Posted on 10/10/2008 6:53:33 PM PDT by TigerLikesRooster
October 11, 2008
Lehman Brothers demise triggers huge default
Tom Bawden in New York and Suzy Jagger in Washington
Lehman Brothers, the bust investment bank, triggered one of the biggest corporate debt defaults in history yesterday as it emerged that the US Federal Reserve is harbouring grave concerns about whether Washington’s $700 billion (£413 billion) bailout fund will avert a financial meltdown.
An auction of Lehman’s bonds yesterday determined that the bank’s borrowings were worth only 8.625 cents on the dollar. The valuation leaves the insurers of the debt a bill of about $365 billion. It is not clear whether the insurers, which are required to settle the bill in the next two weeks, will be able to pay – a development that could further undermine increasingly stressed capital markets.
The $365 billion default came as stock markets around the world suffered one of their worst days since the crash of 11 years ago. Panicking about the prospect of global recession, the FTSE 100 index of leading shares in London crashed within seconds of opening, losing 8.9 per cent of its value, its worse fall since October 1987.
The index recovered to close down 225 points, marking a 5 per cent decline, but more than a fifth was wiped off London shares this week alone. Issues in New York fluctuated wildly as the Dow Jones industrial average slumped by 312.14 points at lunchtime before closing at 8,451.19, down 128.00. Both markets had been scared by losses in Tokyo, where the Nikkei lost 10 per cent of its value.
(Excerpt) Read more at business.timesonline.co.uk ...
There should never have been a bailout in the first place. Let the morons go bust, bankrupt, kaput, and the rest of us will do just fine.
Ping!
Leverage and community activist lawyers from (criminal) ACORN suing banks to make dog sh*t mortgage loans to people who cannot pay the.
Apparently allowing Lehman to go bankrupt has been one of the biggest mistakes. The dominos are now falling. The whole world’s fate is now in the hands of a few people. I am praying that God gives them the wisdom necessary to stave off total disaster.
Apparently allowing Lehman to go bankrupt has been one of the biggest mistakes. The dominos are now falling. The whole world’s fate is now in the hands of a few people. I am praying that God gives them the wisdom necessary to stave off total disaster.
Well, at least the black market hasn’t crashed.
But seriously, the black market can never crash because is is extremely UNDER-regulated.
I would not pass it behind Paulson that he and his associates actually think this is an opportunity to carry out their expansion plan.
It appears that Goldman Sachs has plan for both cases: when bubble grows out of control; when bubble pops badly. They are not passive players exploiting opportunities beyond their control. They fostered bubble blowing it out of proportion. Then they want to exploit the inevitable painful downturn.
the US Treasury has been overwhelmed with requests from executives of other beleaguered sectors ....Mr Paulson does not believe that it is his job to help them. Rather, he is intent on addressing the root problems of the financial crisis
The root cause of the financial crisis is the belief that the US economy is the financial sector, which adds no value. It is the health of the rest of the economy on which the US will rise or fall. It sounds like Paulson is another self-conceited idiot.
Too bad decoupling did not work. If it did, these bozos could hop from economy to economy, keep inflating and popping bubbles while making billions(or trillions.)
On the other hand, there can't be decoupling because they also outsourced U.S. financial risks as well. If U.S. goes down, the rest of world economy is bound to be sucked into crisis by design.
It boggles my mind when I see some financial types desperately wishing for another hot economy out there where they can go to resume their winning streak. They closed out that option themselves, and they are pretty slow to realize it.
This shows how much their perception is warped. A kind of perception you can find among hardcore addicts.
Unfortunately a large part of fixing the real economy involves getting the leeches out of the gears of production. Given the governmental regulatory overreach, legal system overreach, and corporate bureaucratic overreach (those who think large corporations are a lot more efficient than the US government haven’t watched one up close and personal) this is going to take a while.
Only real pain can cure this problem. Leeches won't get off easy. The host has to be pretty sick to get them off. America has to make the best out of this disaster by getting rid of leeches instead of giving them the reason to hang around. To do that, they should not inject themselves with intravenous solution to merely hold off worsening symptoms.
I want some criminal prosecutions. I want Dodd, Frank, Raines, and Gorelick heads on a rhetorical platter.
I want them tarred, feathered, and ridden out of town on rails with their collective next stop to be a prison cell.
Pray for the best and prepare for the worst and for earthly safety buy T-Bills direct from the Treasury... or a nice money market fund backed by short term Treasuries.
Now, with that said, for the life of me I do not know what Paulson hopes to achieve from people with the above mindset, by buying preferred stock (nonvoting shares). He has no sway over that bank other than the threat of pulling out of the government purchace to force the banker to do as Paulson wishes....that is loan to other banks.
Short of the government guaranteeing all loans, why would bankers feel compelled to not worry about giving out loans?
We get to do this all over again when WaMu’s CDS contracts get auctioned in two weeks.
The hotter the market, the more money the participants are guaranteed to lose in total. When markets heat up past a certain point, they become a negative sum game; the more they heat up, the more negative the total. For all practical purposes, that's mathematically guaranteed.
In a sane market, rising prices are a red flag to buyers that they should slow down or stop buying. Bulls, however, see the red flag as a signal to charge ahead.
Which is better: for the government to inject really huge amounts of real money to fill in for all the imaginary money that had been created out of thin air, or to refuse and let the holders of imaginary money get whatever pennies on the dollar back up their assets?
If there are any holders of imaginary money whom the government really does need to protect against loss, the government should pay those particular people directly rather than trying to prop up the House of CarDS.
No matter what the government does, the House of CarDS is going to come down. The only way to prevent it would be for the government to slash the value of a dollar by more than half (propping up the House of CarDS with more money than presently exists worldwide). Given that, I see no reason to spend real money to preserve the illusion of imaginary money.
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