-denominated assets, like U.S. Treasury bills.

    The problem for the rest of the world is that the U.S. dollar standard encourages the United States to be careless in its monetary and fiscal policies.

    STAY TUNED because likely coming and sooner than most thought just 2 yrs ago !

    So the big financial rat houses are banding together to better compete.

  20. Jim Haygood says:

    BostonJoe,

    I certainly wouldn’t spend time standing in line to withdraw cash from a bank. Bank failures aren’t a likely response to a LEH bankruptcy. In fact, the BKX Banking index has held up rather well lately. It’s just a few bad-actor banks that are in trouble. Behemoths such as Bank of America, JPM Morgan/Chase and some others will be preserved at all costs under the “too big to fail” doctrine. I keep some funds (not over $100K) at Chase, and don’t lose any sleep over it.

    The questions on my mind are: (1) whether the Federal Reserve will make an emergency rate cut; and (2) in the event of a stock market crashette, whether government authorities would buy index futures to stop it, or use their power to influence private-sector actors to do so.

  21. John(2) says:

    BostonJoe | Sep 14, 2008 4:55:20 PM
    Providing you have under a 100k in a deposit taking institution you’re FDIC insured so no need to camp out on the pavement tonight. If you have a lot of your 401k/IRA in a money market fund it’s advisable to spread it across a two or more funds. I’ve personally been fairly laid back about this whole mess since the middle of last year and have taken defensive measures but not retreated to a bunker. None of us can say how it’s going to go tomorrow but this has the potential to be a watershed event. A lot of posters for some bizarre reason can’t seem to wait for a meltdown but if it occurs it’s going to inflict huge damage on domestic balance sheets as IRA’s, 401k’s etc go in the tank and hence on the wider US economy. Mr Paulson is playing with fire here because if this does turn into bloodbath tomorrow he’s lost control of the situation and so far despite all the carping from second guessers he’s basically stayed in control.

  22. Groty says:

    Opening early on a Sunday so the banks and B/Ds can net derivitives trades does NOT inspire confidence in the general public. It makes me think they expect chaos if LEH files.

    If LEH does file, I think there’s a tiny chance a “market holiday” is declared and equities will not open for trading. Authorities will use it to buy time to try to arrange solutions for the “too big to fail” dominos (i.e., WM, MER, AIG, etc) that could be further impaired by a LEH bankruptcy.

  23. Jeff M. says:

    So let me get this straight – BoA, which already has its hands full with Countrywide, Lasalle and U.S. Trust, is taking on another failing giant, Merrill, to save the financial system? Why should we expect this to work?

  24. Peter says:

    Why would BofA buy MER for $25-30 a share, that is idiotic. They are going to pay a 50% premium to buy a toxic company? Then again BofA is run by idiots that can’t get their website to transfer money between accounts in different states after ten years.

    Why not wait until next week when MER is trading at $8 to buy them. Does anyone think that MER is any different from LEH?

  25. AGG says:

    And did you hear about the “severance packages” for the the CEOs of Fsnnie and Freddie? Over TEN MILLION DOLLARS EACH. Is this a great country or what?
    Invest in yourself folks. Wall street won’t help you. I would say government won’t help you either but then (with this government) I’d be repeating myself.

  26. jagmohan swain says:

    Wow.What level of screw up they must have gotten themselves into.Where were the risk managers.And I was thinking it’s the individual investors who don’t know how to manage risk.Guess GREED isn’t all that GOOD in this context.Can we have a sequel for Walstreet movie with the above message??

  27. George Nubert says:

    Makes sense. Wonder who else is going to pair up? I had just finished Noureal’s, If Lehman Collapses Expect a Run on All of the Other Broker Dealers and the Collapse of the Shadow Banking System, when the news hit my email. Noureal, who has been spot on, basically indicates that the run on the shadow banks will be sequential with Merrill Lynch being next and that broker dealers and commercial banks better start pairing up.

