Tokyo Mitsubishi says they might be interested by will proceed conservatively and wait until after Lehman announces its third quarter results next week to see what they have to say.
Apparently a trip to the US to perform a due diligence in New York with a look at the books such as the Korean government performed was not in the budget.
T-M says that if the price drops sufficiently after the announcement they may be in a position to make an offer.
We hate to sound cynical, but with all this media posturing about maybe deals we suspect that some folks are fishing for a backstop such as JPM received for Bear, and are using the media to float their trial balloons. Or in the worst case, some insiders are using media leaks to cover the sale of shares prior to the Lehman third quarter results next week.
And the search for a suitable husband for little Lehman by her father Hank goes on far and wide. Stay tuned for the next exciting chapter.
Tokyo Mitsubishi 'interested in buying' Lehman Brothers
Leo Lewis, Asia Business Correspondent
September 3, 2008
The Times
Japan’s biggest megabank, Tokyo Mitsubishi UFJ is poised to enter the bidding for a substantial stake in Lehman Brothers, and may even seek control of the ailing Wall Street titan, according to banking industry sources in Tokyo.
Senior sources close to the Japanese group say that the possible acquisition is being treated as a “once in a lifetime” opportunity but that the notoriously conservative bank will proceed with extreme caution. (Buying Lehman with extreme caution. Is that an oxymoron? Or a hint that a backstop from the Fed is required? - Jesse)
Tokyo Mitsubishi, which has ample sources of funding for a multi-billion dollar acquisition, is expected to keep its powder dry until after Lehman announces its third quarter results next week — an event that traders around the world believe could see yet another bout of “kitchen sinking” and another potential dip in Lehman’s share price. (If they are serious about an acquisition they cannot perform due diligence and simply look at the books with Lehman's management as did the Koreans? - Jesse)
Traders believe that, in addition to its ongoing woes, Lehman’s results could result in the bank being probed by analysts and investors over activities related to R3 Capital Partners, a hedge fund. The fund, which was established this spring by a former senior executive at Lehman and which has the bank as a “passive, minority investor”, has become the focus of rising market concern that it may provide yet more bad news for Lehman.
Lehman has consistently said that all its transactions with R3, as an investor and a seller of assets, are at arm’s length. The bank is understood to have sold perhaps as much as $4.5 billion (£2.5 billion) of assets to R3 since May. Traders in Tokyo and Hong Kong said that the next few weeks would show whether R3 represents an Achilles heel for Lehman in the way that hedge funds related to Bear Stearns contributed to that firm’s downfall.
The head of one Hong Kong-based dealing room told The Times that the results announcement was expected to be the turning point for Lehman. From the point of view of Tokyo Mitsubishi — or any other potential bidders — the period immediately after the results could present the same opportunity that is currently on the table but at a much cheaper price.
If Lehman surprises the market with more bad news or fails to convince that it has a decent capital injection on its way, its shares will fall again and that is when the big Japanese bid will come in, said a source at a large Tokyo brokerage. (And what sort of 'put' shall we call this? - Jesse)
The possible emergence of a Japanese-backed capital injection into Lehman comes as the troubled US firm remains locked in negotiations with the state-backed Korea Development Bank over the sale of a possible 25 per cent stake. (A media circus might be a more appropriate description for this entire sorry episode - Jesse)
Chosun Ilbo, South Korea’s largest daily, today reported that HSBC, a trio of US hedge funds and an unnamed Chinese bank may also be eyeing big stakes in Lehman. But a spokesman for HSBC told The Times: "We're not interested in acquiring an investment bank. We're focused on growing in emerging markets, not developing markets." HSBC is not thought to be interested in acquiring any parts of Lehman. (The Chosun Ilbo is either completely inept at checking sources prior to printing major stories, constantly citing sources of interest that later vehemently deny it, or they are complicit in the manipulation of markets through leaked misinformation from anonymous sources. Take your pick. - Jesse)
03 September 2008
Tokyo Mitsubishi Expresses an Interest in Lehman... Maybe
Either the Fed Kills the Dollar or the Banks. Is It That Simple?
"Either the Fed kills the dollar or the banks. It's that simple. The poor innocent employees. How touching. Where's RL's concern for poor innocent dollar holders?"
Forbes: Communist Tool - The Skeptical CPA
Succinct, a little overstated to our eye moderated by the graying of experience, but true enough if one adds "the few Wall Street banks that gamed the system" and "the dollar over time." Either the Fed kills the Dollar over time or allows the Banks that have gamed the system and lost to accept their losses as gracefully as can be arranged.
