lehman going under
The Fed is taking a different stance with Lehman (not willing to limit losses for potential buyers) than it did with Bear Stearns, which seems likely to result in Lehman going under.
The down side is that fear will spread through Wall Street, now that uncle Sam isn't stepping in to save Lehman with tax-payer money - resulting in selling of investment bank stocks.
The upside is that tax-payers aren't saddled with the debt.
All this is confusing to me for 2 reasons:
1) The current government usually favors large corporations over the tax-payer.
2) Isn't the government interested in devaluing our currency and "starting from scratch" to minimize our national debt? (Just a theory...)
Is this just Treasury Secretary Paulson trying to save his hide after questions being raised over previous bailouts of FNM/FRE/BSC, or is there a fundamental difference that makes Lehman Brothers less worth saving?
The down side is that fear will spread through Wall Street, now that uncle Sam isn't stepping in to save Lehman with tax-payer money - resulting in selling of investment bank stocks.
The upside is that tax-payers aren't saddled with the debt.
All this is confusing to me for 2 reasons:
1) The current government usually favors large corporations over the tax-payer.
2) Isn't the government interested in devaluing our currency and "starting from scratch" to minimize our national debt? (Just a theory...)
Is this just Treasury Secretary Paulson trying to save his hide after questions being raised over previous bailouts of FNM/FRE/BSC, or is there a fundamental difference that makes Lehman Brothers less worth saving?
Comments
i guess there's always a chance that someone in the administration decided to pick the wrong thing to be a fiscal hawk on and gave paulson marching orders to just commit financial suicide, but that just doesn't fit well with the way the bush administration has behaved up until now... i doubt it... but it'd certainly make next week exciting if it occurs...
no bailout. will be an interesting week.
last thing i read it sounded like the system was getting a clandestine bailout -- lehman will go under, but a $50bn pool of loans will be made available from private banks, which will in turn have an increased availability of lending from the federal government. paulson gets to appear like a hawk and the government doesn't have to immediately bailout the system, but public money will flow to the banks through the new lending facilities.
I feel like I 1/2 way deserve it because I'm betting on what I know to be a bad/immoral thing occurring, but still...if I'm going to pay for a bailout as a tax payer, I'd like to minimize the amount I'm actually paying for...Now I've lost stock AND I'm probably going to end up financing additional government loans for other banks.
RIP Lehman Brothers (1850 - 2008)
I prefer RF to RIP in these cases.
RF(Rest Fitfully) Lehman Bros.
BofA isn't paying $44 b for Merrill. It's a stock swap and it doesn't close for several months. As of last night it was valued at $44b but by the time of closing it could be much less (or much more). Read more here: A math lesson for the financially illiterate - Bank of America is NOT buying Merrill for $29/share
Even if they are doing a stock deal, they could have waited and gotten a better deal. I dont think MER could have survived another week without the buyout.
In other news.....AIG in major trouble.. http://money.cnn.com/2008/09/15/news/companies/AIG/?postversion=2008091519 .