    It seems like Hank and Timothy finally said boys you better start pairing up because we can’t bail everyone out and the only hope we see for you guys is to pair up. I have this vision of the scene, just like on TV before a tidal wave, plane crash, or any other near death experience hits, people just start pairing up and hugging each other in accordance with their real desires.

    Maybe this is the beginning of the real solution?

  28. BostonJoe says:

    Jim & John,

    Thanks for your thoughts. Just a regular guy watching all this, and feeling a lot of uncertainty. I did not really participate in the “bubble.” Just paid off a house. And have most everything in the bank (under the FDIC limit). And waiting to see what will happen. But from all I’m reading, it sure does seem that some reckoning is pretty close by. I just wondered how bad a reckoning might be? I suppose time will tell. But thanks for the input.

  29. Scott in Chicago says:

    I’ve put this out there before, but again I’d recommend “Shock Doctrine,” by Naomi Klein. The powers that be are gutting the middle class. Convincing the feeble minded to cash out their home equity so that a few could prosper was a greed play. By the way the home equity scams resulted in the biggest loss of African American wealth in history; real and nominal.

    And after you read “Shock Doctrine,” rent the DVD, “Idiocracy,” to give you an idea where we’re headed. My only beef with the film is it has a 500 year devolution time-frame. I’d put it nearer to 50.

    Buy the three Gs, homeys: Guns, Groceries, and Gold. And, yeah, that was mostly hyperbole.

    As for tomorrow: stop, drop and roll!

  30. JL says:

    I still think that the White House will force the fed to assist in a bail out. There is no way Bush wants the stock market to tank while he is in office. I’m expecting a blink.

  31. rational says:

    So Bank of America is planning to pay $25 to $30 a share for Mer, which closed Fri at $17? What kind of a business deal is this when you pay a 60%+ premium for someone who is feared to be in a weak, and getting even weaker, position? Bank of America is being very reckless with its shareholders’ money.

  32. Scott in Chicago says:

    JL…not to be picky, but the stock market already HAS tanked while Bush is in office..except on CNBC ;)

  33. rational says:

    JL:

    I think the Fed has decided to save its firepower for bigger threats down the road, such as what might happen if home prices fall another 10 to 20%. The Fed probably determined, based on the emergency meeting and prior look at Lehman’s books, that Lehman is not too big to fail.

  34. Jeff M. says:

    @Scott in Chicago: I’m half-way through “Shock Doctrine” and have had similar thoughts. Eerie.

    Will real fear finally grip the markets this week?

    Even if the brokers and banks pair up, will this solve the underlying problems in the short and long term? Anyone have an answer? I’m baffled.

  35. John(2) says:

    km4 | Sep 14, 2008 5:05:33 PM

    This is basically true. The US gets away with murder because it’s the reserve currency just as the Brits did when sterling ruled the waves. When it all goes into reverse it’s horrific (think Britain 1945-1975). That said I don’t think the Dollar is going to lose it’s reserve currency status which is a large part of what the F/F bailout was about.

  36. Paul Jones says:

    The most likely scenario is that the Merrill deal is a LIE!

  37. icm63 says:

    IF ( a big IF) Lehman files for bankruptcy, THIS IS A CHANGE IN TREND, as it was thought that ALL BANKS WOULD NOT BE ALLOWED TO FAIL.

    THE FED/TREASURY HAVE FIRED THERE LAST SHOT WITH FNM/FRE. THERE IS NO MONEY LEFT !! GOVT DEBT RATIOS CAN ONLY TAKE SO MUCH !

  38. I don’t care if one just is on loan from Cirque du’ Soleil, there’s only so many pins on can juggle at a time.

    The Fed/Treas, their ownselves, earlier this year, were sounding off about the need for ‘fewer, more tighly regulated’ Institutions.

    Seems that before this is done, our Financial/Banking landscape is going to look like Canada’s–a handful of Colosii astride the Country, from Coast to Coast to Coast.

    The Plantation Economy is coming, slowly, link by link, into View for All.

    and, just to mix metaphors, Allenwood may be an easier stretch than Sing Sing, but they’re both Prisons.

