How the Fed Reached Out to Lehman

nyt ^ | 12.16.08 | ANDREW ROSS SORKIN

[ken21]

How the Fed Reached Out to Lehman

It’s a $138 billion mystery.

In the early hours of Sept. 15, after the government refused to rescue the foundering Lehman Brothers, something odd happened. The Federal Reserve lent tens of billions of dollars to a subsidiary of the newly bankrupt bank.

[ken21]

fyi

[Texas Songwriter]

save

[TigerLikesRooster]

Ping!

[Just mythoughts]

When did the Federal Reserve become a ‘government’ entity? I thought they were a private entity that answers to none in plain language.

[ken21]

good question.

[johnnycap]

Paulson had it in for Lehman because he hates Dick Fuld. Everybody on the street knew that. It was payback.

[ken21]

interesting.

also, i read some time ago that paulson took out corzine, now the gov of nj.

corzine was paulson’s superior at goldman sachs and paulson organized a coup while the former was out of town.

[JasonC]

It was not odd, it just reflects the author's ignorance, pretty much. JP Morgan was commissioned by the Fed to close Lehman's books. The issue was preventing a cascade of failure due to Lehman's securities trades not clearing, involving all their counterparties and tying up all their client accounts. The Fed lent to allow Lehman to settle its sides of open trades, so its counterparties didn't go bankrupt along with it. JPM did the actual work of clearing the transactions and cancelling offsetting positions etc. Which briefly put it on the hook for some of Lehman's trades in process, which is normal markets take up to 3 days to "clear". JPM was only willing to take that exposure with a Fed guarantee, and got it. It also did an excellent job, and as the trades settled in the ordinary course of events, the loans were repaid in due course, etc.

Conspiracy theory mongering where there was only professionalism - entirely covered at the time, I might add.

[JasonC]

The Treasury and a group of nationally chartered banks subscribed the Fed's initial capital when it was founded. After paying very small "dividends" to the branches on that original subscription amount, virtually all of the profits of the Fed, coming to around $30 billion a year, are paid over to the US treasury, its beneficial owner in all but name. Why people still peddle this crap is beyond me. Next they will recycle breathless tales of Secret Rome...

[dljordan]

“The Treasury and a group of nationally chartered banks subscribed the Fed’s initial capital when it was founded. After paying very small “dividends” to the branches on that original subscription amount, virtually all of the profits of the Fed, coming to around $30 billion a year, are paid over to the US treasury, its beneficial owner in all but name. Why people still peddle this crap is beyond me. Next they will recycle breathless tales of Secret Rome... “

That’s pretty interesting, I never knew. You wouldn’t, by chance, know where I could read up on that?

[sageb1]

Why did Soros put so much into Lehman shortly before it failed?

[Orange1998]

Agreed.

[Just mythoughts]

The Treasury and a group of nationally chartered banks subscribed the Fed's initial capital when it was founded. After paying very small "dividends" to the branches on that original subscription amount, virtually all of the profits of the Fed, coming to around $30 billion a year, are paid over to the US treasury, its beneficial owner in all but name. Why people still peddle this crap is beyond me. Next they will recycle breathless tales of Secret Rome...

Crap you claim, why when the head of the Fed goes to Congress to speak in an unknown tongue do these people ask as if 'god' was addressing them.

Now maybe you are clued in on this language but I never understood what Greenspam had to say, although there did seem to be something to his 'irrational exuberance'.

http://www.irrationalexuberance.com/definition.htm