Hint to our non-US readers. In the United States it has recently become culturally acceptable to publicly lie through your teeth if you are covered by the “Safe Harbor” Statement rule under the Private Securities Litigation Reform Act of 1995, or if you are a government functionary and are shaping perception for the good of the American public.
This morning's speech by Fed Chairman Bernanke to the conference on monetary policy in Barcelona was a fine example of shaping perception or 'spin.' Ben was obviously answering some concerns raised by your own government leaders who have heavily invested your national savings in the US dollar and US financial assets. These investments are at a high risk of significant devaluation or default, even moreso than they have seen already.
There is little doubt that Ben is panicking because the weakening dollar and rising commodity prices are bringing the US financial crisis to a new stage that threatens its unsustainable equilibrium. We are experiencing a 'trade shock' which is crippling the real economy. The Fed does not wish to continue to cut rates for the sake of the economy and risk continuing declines in the bond and the dollar. Unfortunately they have few options.
The current US financial situation is not sustainable without continuing massive subsidies of real wealth from non-US sources. It is not being used to correct the problem, merely to sustain the status quo.
They pretend to tell the truth and we pretend to believe them. We have little choice.
Lehman May Need to Raise Capital as Analysts See Loss
By Ambereen Choudhury and Yalman Onaran
June 3 (Bloomberg) -- Lehman Brothers Holdings Inc. may report its first quarterly loss since going public in 1994, increasing pressure on the company to raise capital by selling stock.
The fourth-biggest U.S. securities firm probably will post a second-quarter loss of 50 cents to 75 cents a share, according to analysts at Oppenheimer & Co. and Bank of America Corp. New York-based Lehman holds ``very large, illiquid'' assets and ``we can't rule out equity issuance'' to replenish the balance sheet, analysts at Merrill Lynch & Co. said in a report yesterday.
Lehman may seek as much as $4 billion by selling common stock, the Wall Street Journal reported today, citing unidentified people with knowledge of the matter. The company has raised $6 billion since February amid asset writedowns and losses from the collapse of the U.S. subprime mortgage market. Lehman dropped 48 percent in New York trading this year, the worst performance on the 11-company Amex Securities Broker/Dealer Index.
``This is adding to the perception that there's a need for more write-offs and capital raisings,'' said Greg Bundy, executive chairman of merger advisory firm InterFinancial Ltd. in Sydney and a former head of Merrill's Australian unit.
Lehman spokesman Mark Lane declined to comment. The company's shares were down $1.28 at $32.55 in early New York trading, after falling 8.1 percent yesterday on the New York Stock Exchange.
`Behind Us'
Chief Executive Officer Richard Fuld said at the annual shareholders meeting in April that ``the worst is behind us'' in the credit-market contraction that has cost the world's biggest banks and brokerages more than $387 billion. (Mission Accomplished? - Jesse)
Financial-services firms have been forced to raise $276 billion to cover the losses, according to Bloomberg data. Citigroup Inc., the biggest U.S. bank, has raised the most, pulling in more than $44 billion with a combination of stock sales and private offerings to investment funds controlled by foreign governments including Abu Dhabi.
Lehman Chief Financial Officer Erin Callan said last month at an industry conference in New York that the firm's leverage-- the ratio of assets to equity -- declined to 27 to 1 from almost 32 to 1 at the end of the first quarter. The company needs more capital because of declines in the credit markets, David Einhorn, a hedge fund manager who's betting Lehman shares will fall, said in an interview last week.
Merrill Rating
Standard & Poor's downgraded the credit ratings of Lehman and bigger New York-based competitors Morgan Stanley and Merrill yesterday, saying they may disclose more writedowns for devalued assets. Lehman's credit rating was cut to A from A+, as was Merrill's.
Investors have ``serious concerns that the subprime crisis isn't over at all,'' said Fumiyuki Nakanishi, an equity strategist at Sumitomo Mitsui Financial Group Inc. in Tokyo. (Its not over. What the hell is wrong with you people. Are you delusional? - Jesse)
The S&P downgrades may make it harder for the banks to sell derivatives such as credit-default swaps that are tied to bonds or loans, said Brad Hintz, an analyst at Sanford C. Bernstein in New York, who has a ``market perform'' rating on Lehman.
``Lehman needs to reduce its leverage ratios to reflect the new realities of the fixed-income marketplace,'' Hintz wrote in a report to clients today. ``This will not be good for the firm's revenue base.'' (Lehman was levered up like a hedge fund, moreso than a bank, and was heavily invested in misrated assets. Reckless disregard for risk management and sound investment practice for a bank. - Jesse)
To contact the reporters on this story: Ambereen Choudhury in London at achoudhury@bloomberg.net; Yalman Onaran in New York at yonaran@bloomberg.net.