  39. SteveC says:

    Isn’t laissez-faire governence great? I think we all know were this a headed. A collapse of the US dollar, perhaps after a McCain victory. Get your wheelbarrows ready. If you thought Zimbabwe has it bad, wait to see what happens here. A worldwide vote of no-confidence in the US.

  40. also, this: THE FED/TREASURY HAVE FIRED THERE LAST SHOT WITH FNM/FRE. THERE IS NO MONEY LEFT !! GOVT DEBT RATIOS CAN ONLY TAKE SO MUCH !

    Posted by: icm63 | Sep 14, 2008 5:39:18 PM

    would qualify as a short-hand translation of Lammert’s fractal summation–if anyone cares :)

  41. John(2) says:

    Posted by: JL | Sep 14, 2008 5:29:07 PM

    I agree the day is not over yet. The problem is the known unknowns are fairly horrible and god knows what the unknown unknowns are going to look like with hedged deals totally unconnected with LM coming unravelled.

    rational | Sep 14, 2008 5:36:58 PM

    What you say may be right so it’s a known unknown but as this whole saga has played out what we’ve seen is the unknown unknowns sandbagging Paulson and co. He’s opening Pandora’s box if he let’s LM go.

  42. Scott in Chicago says:

    Jeff M-
    There’s soooo much stuff to unwind that I’m convinced that bank/brokerage pairings and the like may blunt the trauma a bit, but only a bit. This is a slow motion train wreck, though as the inevitable collision gets closer the senses are heightened and things seem to slow down, but from the outside the pieces are hauling ass. Ask Einstein.
    And, wow, did Klein time her book for the moment or what?
    This is only going to get uglier. We Americans have long had the delusion that the lessons of history, of empire, didn’t apply to us. Oops. That doesn’t mean we’re totally going to hell in a handbasket, more likely we’re going to fade for a few decades a’la europe, before reinventing ourselves as a significantly reduced military power, and getting our house back in order. Who knows, we may rediscover those quaint founding father notions about foreign entanglements, or Ike’s military, industrial (congressional) complex; see Halliburton, KBR, Blackwater, etc. That is another area of huge wealth theft, through national deficit and debt being funneled to a handful of the well connected. Alright, that’s about enough of that rant.
    Looking forward to CNBC tonight, and the apocalypse (kidding) tomorrow.

  43. icm63 says:

    Just MAYBE after Paulson sent his own people into FNM/FRE he realised just how much money the taxpayer will be on hook for ( $800 bn c/- MrMortgage), and just cant take on any more risk on the Govt books !

  44. Worried Investor says:

    My entire 401k is in Legg Mason’s “Western Asset Money Market C”. (SBZXX)
    http://finance.google.com/finance?q=SBZXX

    My understanding was that this was the most conservative of all choices I had, but some recent postings here have left me concerned that it might actually lose value. It would be greatly appreciated if someone could explain the risk…

    Thanks in advance.

  45. Jeff M. says:

    Just had a thought – how will Sir Goldilocks, Dennis Kneale, Jerry Bowyer, Cramer and all of the other perma-bulls on CNBC spin this one in a positive fashion tomorrow?

    Goldilocks lives!!

    Kneale will undoubtedly say “no problem, they may even mark these up in the end”.

    What a joke.

  46. MadJackMcMad says:

    DJ futures -300

  47. ed says:

    I would guess the Merrills BoA story is in place to try and slow the rush of shareholders and counterparties out of Merrills door.

    Once the principle that a huge broker dealer is allowed to go under why would people hang around to find out whether their investment/counter party qualifies for help or not? The only thing that prevents a large leveraged financial organisation going under when confidence is lost is the belief somebody will bail you out. Non of them have the balance sheets to withstand a loss of confidence. High stakes poker indeed

  48. John(2) says:

    icm63 | Sunday, September 14, 2008 at 05:56 PM

    To get Barclays or ano to take them over he needed to guarantee around 30 billion, chump change in the context of F/F. As of now it looks like he’s decided to roll the dice for what reasons exactly it’s hard to discern. That’s the problem, he moves from a mode of controlling the situation to one of letting the market take over. If (if) there’s a bankruptcy filing it’s going to be rough. Since the banks have walked the only remaining vehicle is to take LM into some sort of conservatorship as the FDIC does with retail banks if he’s still ready to step in at the 11th hour. We’ll see what happens over the next few hours. I’ll bet you he’s going to be getting a call from Trichet.