The losses must be taken; they do not simply vanish. Every dollar of loss taken by the public trust is a hidden tax that is levied on all holders of the dollar. Even if one tries to make the improbable case that this inflation is offset by deflation it is still a reallocation of net wealth from the many to financial insiders.
The upper bound of the Fed's latitude is the dollar and our sovereign debt. The recent support of the banks is a policy choice, not a monetary action: a means of socializing the losses of the elite few for the sake of expediency.
A capitalism where an elite keeps all their profits and force their losses on the public is no capitalism and not even a democratic republic: it is a form of unrepresentative taxation by the banks that is a tyranny known as crony capitalism.
How can one set up a free market system in which one set of players have access to the house's funds and cannot lose? How does one sustain a game like that until the other players realize it is a blatant fraud and kick over the table?
The usual response is "but what are we to do? It is a crisis! Act now! Here are your choices!"
Make it an orderly process of receivership if required, but put the losses and the taxes directly on those who profited from the loss generating enterprises: shareholders, management, affiliates, and above all the insiders. By all means the central bank should lend freely, but at high rates of interest, not at subsidies.
Support what must be supported temporarily, but extract all incentive for those who gained so that they might be less tempted to do it again. That which is unprofitable and not rewarded is not desired; that which is punished will be deterred. These are the basics of natural law.
Investigate and punish any wrongdoing with commensurate fines and appropriately deterrent punishment including loss of freedom. Restore the integrity of the system through the enforcement of law and regulation already in place that has been undermined and neglected. Keep and reinstate that which has worked and reform the rest.
But above all, do not allow the situation to be resolved by an injustice to the public trust even 'this one time' for the sake of expediency. That is a moral hazard that stays with us and keeps regenerating. It is a distortion of the capital market system and an invitation to a procession of frauds and bubbles that eventually will wreck the dollar and the nation as we know it.
At first the comparison of this crony capitalism to communism was jarring. But as we thought about it, we saw that it was just another form of statism, in that the unelected few are unjustly apportioning resources at odds with a free market and the law.
Yes, it can be that simple. We might also say that either we restrain the incredible growth of the financial sector as a percentage of GDP and restore the system to some balance of production and capital allocation and accumulation or we will destroy it through this cycle of bubble, bust and credit crisis.
The share of financials in value added has steadily increased and has reached about 8 percent in 2006-2007. The share of profits, however, climbed to reach an extraordinary 40 percent and more!
The Financial Sector and Its Growing Excesses - Mostly Economics
On the Necessity of Regulation To Maintain Free Markets
There is an economic school of thought that believes that all government regulation is an impediment to markets. Markets are thought to be in their most perfect state when unfettered by any external interference or restraints. They are naturally self-ordering because of the dominance of a inherently reasonable goodness in the market participants. As this has been popularized there are many who mouth its slogans without serious thought about the assumptions and implications of those assumptions.
The other primary argument seems to be that since regulations are not perfectly sufficient by themselves without any additional effort then we ought to get rid of them. This is of course a logical fallacy since nothing in the real world is perfect and sufficient in itself without tending. Structures in the physical world tend to weaken and decay over time, requiring renewal, refreshment, endorsement, upholding.
Unfettered or free marketism is a modern variant of the 18th century cult of primitivism and the noble savage; mankind is perfect and most effective in its natural state, unspoiled by laws or civilization. It is a proper cult, because the same notion, when logically applied to any other system of interactions and transactions, is quickly seen to be patently absurd and unworkable. We offer the example of a football game, a traffic interchange, a cocktail party.
To say that some regulation is a necessary good does not imply that a surfeit of regulation is optimal. This is another cult called 'statism.' It is this extreme of over-regulation that is used to promote extreme deregulation for its own sake by the free marketists. Cults tend to be infested with cultish minds, reasoning from one extreme to the other, always and everywhere creating inefficient and untractable problems.
Certainly law and regulation can be abused, misused, overdone. But merely cutting regulations down to free the native economy can have unexpected consequences, even towards those who promote mass deregulation to achieve their personal ends.
Sir Thomas More: What would you do? Cut a great road through the law to get after the Devil?
William Roper: Yes, I'd cut down every law in England to do that!
Sir Thomas More: Oh? And when the last law was down, and the Devil turned 'round on you, where would you hide, Roper, the laws all being flat?
This country is planted thick with laws, from coast to coast... And if you cut them down, and you're just the man to do it, do you really think you could stand upright in the winds that would blow then?
Robert Bolt: A Man for All Seasons
