Posts Tagged ‘Lehman’

Financial Reform: Will We Even Have A Debate?

Financial Reform: Will We Even Have A Debate?

Courtesy of Simon Johnson at Baseline Scenario 

The New York Times reports that financial reform is the next top priority for Democrats.  Barney Frank, fresh from meeting with the president, sends a promising signal,

“There are going to be death panels enacted by the Congress this year — but they’re death panels for large financial institutions that can’t make it,” he said. “We’re going to put them to death and we’re not going to do very much for their heirs. We will do the minimum that’s needed to keep this from spiraling into a broader problem.”

But there is another, much less positive interpretation regarding what is now developing in the Senate.  The indications are that some version of the Dodd bill will be presented to Democrats and Republicans alike as a fait accompli – this is what we are going to do, so are you with us or against us in the final recorded vote?  And, whatever you do – they say to the Democrats – don’t rock the boat with any strengthening amendments.

Chris Dodd, master of the parliamentary maneuver, and the White House seem to have in mind curtailing debate and moving directly to decision.  Republicans, such as Judd Gregg and Bob Corker, may be getting on board with exactly this.…
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Lehman chief warns of more big bank failures

Lehman chief warns of more big bank failures

Courtesy of Edward Harrison at Credit Writedowns 

Lehman Head Bryan Marsal has warned that Wall Street had not learned its lesson in the credit crisis and that another megabank bankruptcy is likely. Marsal made the remarks while in Berlin for a bankruptcy conference in an interview with German business daily Handelsblatt, which I have translated below. A link to the full German text is provided at the bottom of this post. His comments serve as a reminder that the megabanks are still too large and complex, and, therefore pose a risk to the entire global banking system.

Text of the interview

Handelsblatt: you are handling the largest bankruptcy in human history. Can anything like this happen again?

Bryan Marsal: It is even likely that a case like Lehman’s will repeat itself – in any event, as long as nothing fundamental changes in financial regulation and in financial institutions. Wall Street has not really learned a lot from the situation. There is still too much leverage in the market, and credit default swaps remain completely unregulated. Even with regulators and in the companies little has been done after the global catastrophe.

HB: But financial regulators around the world are now pulling in the reins …

Marsal: Oh, really? That’s just for show. The regulators are overworked and underpaid. Someone who earns $80,000 a year cannot seriously compete with someone who gets $400,000 for finding ways to get around the system. And so far no one from the regulators at the SEC, at the FDIC or our government has asked  how the Lehman collapse could have been avoided and what countermeasures could be taken to prevent a recurrence.

HB: So David loses to Goliath?

Marsal: I wouldn’t put it that way. In Canada, for example, you have to put up at least 25 percent equity to finance your own home. The banks finance no more than three quarters of the money. If we had such a rule in the U.S., there would never have been the massive mortgage-speculation in the years from 2005 to 2007.

HB: What should have been done?

Marsal: You see, Lehman


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Chris Dodd Asks Department Of Justice To Probe Lehman Repo 105 And “Other” Accounting

Chris Dodd Asks Department Of Justice To Probe Lehman Repo 105 And "Other" Accounting

Courtesy of Tyler Durden

Not to worry Dick "Tragic, Mistaken Figure" Fuld – after all Repo 105, what was the line, merely "vindicated you." There is absolutely no need to jump on a one flight to Caracas.

Dick FuldMarch 19, 2010

The Honorable Eric H. Holder, Jr.
Attorney General of the United States
United States Department of Justice
950 Pennsylvania Avenue, NW
Washington, D.C.  20530

Dear Attorney General Holder:

I am deeply concerned about the facts that have come to light regarding the demise of Lehman Brothers and the accounting manipulation that contributed to it. I respectfully ask you to commission a task force to investigate the Lehman situation as well as other companies that may have engaged in similar accounting manipulation with a view to prosecution of employees or agents who contributed to any violations of the law.     

According to the Report of the U.S. Trustee-appointed Examiner Anton R. Valukas, Lehman presented a misleading picture of its financial condition to the public by using extensive repurchase agreements known as Repo 105 transactions. The Examiner found that "Lehman did not disclose its use — or the significant magnitude of its use — of Repo 105 to the Government, to the rating agencies, to its investors, or to its own Board of Directors." The result was to conceal its holdings of bad assets and to temporarily remove approximately $50 billion of assets from its balance sheet at the end of the first and second quarters of 2008. The Examiner found that Lehman used Repo 105 transactions for no other articulated purpose than to shrink its balance sheet at the quarter-end, in a manner that deceived investors and creditors about its true financial state and misleading others.     