  49. Mark says:

    CNN News:

    “Bin Laden: Goal is to bankrupt U.S.”

    Of course, as I’m sure you know…that was stated 4 years ago.

    http://www.cnn.com/2004/WORLD/meast/11/01/binladen.tape/

  50. JustinTheSkeptic says:

    John2, it seems your late to the party. You obviously have too much hope in our central government. If you’d been following this game all along you’d realize that Paulson, is not God, and the markets will rule in the end. That is why they should have been left to rule way back in 2001 – post 9/11… Interest rates stayed too low, too long. Because of that intervention the U.S. Economy has forgoten how to “take a lick’en and keep on tick’en!!! Now we are down here again having low interest rates but there is no “value” left to take advantage of them. Yes there are people on the side lines with lots of cash but why throw their good money into the sea of uncertainty that the greedy people in power have created?

  51. manhattanguy says:

    Futures down 3% on open..will be interesting to watch the markets tomorrow.

  52. Daniel says:

    Why would BAC not wait a day and scoop MER cheap if they are dying for it? :

    From Google message board – “They would pay $25 or $30 because that is what the assets are worth.
    Ml is worth more like $40 a share but the $10 delta is in harder to
    calculate assets. An investments banks most worthy assets are the
    employees. If you buy it for less, and the employee leave, you have
    not bought anything. So, they are getting a good deal by buying a $40
    asset for $25 or $30 and ML has little choice but to accept because
    people have shorted the stock down and will do so intil they are out
    of business. The current stock price does not reflect the actual value
    of the company. It is undervalued.
    They are financing the deal in stocks which means they will issue more
    stocks and trade them for ML stocks. The Bank of American stocks of
    which there are now more will be worth less accordingly. ”

    Hmmm…dilute your beatup shares unnecessarily in THIS market. Ken Lewis might be thinking he won’t have another chance with Thain on the wheel – yeah, right, just wait a few days and FED will BEG you to buy MER or merge, whadda rush for ?! :-)

  53. Spam 2.0 says:

    Wow old Nedly really craving for attention. Changed his modus operandi a shade, but still the same pattern for his spam 2.0.

    Everyone can ignore the posts by:

    Albert

    INverse_N0m3

    Ptash

    Or basically any link that resolves to a tinyurl or xrl.us address.

    Barry, too bad you have to put up with such shit. Perhaps you should consider limiting HREFs or at least those whose link doesn’t match the text.

  54. JS says:

    I’m confused by the WSJ headline – WS Firms Scrample to Avert Financial Crisis.

    If what is happening right now is not a crisis I dont know what qualifies!

  55. John(2) says:

    icm63 | Sunday, September 14, 2008 at 05:56 PM

    You’re mixing up a bunch of different issues. I’m the first to agree cheap money was one of the prime causes of this mess but you forget Paulson has only been around for 18 months more or less when the meltdown started. Not being a nihilist I think he’s doing the right thing in trying to keep control of the situation and not paying too much attention to holy cows. He was right over BS and F/F and although it’s a tougher call he’s taking a hell of risk throwing LM under a bus. How much of risk we’ll find out won’t we.

  56. VennData says:

    How much due diligence did Thain do before taking the Merrill job a few months ago?

    More “Smart Money?”

  57. Sasha says:

    Look at those S&P Futures!
    Emini ESU8 tading down 36 @ 1221 range.

    Tomorrow is gonna hurt!

  58. JustinTheSkeptic says:

    JS, don’t worry, the bulls will take it as another Mr.Roger’s “wonderful day in the neighborhood.” Dow 20,000 by the end of the year!

  59. DarrenH says:

    http://dealbook.blogs.nytimes.com/2008/09/14/lehman-to-file-for-bankruptcy-protection/

    “And the Federal Reserve has agreed to accept lower-quality assets in return for loans from the government.”

