Crunch time as the rumoured deals prove ephemeral, contingent on substantive support. Lehman staggers into the weekend.
If a deal is created, keep an eye out for subtle government support through a lower profile mechanism such as the special facilities or the FHLB.
Based on this attendance list, there is probably a significant discussion of counterparty risk, and possible impacts should Lehman be allowed to fail, including potential CDS impacts
If they were ever going to let a bank fail to achieve some credibility, Lehman would be the one.
The financial dons must have the chance to speak their minds, discuss the pros and cons of the alternatives, as the jackals and vultures circle to pick the carcass.
The Wall Street Journal
New York Fed Holds Emergency Meeting On Lehman's Future
By DAMIAN PALETTA and SUSANNE CRAIG
September 12, 2008 9:01 p.m.
The Federal Reserve Bank of New York held an emergency meeting Friday night with top Wall Street executives to discuss the future of venerable firm Lehman Brothers Holdings Inc. and the parlous state of U.S. financial markets.
In attendance were Treasury Secretary Henry Paulson, Securities and Exchange Commission Chairman Christopher Cox, Morgan Stanley Chief Executive John Mack and Merrill Lynch Chief Executive John Thain, among others.
Talks about a sale of Lehman or many of its parts are taking place in other forums and will likely continue through the weekend.
The meeting began at 6 p.m. but precise details about what was discussed could not be learned. The meeting appeared similar to one a decade ago when the New York Fed pulled together top Wall Street executives to prevent the collapse of hedge fund Long-Term Capital Management.
One big issue: Most of the firms at the meeting have themselves been hit with big losses and may not have the excess capital to step in...
As of late Friday, Bank of America Corp. was seen as the likeliest buyer, but Lehman and its investment bankers also were meeting with other potential bidders, including Barclays PLC and HSBC PLC, both of the U.K. Other parties were looking only at pieces of Lehman, with Goldman Sachs Group Inc. interested in some of the securities firm's huge real-estate portfolio.
But suitors like Bank of America, worried about the risk of buying an ailing financial institution like Lehman, want the government to step in with a package similar to what was offered to J.P. Morgan when it bought Bear. Then, the federal government agreed to absorb as much as $29 billion in losses. In seeking a Lehman deal, Bank of America Chairman and Chief Executive Kenneth D. Lewis is likely to face a tough sell to investors if he doesn't secure some federal government backing...
