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

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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) 

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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. CNBC Sucks says:

    The Fed will now take handwritten IOUs on used toiletpaper for collateral.

  2. manhattanguy says:

    Thanks for the live update Barry. It helps people with no cable service. I hate the “cheerleading” network CNBC anyways.

  3. DC says:

    Friday morning on Bubblevision a couple of “legendary” wealthy pukes were talking about LEH — how it’s so vast that only a handful of people in the universe could possibly manage it. Hey…how about Sarah Palin? She can do it all and she cranks out babies like Pez. We need more hotness is our public officials.

    But honestly. If the I-banks are so convoluted that they are the equivalent of a 10,000 MPH car that no one can control, then why the hell do they exist? The Kudlows and Kernens and Kristols don’t want any regulation whatsoever, but “too big to manage” is just another way of saying it’s a house of cards.

    That said there’s still a chance that the rabbit gets pulled out of the hat by the open. PPT will use whatever magic dust they have left.

  4. Stuff Goin On — Wall Street — On A Sunday

    Hey turn on CNBC. Yes, this is Sunday afternoon/evening. Stuff is happening. Lehman Brothers is probably filing for bankruptcy because the Fed is not bailing them out. This means the stock market will realize that the Fed is not going…

  5. chad says:

    Latest – THE FED IS TAKING EQUITIES!

    HOLY FUCKING SHIT………….

    I wonder if Bill Miller can post his positions in financials at the fed?

    Roubini on bloomberg earlier says ALL investment banks will no longer be independent.

    God damn…………..

  6. 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.

    Posted by: PureGuesswork | Sep 14, 2008 8:32:54 PM

    Peep better start paying attention to something other than the MSM..

    Roubini has cared enough, about us all, to suffer the slings and arrows, to tell us the Truth as he sees it, He’s one of the Few.

    It, the MSM, is worse that a, mere, waste of time..

    We better wake up to the fact that most of our, cherished, and widely held, Premises are False.

    This, what’s going on, wasn’t caused by a, simple, Greed for ‘Money’, it has been motivated by a, complex, Desire for Control.

    Please check your, ingrained, reflex to cry: “********** Theory”

    Do some websearches, visit some sites you’ve never seen before.

    the Party Line doesn’t add up, and it’s meant to subtract what you have.

  7. manhattanguy says:

    Thanks for the live update Barry. It helps people with no cable service. I hate the “cheerleading” network CNBC anyways.

  8. tranchefoot says:

    how much of the merrill purchase was financed by merrill, do you think?

  9. Winston Munn says:

    I’m a bit confused. Did they say Bank o-f America or the Bank i-s America?

  10. Byno says:

    AIG turning to Fed for help?

    Seven years ago, I asked the chief economist of one of the Biggies if he thought we could avert some kind of Japanese-style banking disaster. His answer: we’re much more transparent and willing to let capitalism takes its course than the Japanese, so no. I disagreed, and he did his damnedest to make an entire room of people think I was an idiot.

    Cue Fight Club line:

    A major one.

    Oh, and it’s not getting bought by BAC tomorrow.

  11. Quant says:

    Why do the idiots on CNBC not allow Prof Roubini to talk more than a few words before they have to go running off for a freaking break?
    Thieves all!

  12. KJ Foehr says:

    Bloomberg reporting BAC paying $44B, $29 a share for MER.

  13. joe three-pack says:

    These Bushes are the kiss of death…isn’t
    Jeb a Bro’ employee ?

  14. Byno says:

    Bloomberg also reporting ML didn’t have a choice.

  15. VennData says:

    The “We must allow Private Equity to help the banks” has been shown to be a total joke if they’re demanding AIG backstop their loans with Fed guarantees.

    Oh, what bold buccaneers of finance those PE studs are.

  16. CNBC Sucks says:

    Bertha Coombs just asked Red Sox Lehman dude, “Lehman is part of the fabric of American capitalism, how do you feel about the Fed not bailing it out?”

    Are you f-ing kidding me?

  17. Bruce says:

    Chad,

    I take it you think the fed shouldn’t take equities?

    Reminds me of a line from the movie airplane…

    “I picked a bad day to give up being rational”…apologies to Lloyd Bridges…

    Bruce in Tennessee

  18. Stuart says:

    The Fed is lowering standards, again, as to what it will accept as collateral, NOW including equities.. blink blink blink… Say good night Gracie. The Fed just committed suicide.

    re: 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?

    too much for my little head to comprehend. Just too much.

  19. Scott in Chicago says:

    Harvey Pitt is a tool! It’s “easy to look for scapegoats,” my ass. Bill Siedman is correct. A lot of the problem we now face is the result of Pitt’s SEC allowing sky’s the limit leveraging beginning in ’04. Pitt should be in jail, not on a panel of “experts.” Fuck me!

  20. brion says:

    “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….
    ___________________

    Someone has to get elected though to let those wall street bankers go hog wild.
    Those “someones” are corporate luvin’ fascist republicans….:”ever time a Regyoolayshun is passed the baby jesus cries and a terrist eats a bible!”

    Dems suck too, just not to the same degree.

  21. Paul in NYC 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/

    Posted by: Mark | Sep 14, 2008 6:17:19 PM

    Well bin Laden knew what he was doing since, as per Suskind’s book “The One Percent Doctrine”, CIA analysts concluded that bin Laden’s intent was to help Bush defeat Kerry.

  22. Bruce says:

    Chad,

    I would hope that the news that the Fed is considering equities for collateral to be on of those “fog of war” reports that will be disavowed tomorrow. If not, I think we are sunk.

    Bruce in Tennessee

  23. Mark says:

    @Paul in NYC: I think that Bid Laden could read “Conquer the Crash” like anyone else, and thereby see the deflationary writing on the wall. All he had to do to be a hero to enemies of the U.S. was to take credit for it.

  24. Elmer Fuld says:

    As a taxpayer, I’m very upset by all of this. It looks like Paulson has been arranging for all this stuff to happen on weekends so he can run up his overtime. Congress should investigate.

  25. Hal says:

    after looking the the posts in this thread, here are a couple of comments:

    1) it is significant that asian markets are for the most part closed Monday-give fed and treasury a bit more time (and I heard china is closed for 3 days)

    2) forget mkt cap of MER–MER has 16 bil of tangible net assets at book–assuming there is more clean up BAC paying 44 bill for a messed up company in a sector thats lost its big profit products is absurd. But we are in the theatre of the absurd.

    3) I would not be surprised at all if the equities closed up Monday, given 70 billion has been digitally printed and sent to 10 banks. A lot of futures can be bought (and sold, ie gold, oil) with 70 billion.

    as I type I am watching a raid on gold and silver and the dollar strengthen.

    the spin meisters will be out in force-as Paulsen said, he will use all tools available to him

  26. b_thunder says:

    Question #1:
    Anyone knows what’s Thain’s take after the sell-out to BofA? Last year he took close to $100mil for 2 weeks of “service”, I’m wondering if he’ll clear $200mil for 9 months at MER. What was the stock price when he took over? Close to 2X$29

    Question #2:
    Is BofA trying to make itseft “waaaayyyy to big to fail?” Trying to cover their asses?