    So much for no help from the Fed. Where is Walter Bagehot when we desperately need him?

  60. Eric says:

    Jeff M., you already know the answer RE how Cramer will spin it. If the market tanks, he will place it ********ALL********* in the lap of the government/Fed. “If only they’d listened to me a year ago.” (Ignoring the fact that the level of interest rates isn’t the problem.)

  61. VennData says:

    Can you imagine the poor hedgie who sold a five year $10,000,000 CDS on Lehman for $40-$50,000 in 2005 and had a nice steak dinner for yourself?

  62. rickrude says:

    So let me get this straight – BoA, which already has its hands full with Countrywide, Lasalle and U.S. Trust, is taking on another failing giant, Merrill, to save the financial system? Why should we expect this to work?

    Posted by: Jeff M. | Sep 14, 2008 5:20:05 PM
    ?????????????????????????????????????????//

    because Bernanke will bail out BoA, and it
    will appear, atleast quantitatively,
    fewer bailouts will have been granted
    by Bernanke

  63. JustinTheSkeptic says:

    John2, what we are trying to say is that there is nothing that Paulson can do! Not even Jesus Christ can help in this situation. Markets are ment to expand and contract. This market has not been left to contract, but now it will.

  64. John(2) says:

    There are so many scary dimensions to this it’s hard to count but the one that should give most concern since we don’t know the extent of it are all the deals out there involving CDS and hedges that have absolutely nothing directly to do with LM but involve third, fourth, fifth, sixth party transactions. Until LM actually goes under they are not going to emerge like a chain reaction.

  65. johnnyvee says:

    How the mighty fall.

  66. Scott in Chicago says:

    So really, is D-Life more important on CNBC than live reporting on Lehman, et al? I’m watching Bloomberg–they are live, and they have Roubini coming on in 10 minutes. This reinforces the true nature of CNBC: it is an infomercial for Bull Markets.

  67. John(2) says:

    JustinTheSkeptic | Sep 14, 2008 6:54:16 PM

    With due respect…. bollocks. When he took over F/F he averted a complete freeze up the retail mortgage market and therefore home sales. No doubt you would have considered that good for all of us. I don’t.

  68. jtil says:

    “Strap on your seat belts, folks. It’s gonna be a very bumpy ride…”
    –Bette Davis

  69. Abbott_Of_Iona says:

    If BoA are doing a deal with Merrill it is clear the Lehman are going into BK.

    Merril were next.

    That’s were Hank is going to use the last shot of his bazooka.

    Roubinni(?) is right. This is the meltdown of the secondary (shadow) banking system.

    Do BoA have ehough capital to bail out Merrill?

    Have the Fed & Treasury both run out of money.

    Japan & China may be closed tomorrow. But they will wake up on Tuesday.

  70. Eric says:

    Not that BR gives a rat’s butt what I think or say about him, but I want to say that I seriously underestimated his willingness to say it straight about Cramer. I was way, way off. BR big; me small.

    ~~~

    BR: Ha! There’s more coming later this week.
    But I am serious — I don’t want to be the all Cramer all the time blog

  71. km4 says:

    “The average age of the world’s greatest civilization has been two hundred years. These nations have progressed through this sequence. From bondage to spiritual faith; from spiritual faith to great courage; from courage to liberty; from liberty to abundance, from abundance to complacency; from complacency to apathy, from apathy to dependence, from dependence back into bondage.”

    Alexander Tyler circa 1787 re the
    fall of the Athenian Republic.

  72. fallon says:

    No life lines to the I-Banks because the Treasury will have to rescue WAMU or at least be prepared for a triple play on the FDIC funds by WAMU : Downey : GMAC -all coming next.

    This is going to get much worse before it gets betters. And not to inject too much politics into a situation that will not be solved politically, but the brain trust is with the Obama-Biden camp on thinking this mess through not with McCain-Palin. McCain-Palin has not a clue or even a basic interest and macro-economics or political economy. I suppose John and his soulmate could declare war on our debt holders (China, the Saudis, et al). Now THAT would be a stimulus package.

