BAC Dumps Lehman, Said to Be Courting Merrill

Are these guys meeting at the NY Fed or Plato's Retreat?

Odd man out can be the towel boy.

Bank of America Said to Walk Away From Lehman Talks
By Margaret Popper and Yalman Onaran

Sept. 14 (Bloomberg) -- Bank of America Corp. abandoned talks to buy Lehman Brothers Holdings Inc., according to a person with knowledge of the matter, less than three hours after Barclays Plc said it wouldn't buy the faltering investment bank.

Bank of America, Merrill Lynch In Merger Talks
By MATTHEW KARNITSCHNIG, SUSANNE CRAIG and DENNIS K. BERMAN
September 14, 2008 4:08 p.m.

Bank of America and Merrill Lynch & Co. Inc. are in merger discussions, according to people familiar with the matter.

The talks come amid a Wall Street scramble to sort out a potential liquidation of Lehman Brothers Holdings Inc.

Bank of America had considered buying Lehman, but when those talks failed to result in a deal, BofA turned its attention to Merrill, which is considered a better fit for the bank.

Much remains uncertain and conditions were fluid.

Wall Street Braces for Lehman Bankruptcy with Special Trading Session

Wall Street Prepares for Potential Lehman Bankruptcy
By Craig Torres
September 14, 2008 15:19 EDT

Sept. 14 (Bloomberg) -- Wall Street prepared for a potential Lehman Brothers Holdings Inc. bankruptcy after Barclays Plc said it pulled out of talks to buy the firm and the government indicated it wouldn't provide funds in a resolution.

Banks and brokers today held a session for netting derivatives transactions with Lehman, or canceling trades that offset each other, in case the New York-based firm files for bankruptcy before midnight New York time.

``The purpose of this session is to reduce risk associated with a potential Lehman Brothers Inc. bankruptcy filing,'' the International Swaps and Derivatives Association said in a statement today. The ISDA includes 218 banks, brokerages, insurance companies and other financial institutions from the U.S. and abroad.

The step indicates that Wall Street lacks confidence that three days of talks to find a buyer for Lehman, held at the Federal Reserve Bank of New York, will be successful. Treasury Secretary Henry Paulson, who has led the talks with New York Fed President Timothy Geithner, was adamant two days ago against using taxpayer funds in a resolution.

The fourth-largest securities firm until the past week, Lehman has thousands of such trades in credit, equity, commodity, interest rates and currency derivatives.

``ISDA confirms a netting trading session will take place between 2 p.m. and 4 p.m. New York time for over-the-counter derivatives,'' the ISDA said. ``Trades are contingent on a bankruptcy filing at or before 11:59 p.m. New York time, Sunday, Sept. 14, 2008. If there is no filing, the trades cease to exist.''

The announcement came after Barclays, the U.K.'s third- biggest bank, said it abandoned talks to buy Lehman, contending it couldn't obtain guarantees to protect against potential losses at the U.S. securities firm.

Barclays Pulls Out of the Lehman Talks

Barclays walks away from deal to rescue Lehman Brothers
By James Quinn in New York
6:28pm BST 14/09/2008
UK Telegraph

British bank Barclays has decided to walk away from talks to buy some or all of troubled US investment bank Lehman Brothers.

Barclays, whose negotiating team is led by Barclays Capital chief Bob Diamond, is in the process of informing Lehman and the Federal Reserve Bank of New York that it no longer wants to take part in the discussions because of the US government's unwillingness to guarantee Lehman's assets.

Although Barclays is understood to be happy that the New York Fed was leading discussions for Lehman's $41.8bn of troubled property assets to be ring-fenced, it is unhappy with the fact that its balance sheet would still be exposed to all the remaining counter-party and other risks within Lehman.

Under UK Listing Authority rules, the third-largest British bank would have to hold a full shareholder vote if it were to provide such a guarantee itself, something that is impossible to do given the race to secure a buyer as quickly as possible.

The decision by Mr Diamond, who has been looking for ways to catapult Barclays' into Wall Street's top tier, has been taken with the full knowledge of Barclays group chief executive John Varley and the rest of the board.

The surprise decision leaves a consortium led by Bank of America as the only potential buyer for Lehman, whose fate remains precarious. One sourrce suggested that the move could be merely a negotiating tactic by Barclays to force US Treasury Secretary Hank Paulson to offer a guarantee.

A team of senior Barclays executives, including Bob Diamond and Jerry del Missier, the chief executive and co-president of Barclays Capital respectively, have been locked in talks aimed at finding an appropriate structure for a takeover of Lehman.

Bob Diamond, is an American born in Massachusetts. He has been with Barclays since 1996, and caused a stir in 2006 by becoming the highest paid CEO among the FTSE 100, taking home an estimated £22,000,000, up slightly from the £21m he earned in 2005. He is an avid supporter of the Boston Red Sox.

Greenspan Says Its a "Once in a Century Crisis"

Perhaps its because we just had the worst federal reserve chief in a century leave office after a lengthy tenure.

Greenspan: Economy in 'once-in-a-century' crisis
September 14, 2008: 1:08 PM EDT

In an interview Sunday, the former Federal Reserve chairman said that more financial firms will fail and that housing won't stabilize until 2009.

WASHINGTON (CNN) -- The U.S. credit squeeze has brought on a "once-in-a-century" financial crisis that is likely to claim more big firms before it eases, former Federal Reserve chief Alan Greenspan said Sunday.

Greenspan told ABC's "This Week" that the situation "is in the process of outstripping anything I've seen, and it still is not resolved and it still has a way to go."

"Indeed, it will continue to be a corrosive force until the price of homes in the United States stabilizes," Greenspan said. He predicted that would not happen until early 2009, and said the odds of U.S. recession have gone up in recent months. (early 2009? In your dreams econo-weenie, not unless we have a market-clearing event and houses drop another 25%. Credit is tight and real wage growth is nil - Jesse)

"I can't believe we could have a once-in-a-century type of financial crisis without a significant impact on the real economy globally, and I think that indeed is what is in the process of occurring," he said.

While recent declines in the prices of oil and food may help avert a recession, he said, "I wouldn't put my money on it."

The financial crunch already has claimed investment bank Bear Stearns, spurred the federal seizure of mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) and left century-old Wall Street institution Lehman Brothers (LEH, Fortune 500) clinging by its fingernails after suffering nearly $7 billion in real estate-related losses.

Federal regulators and Wall Street executives were holding weekend crisis talks aimed at resolving the Lehman situation without further shock to the financial sector.

Greenspan, who left office in 2006, said he expected more failures before the crisis eases. While regulators "shouldn't try to protect every single institution," he said, companies should be kept from failing "in a sharply disruptive manner" to prevent further shocks.

Greenspan's critics say he helped inflate the housing bubble by keeping target short-term rates too low for too long, leading to reckless lending and borrowing in the housing market. But Greenspan has said the problem lay not in the loans themselves, but in their repackaging as securities and sale to investors. (Greenie you lying old whoremaster - Jesse)