We must work tirelessly to reduce the incidence of financial fraud in order to restore trust and confidence in the financial markets. A task force investigation and taking appropriate Federal actions in these matters will contribute to these goals.

Sincerely Christopher J. Dodd Chairman 

Portrait: Courtesy of Wall Street Cheat Sheet


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SEC, Fed Alerted By Merrill of Lehman Balance Sheet Games in March 2008

SEC, Fed Alerted By Merrill of Lehman Balance Sheet Games in March 2008

By Yves Smith at Naked Capitalism

At least 35 villagers die in Kazakhstan flood

So which theory is it: stunning bureaucratic incompetence, wishful thinking and denial (a better gloss on theory #1) or a cover up? Or a combination of the above?

No matter which theory or theories you subscribe to, the continuing revelations of how the SEC and perhaps more important, the New York Fed conducted themselves in the months before Lehman’s collapse paint an increasingly damning picture.

The Valukas report shows both regulators were monitoring Lehman on a day-to-day basis shortly after Bear’s failure. They recognized that it has a massive hole in its balance sheet, yet took an inertial course of action. They pressured a clearly in denial Fuld to raise capital (and Andrew Ross Sorkin’s accounts of those efforts make it clear they were likely to fail) and did not take steps towards any other remedy until the firm was on the brink of collapse (the effort to force a private sector bailout as part of a good bank/bad bank resolution).

One of the possible excuses for the failure to do more was that the officialdom did not recognize how badly impaired Lehman was until too late in the game to do much more than flail about. But that argument is undercut by a story in tonight’s Financial Times…  [Read more by Yves here.>>] 

From the Financial Times:

Former Merrill Lynch officials said they contacted regulators about the way Lehman measured its liquidity position for competitive reasons. The Merrill officials said they were coming under pressure from their trading partners and investors, who feared that Merrill was less liquid then Lehman…

In the account given by the Merrill officials, the SEC, the lead regulator, and the New York Federal Reserve were given warnings about Lehman’s balance sheet calculations as far back as March 2008.

Former and current Fed officials say even in the competitive world of Wall Street, it is un­usual for rival bankers to relay such concerns to the Fed.

The former Merrill officials said they contacted the regulators after Lehman released an estimate of its liquidity position in the first quarter of 2008. Lehman touted its results to its counterparties and its investors as proof that it was sounder than some of its rivals,


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Wall Street’s Naked Swindle

Worth reading if you haven’t yet. – Ilene

Wall Street’s Naked Swindle
A scheme to flood the market with counterfeit stocks helped kill Bear Stearns and Lehman Brothers — and the feds have yet to bust the culprits

Low angle view of a mid adult man tied up in rope

By MATT TAIBBI in Rolling Stone

On Tuesday, March 11th, 2008, somebody — nobody knows who — made one of the craziest bets Wall Street has ever seen. The mystery figure spent $1.7 million on a series of options, gambling that shares in the venerable investment bank Bear Stearns would lose more than half their value in nine days or less. It was madness — "like buying 1.7 million lottery tickets," according to one financial analyst.

But what’s even crazier is that the bet paid.

At the close of business that afternoon, Bear Stearns was trading at $62.97. At that point, whoever made the gamble owned the right to sell huge bundles of Bear stock, at $30 and $25, on or before March 20th. In order for the bet to pay, Bear would have to fall harder and faster than any Wall Street brokerage in history.

The very next day, March 12th, Bear went into free fall. By the end of the week, the firm had lost virtually all of its cash and was clinging to promises of state aid; by the weekend, it was being knocked to its knees by the Fed and the Treasury, and forced at the barrel of a shotgun to sell itself to JPMorgan Chase (which had been given $29 billion in public money to marry its hunchbacked new bride) at the humiliating price of … $2 a share. Whoever bought those options on March 11th woke up on the morning of March 17th having made 159 times his money, or roughly $270 million. This trader was either the luckiest guy in the world, the smartest son of a bitch ever or…

Like all the great merchants of the bubble economy, Bear and Lehman were leveraged to the hilt and vulnerable to collapse. Many of the methods that outsiders used to knock them over were mostly legal: Credit markers were pulled, rumors were spread through the media, and legitimate short-sellers pressured the stock price down. But when Bear and Lehman made their final leap off the cliff…
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More Arrogation Of Power?

More Arrogation Of Power?

Courtesy of Karl Denninger at The Market Ticker

Bloomberg has an interesting story up on the AIG derivative "payoff" mess I’ve repeatedly written about (just stick "aig & billions" into the search box and start reading.  Make sure you have a lot of time):

Beginning late in the week of Nov. 3, the New York Fed, led by President Timothy Geithner, took over negotiations with the banks from AIG, together with the Treasury Department and Chairman Ben S. Bernanke’s Federal Reserve. Geithner’s team circulated a draft term sheet outlining how the New York Fed wanted to deal with the swaps — insurance-like contracts that backed soured collateralized-debt obligations….