    If I was the Obama-Biden campaign I would hold an economic summit with smart folks from either persuasion ASAP followed with some town hall style meetings in swing states and get back to the basics of post-partisan, how to we manage this shit, boldness and stop the lipstick banter cold and come out with a message about leadership and the serious urgency of now.

    Serious shit is going down and the speed of deflation is accelerating and the velocity of money is about to hit the wall, fall apart, and not move an inch until everything is mark to market. Folks are scrambling not to expose to the market what they model in private. Cross-dressing is fun until you get caught.

  73. joe says:

    I don’t know how to put this, but, ‘yawn’. No vultures are naked short selling with the intention of ruining the entire economy just to make a few dollars. Oil is returning to normal. This looks like a panic among the inbred. A zero sum game is settling it’s bets. Afterwards, a new soap opera story will emerge and it will snowball into captivating headlines. Why on earth should companies that make LCD televisions suffer because a few stock brokers and mortgage makers go bust? The fundamentals imply this is a buying opportunity of legend.

  74. Winston Munn says:

    There is no way after the bailouts of Bear, Fannie, and Freddie that all of a sudden Paulson and Bernanke were smitten by the ghost of Atlas Shrugged past and decided on principles to allow Lehman to fail.

    No freakin’ way.

    So does that mean Lehman couldn’t be saved, that it was too risky to save, or something much more ominous is at hand?

  75. scorpio says:

    LEH filing btcy 18 years after Drexel, the last such disaster. let’s see, now what was the market’s PE in 1990? hmmmmm

  76. Posted by: Worried Investor | Sep 14, 2008 6:01:26 PM

    WI,

    read the Prospectus of that MMF, see what’s in it–Take to heart BR’s adage: “Know what you Own.”

    if they’ve been prudent, the MMF should be ok, those ‘institutions’, I hope, still fear “breaking the buck” of their, respective MMFs.

    But, now is not the Time to be Short: information , and Long: sanguinity

    that pair trade has always been a loser..

    http://www.thefreedictionary.com/sanguinity

  77. Entrepreneur says:

    BR -

    Your headline update says Dow down by 23. I think you meant 231?

  78. ct says:

    Spot Gold up $14.60, How much by the open?

  79. q says:

    my goodness… while i do feel bad for those at lehman …to the rest of the chicken-littles…man up!…sheesh…banks, brokers and dealers have been going out of business for centuries…always due to the same thing too much leverage on shitty collateral. the most interesting thing i see here is that if bac does buy mer (and no offense daniel @6:24 but this is what makes a market i suppose) what price they pay. after the reports of leh having almost 3 times more problems on their books than reported who’s to believe merril’s (or anyone else’s) numbers now. right now I wouldn’t pay any more than half of stated bvps for mer and that’s if i had the nol carryforwards form buying countrywide. you’re catching a falling knife othewise… as an aside, notice buffet (and others like him) hasn’t been stepping up and buying…(and it’s not like he’s afraid of, or doesn’t understand the industry…lol)…this too shall pass and on the other side things will be better…always has been and always will

  80. HCF says:

    > Special Fed rules for taking even junkier paper;

    I guess the Fed is tired of putting up a facade. Might as well just say that they’ll take garbage rather than pretend that everything they are taking is AAA.

  81. CNBC Sucks says:

    8:11 PM Jim Cramer: I’m a buyer, not a seller.

    HAHAHA

    Why don’t you get in front of that speeding semi on the Interstate while you’re at it?

    Then again, all the Westburies out there will probably float this turkey back up by open of trading tomorrow.

  82. Pete Davis says:

    The fact that anybody is remotely blindsided by this is beyond me. The writing has been written on the wall in big, fluorescent letters for quite a while now.

    We are now reaping what we have sown.

