Did JPM Cash Call Bring Down Lehman ?

This continues to become ever more interesting . . .

“Lehman Brothers Holdings Inc.’s main lender and clearing agent, JPMorgan Chase & Co., caused the liquidity crisis that led to Lehman’s collapse, creditors said.

JPMorgan had more than $17 billion of Lehman’s cash and securities three days before the investment bank filed the biggest bankruptcy in history on Sept. 15, the creditors committee said in a filing Oct. 2 in bankruptcy court in Manhattan. Denying Lehman access to the assets on Sept. 12, the bank “froze” Lehman’s account, the creditors claimed.

JPMorgan, the biggest U.S. bank by deposits, financed Lehman’s brokerage operations with daily advances, while money market funds and other short-term lenders provided overnight loans, according to bankruptcy court documents. When JPMorgan shut Lehman off from funds, Lehman “suffered an immediate liquidity crisis that could have been averted by any number of events, none of which transpired,” according to the filing.

The creditors asked the judge in charge of the case to let them interview a witness and request relevant documents from JPMorgan and to pursue possible legal claims. U.S. Bankruptcy Judge James M. Peck is scheduled to hold a hearing Oct. 16 on that request, the creditors said.”

The Times of London added:

“Lehman’s collapse is fast emerging as the single biggest event of the credit
crunch, sparking a number of unexpected effects. The unravelling of the firm’s prime brokerage operations has already forced a
number of hedge funds out of business.”

Stay tuned — this charge may have legs . . .


UPDATE: October 5, 2008 10:38am

Ron Kirby notes: “I wrote about a very strange occurrence – the reporting of J.P. Morgan “transferring” 138 billion dollars to Lehman, after Lehman had already filed for Chapter 11 bankruptcy early last Monday morning…It is highly likely [or a certainty on my planet] that J.P. Morgan was INSOLVENT and was “BAILED OUT” last Monday, September 15, to the tune of 138 billion dollars. This would explain why the Fed and Treasury dictated that Lehman fail – to disguise or otherwise obfuscate the recapitalization of or illicit transfer of 138 billion to A MUCH SICKER, TEETERING ENTITY, J.P. Morgan Chase.”



Lehman Cash Crunch Caused by Lender JPMorgan, Creditors Say
Linda Sandler and Jeff St.Onge
Bloomberg, Oct. 4 2008


JP Morgan ‘brought down’ Lehman Brothers
Iain Dey and Danny Fortson
The Sunday Times, October 5, 2008


Category: Bailouts, Credit, Finance

Graphic Depiction of Finance Crisis

Nice collection of charts and graphics over at the BBC.  These two are my favorite: > ~~~   > > Source: Finance crisis: in graphics BBC, Friday, 3 October 2008 http://news.bbc.co.uk/2/hi/business/7644238.stm

Category: Bailouts, Financial Press

Bird and Fortune – How the markets really work, Subprime Crisis

How the markets really work (2007) Here’s a more intriguing version — Bird & Fortune audio over economic and market data as visuals

Category: Digital Media, Markets

Saturday Night Open Thread

Category: Weblogs

Federal Reserve Director on the CRA

Category: Federal Reserve, Taxes and Policy, UnScience

Recommended Investment Books

  Stock Market Wizards : Interviews with America’s Top Stock Traders The New Market Wizards : Conversations with America’s Top Traders The Investor’s Anthology: Original Ideas from the Industry’s Greatest Minds Bull: A History of the Boom and Bust, 1982-2004   Historical Perspectives   How I Trade and Invest in Stocks and Bonds Reminiscences of…Read More

Category: Books

The CRA: Its a Racial Thing . . .

Georgetown University’s legal and finance scholar Emma Coleman Jordan, and Bill Moyers look at the noise machine, which seems to be operating at full tilt:

BILL MOYERS: There’ve been a lot of voices on cable channels recently blaming this bubble, this crisis, the cause of all of this catastrophe we’re in right now, on poor people who took out mortgages that they couldn’t afford to buy home they wanted. They shouldn’t have. Watch these clippings and tell me what you think about them.

LAURA INGRAHAM: 1995 when Bill Clinton decided to tell, you know, Robert Rubin to rewrite the rules that govern the Community Reinvestment Act and push all these institutions to lend to minority communities, many very risky loans, that was a noble idea, perhaps, but that certainly wasn’t following free-market principles.

NEIL CAVUTO: I don`t remember a clarion call that said, Fannie and Freddie are a disaster. Loaning to minorities and risky folks is a disaster.

LARRY KUDLOW: It’s time for the Congress, Republicans and Democrats, to stop encouraging, exhorting, and forcing banks to make low income loans with no documentation. Stop that. The community reinvestment act which was passed in the mid nineties, which was extended in the early 2000s, literally pushed these lenders to make low income loans.

BILL MOYERS: Lending to minorities and risky people. Do you see this, are they seeing this as issues of race and class?

EMMA COLEMAN JORDAN: Absolutely. And it’s a cynical manipulation. It’s reprehensible. And, in the worse tradition of Lee Atwater and the Willie Horton ad, to use race as a wedge issue to make people who pay their mortgages believe that the people who are getting the benefit of the 700 billion dollars, that we’re being asked to pay, are poor, minority people who caused the crisis.

This is unconscionable. This problem is not a problem that was caused by the Community Reinvestment Act. The data is very clear that the Community Reinvestment Act loans were being offered in a way to people that were much more responsible and had none of the characteristics of default that are being attributed in this discussion. And what this does is to say, this problem is a problem that was caused by black people.

And it means that it gives an opportunity to bring up that old wedge. But I think the people in the country are smarter today. I just don’t think it’s going to fly. I think that people understand that the enemy is not a person who got a home loan and was tricked into getting that loan by a fast-talking broker who originated the loan but that the problem was the securitization process, the high leveraging that Wall Street was doing, the lack of regulation.

Click for video:


Emma Coleman Jordan
October 3, 2008

Category: Bailouts, Credit, Real Estate, Video

Bad Medicine


Category: Credit, Federal Reserve, Legal, Real Estate

Whackage! Worst Week Since September 2001

Category: Markets, Technical Analysis, Trading

The End Of Free-Market Fundamentalism?

Amid the chaos and chatter about this week’s financial bailout, one clear theme emerged in some quarters: The era of free-market fundamentalism is over. But is it, really?


Video after the jump.


The End Of Free-Market Fundamentalism?
Nick Penniman
American News Project, Sep 25, 2008



Read More

Category: Economy, Politics, Video