Lehman Brothers collapse

SPML and Preferred are the UK sub-prime lending subsidiaries of Lehman


Really sums up the current financial crisis. They think they lost $2.6 billion. It doesn’t inspire confidence in a company if it doesnt know how much its lost. If they dont even know where they stand now then how can you expect them to sort out their problems. Oh I forgot. They cant sort themselves out. Ben Bernanke and the American taxpayer will.

The CFO and COO of Lehmans have been sacked, share price down about 10% in pre-market trading.


you have to hand it to the yanks, they don’t fuck around like we do when it comes to accountability

(government finances exploded? no-one to blame here, sure it’s all down to ‘forces beyond our control’. errrr let’s all move on. ME HOLE :angry: )

From another thread thepropertypin.com/viewtopic.php?t=10755:

you have to hand it to the yanks, they don’t fuck around like we do when it comes to accountability

It is a bit of a nonsense choice of victims though. The CFO just reports the numbers. The finance function in an investment bank has shag all say in terms of trading strategy. Going into the credit crisis Lehman had a huge balance sheet of sub-prime mortgages and commercial mortgages ready for securitisation but then the music stopped. That plus syndicating high yield loans was the trade that they were riding. Responsibility? The head of fixed income trading or Dick Fuld himself.

The music stops and Lehman can not shift its inventory as the syndication and securitisation markets are closed. Prices in the subprime, CMBS and High Yield markets are falling and Lehman is taking losses as it marks down its loan books. To hedge these losses it can buy default swap protection on the CMBX, ABX or LEVX indices (see markit partners website). In a normal market as the price of the subprime or CMBS bonds falls the value of protection hedging it rises, net net no gain or losses. Trouble is nobody is actually buying CMBS or sub-prime RMBS bonds or the underlying loans so there is no clarity on pricing. But everyone is buying the derivative protection on the CMBX, ABX and LEVX, some to hedge their positions, but most to short the market. Hedge funds were taking a bet that the indices would rise and a bubble was created, the price of buying protection lost all relationship to the credit risk of the underlying bonds. Lehman bought their protection at the top of this bubble.

It was discussed on Sudden Debt, Calculated Risk and I think here that there was a disconnect between the CMBX and ABX and the underlying cash bond markets. It was no great secret, but shareholder and press pressure must have led Lehman to buy at those levels. The bubble burst after March. The speculators closed out their bets and took their profits. BBB CMBS protection on CMBX was 1200bps in March and is 400 now. The protection is worth a third of its value, but as the bond market had become disconnected it has not shown a commensurate gain.

So Lehman take their losses on the derivatives and no gains on the bonds and loans. It was a pretty crude strategy. But the strategy would have been agreed at the top, by the heads of trading and Dick Fuld. The finance function would have had no say. But hey some one has to be seen to lose their job, so lets shoot the messenger. Utter nonsense

Click on link to see graph.

The rumours refuse to go away. From Across the Curve:

Stock currently down 8 some percent.

Down 19% and counting today…


To be honest, I’m surprised they’ve lasted this long.

Also, Columbia banking system:


I thought Treasury Secretary Paulson’s comment during testimony to Congress today was revealing: “Large financial institutions should be allowed to fail”.
You could hear the bums squeak over at Lehman Brothers.

Lehmans shares down another 12% premarket not long before they are suspended surely?

Fannie and Freddie going to be bailed out by US taxpayer?

bloomberg.com/apps/news?pid= … refer=home

[*Lehman in talks to sell $40bn in real estate * (https://www.ft.com/cms/s/0/c1f750a0-6af2-11dd-b613-0000779fd18c.html?nclick_check=1)
By Henny Sender in New York

Published: August 15 2008 23:32 | Last updated: August 15 2008 23:32

Lehman Brothers is in talks with potential buyers over the sale of its $40bn portfolio of commercial real estate assets and securities in an effort to replenish its balance sheet.

People who have been in the discussions say the troubled investment bank wants to sell the assets either as a whole or in pieces but added there was a gap between Lehman’s perception of the value of the portfolio and that of buyers.

Lehman faces fight to shed real estate assets - Aug-15Merrill Lynch faces NY lawsuit over ARS - Aug-15Merrill set to avoid UK tax after $29bn loss - Aug-14JPMorgan raises $1.6bn to boost balance sheet - Aug-15Wall Street banks hit by downgrades - Aug-13Lehman share woes deepen - Jul-11In a move to lure buyers, Lehman has offered to shoulder the first $5bn of any losses suffered on the portfolio’s assets following a sale, they said.

If the sale talks fail, Lehman is believed to be considering spinning off the entire commercial property division and listing it separately, people close to the discussions said.

Such a move might not raise much fresh capital but could help Lehman to dispel the concerns over its balance sheet and financial health that have dogged it for the past few months.

Since May 15 its shares have fallen by about 63 per cent while the S&P 500 index of financial stocks has dropped about 20 per cent.

Lehman, which has raised more than $13bn in capital after suffering credit-related writedowns and losses of more than $8bn, is expected to make a decision by the time it reports third-quarter results next month.

Those who have held talks with Lehman on the fate of the troubled division include BlackRock, Blackstone, Colony Capital, and J.E. Robert Companies – all of which have large real estate portfolios.

Lehman has been slow to deal with its commercial real estate portfolio, which the company valued at almost $52bn at the end of November and was worth $40bn at the end of May.

The portfolio includes mortgages and mortgage-backed securities that were valued at $29.4bn as of May 31. It also contains real estate assets worth $10.4bn at the end of May.

The scale of the operations is huge when compared with either Lehman’s market capitalisation of about $12bn or its balance sheet.

Lehman declined to comment. People close to the discussions said no final decision had been made on the commercial real estate portfolio.

Additional reporting by Francesco Guerrera in New York

Sounds like the Irish property market 8)

Indeed, although developers haven’t got to the point where they are willing to indemnify people against a certain amount of losses just yet.