  83. PureGuesswork says:

    Surprisingly(?) S&P futures have stayed above Friday morning’s lows so far. We also have all this happening on a Sunday night when Asian markets are closed for a holiday. Very strange. Remember how important it seemed that the Bear Sterns and Fannie/Freddie deals were done before Asian markets opened on Sunday. But there are no Asian markets tonight. Australia is not exactly a substitute for Toyko, Hong Kong, etc.. It will be another 6 1/2 hours before any major stock exchanges open in Europe.

  84. HCF says:

    There we go…

    I knew it’d be only about 15 min before someone mentioned short selling. Harvey Pitt just blamed “short selling not related to fundamentals.” Hmmm, how about we stop all transactions not related to fundamentals. That way, each time you buy or sell, you need to write an essay that justifies your purchase or sale… Crazy stuff…

    btw, anyone else here think that Lehman should be turning off their giant LED signs outside the headquarters? Maybe instead of scrolling “LEHMAN BROTHERS” in giant letters, someone could hack in and make it say “WE ARE F–KED!”

  85. Chris says:

    Tomorrow is going to be the first pull of the federal bailout bandaid from the raw wound of banking/financials. It’s going sting like hell for some.

    If I were a BOA shareholder…that’s hella funny….but if I were….I’d be SCREAMING.

    I’ve been long TWM, SKF, EEV for a month or so waiting for the reality to set in….so I’ll sleep pretty good tonight.

  86. manhattanguy says:

    Cramer wants a rate cut…can someone make this clown to shutup?

  87. Stuart says:

    If BofA pays the reported $25-$30 for MER, BofA is the short of the decade!!!!! And we could start a dead pool poll on BofA execs involved in this blunder, as if CFC wasn’t sufficient. The fact this came out so soon…. smells like BS to deflect attention, not that any such thing would be planned..

  88. PureGuesswork says:

    One more thing. An answer for Daniel on why B of A would not wait another day to get Merrill at a cheaper price. The deal seems to be that they are paying 100% in B of A stock. And if you wait for things to get uglier and uglier who can say what B of A stock will be trading at in a day or two? Roubini is saying today that this will spread to Goldman and Morgan Stanley and then to Citibank, etc., etc.. That he didn’t mention B of A is probably just an oversight.

  89. manhattanguy says:

    Stuart – I am with you there. I have been short $BAC since last week.

  90. Scott in Chicago says:

    On the upside I had zero dollars with Insana Capital Management…

  91. Joe says:

    Come on.. BoA is only paying a rumored 70% premium on this great company.

    ~~~

    BR: Sold to you.

  92. Stuart says:

    “CNN News:

    “Bin Laden: Goal is to bankrupt U.S.””

    We didn’t need Bin Laden. The stupidity and greed of Wall Street bankers was more than sufficient.

    Mama, don’t let your kiddies grow up to be bankers….

  93. JustinTheSkeptic says:

    Vince Ferrell, is saying it is time to buy. Wow, he’s always been saying that…he’s a broken record. Can these guys really be professional money managers? My goodness!

  94. Vermont Trader says:

    Everytime we have these evening crises we get a huge inside out reversal off the lows or highs the next day..

    Last week the shorts were scared shitless, this week they are supremely confident.

  95. CNBC Sucks says:

    PureGuesswork: BoA / Merrill deal done. That is more than pure guesswork on your part. That’s actual thinking.

    I think CNBC has a reality show hit on their hands. I love how they have the guilty parties covering the trial.

  96. Jim says:

    We didn’t need Bin Laden. The stupidity and greed of Wall Street bankers was more than sufficient.

    Bin Laden’s daddy was an investor in the Carlyle Group and is a buddy of Bush’s daddy.

    How do you know that Bin Laden’s family’s “disowning” of him is for real? How do you know “the stupidity and greed of Wall Street bankers” and Bin Laden’s aims are non-intersecting phenomena?

  97. Vermont Trader says:

    How much commercial paper do you think LEH has outstanding??

  98. JustinTheSkeptic says:

    The Merrill deal is just a canard! Another red-herring to try and stop the markets from plunging.

  99. Anonymouse the internet coward says:

    Speaking of CNBC, I wonder what GE Capital’s book looks like?