Lehman Emergency Meeting Resumes the Long Day's Journey into Night

AP
Emergency Meeting on Lehman Rescue Resumes
By JEANNINE AVERSA

WASHINGTON - With the global financial system holding its collective breath, the U.S. government scrambled Saturday to help devise a rescue for Lehman Brothers and restore confidence in Wall Street and the American financial structure.

An official from the Federal Reserve Bank of New York, who asked not to be named due to the sensitivity of the talks, said deliberations have resumed with leading Wall Street executives and top U.S. financial officials.

They include Treasury Secretary Henry Paulson, Timothy Geithner, president of the New York Fed, and Securities and Exchange Commission Chairman Christopher Cox. They were meeting on the heels of an emergency session convened Friday night by Geithner — the Fed's point person on financial crises.

Participants in Saturday's discussions also include executives from Goldman Sachs, JPMorgan Chase, Morgan Stanley, Citigroup and Merrill Lynch.

Federal Reserve Chairman Ben Bernanke is actively engaged in the deliberations but wasn't in attendance.

Fed and Treasury officials are aiming to engineer a private-sector rescue for the troubled firm that doesn't involve government money. Options include selling Lehman outright or breaking it up into pieces to be sold to private firms. (The most likely outcome is the latter unless Fuld and the shareholders oppose it. Then it will get interesting - Jesse)

Potential buyers could include Bank of America Corp., Britain's Barclay's Plc, Japan's Nomura Securities, France's BNP Paribas and Deutsche Bank AG. All have declined to comment.

Global fears intensified Saturday that the collapse of the country's fourth-largest investment bank would stagger markets and undercut confidence in the U.S. financial system.

U.S. regulators face growing pressure from abroad to find a way out ahead of Monday's reopening of Asian markets. Germany's Finance Minister Peer Steinbrueck urged that a resolution be found before then, warning ominously, "the news that is coming out of the U.S. is bad."

Lehman Brothers Holdings Inc. put itself on the block earlier this week. Bad bets on real-estate holdings — which have factored into bank failures and taken out other financial companies — have thrust the 158-year-old firm in peril. Its stock has been hammered and it has been dogged by growing doubts about whether other financial institutions would continue to do business with it.

Leviathan: Children of the Vortex

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.

The darkness drops again; but now I know
That twenty centuries of stony sleep
were vexed to nightmare by a rocking cradle,
And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?

W. B. Yeats 1817

Westwärts
schweift der Blick:
ostwärts
streicht das Schiff.
Frisch weht der Wind
der Heimat zu:
mein irisch Kind,
wo weilest du?

Richard Wagner, Tristan und Isolde, Act III, Sc. 1

NY Fed Holds Emergency Meeting to Discuss the Fate of Lehman

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...

US Dollar Weekly Chart with Commitments of Traders