Part of a sentence in the document was crossed out. It contained a blank space that was intended to show the amount of the haircut the banks would take, according to people who saw the term sheet. After less than a week of private negotiations with the banks, the New York Fed instructed AIG to pay them par, or 100 cents on the dollar. The content of its deliberations has never been made public.

Where did the NY Fed get this authority?  Remember, this wasn’t the NY Fed’s money – it was ours.  Where was it appropriated by Congress?  This was not part of TARP – AIG was separate.

All appropriation bills must originate in The House. 

This one didn’t originate at all.  It was simply arrogated by The Federal Reserve and the NY Fed.

Section 13(3) of The Federal Reserve Act allows The Fed to lend to anyone under "unusual and exigent circumstances."  But this was not a loan.  It was a pass-through payment to Goldman Sachs and other banks for credit-default swaps that were in fact functionally worthless, as AIG was functionally bankrupt.  Why was it done?

One reason par was paid was because some counterparties insisted on being paid in full and the New York Fed did not want to negotiate separate deals, says a person close to the transaction. “Some of those banks needed 100 cents on the dollar or they risked failure,” Vickrey says.

So what?

And which of those banks were at risk of failure?  Goldman?  Merrill? Deutche Bank or Soc Gen?

This deal was even worse than it first appeared.  The Fed…
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Wall Street Titans Use Aliases to Foreclose on Families While Partnering With a Federal Agency

Wecome to Pam Martens!  Pam wrote this article for CounterPunch and kindly allows us to reprint it here. This is Part One of CounterPunch’s Special Investigation Series - I’m looking forward to additional great articles by Pam. – Ilene

Wall Street Titans Use Aliases to Foreclose on Families While Partnering With a Federal Agency

By PAM MARTENS

A federal agency tasked with expanding the American dream of home ownership and affordable housing free from discrimination to people of modest means has been quietly moving a chunk of that role to Wall Street since 2002.  In a stealth partial privatization, the U.S. Department of Housing and Urban Development (HUD) farmed out its mandate of working with single family homeowners in trouble on their mortgages to the industry most responsible for separating people from their savings and creating an unprecedented wealth gap that renders millions unable to pay those mortgages. This industry also ranks as one of the most storied industries in terms of race discrimination.  Rounding out its dubious housing credentials, Wall Street is now on life support courtesy of the public purse known as TARP as a result of issuing trillions of dollars in miss-rated housing bonds and housing-related derivatives, many of which were nothing more than algorithmic concepts wrapped in a high priced legal opinion.  It’s difficult to imagine a more problematic resume for the new housing czars.

To what degree this surreptitious program has contributed to putting children and families out on the street during one of the worst economic slumps since the ’30s  should be on a Congressional short list for investigation.  HUD’s demand for confidentiality from all bidders and announcement of winning bids to parties known only as “the winning bidder”  deserves its own investigation in terms of obfuscating the public’s right to know and the ability of the press to properly fulfill its function in a free society. 

Despite three days of emails and phone calls to HUD officials, they have refused to provide the names of the winning bidders or the firms that teamed as co-bidders with the winning party.  Obtaining this information independently has been akin to extracting a painful splinter wearing a blindfold and oven mitts. 

That a taxpayer-supported Federal agency conducts a competitive bid program of over $2 billion and then refuses to announce the names of the winning bidders is beyond contempt for the American people.  If the
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Lehman Brothers (LEHMQ.PK) Up 200% Friday

Read this one with Zero Hedge’s "Why The SEC Is Irreperably Conflicted On The Issue Of High Frequency Trading" here. - Ilene

Lehman Brothers (LEHMQ.PK) Up 200% Friday

TraderMark of Fund My Mutual Fund

Thanks to a reader for alerting me on this action Friday – the shell known as bankrupt Lehman Brothers (LEHMQ.PK) which now trades on the pink sheets rallied a solid 200% Friday. And why not – fundamentals no longer matter; even having a functioning business is just an afterthought.

As long as you have a shell that one high frequency trading firm can trade with another (or if you are real clever, I assume the same HFT firm can work in the dark pools and trade among themselves to create "demand" – not that this would ever happen because its illegal) – and lo and behold you can attrack other HAL9000s and the retail trader in.

What is inside that shell is really a moot point. The key is generation volume and earning rebates for each trade since you are adding liquidity – the cheaper the better (more shares = more rebates). Boo yah. Via Reuters:

  • It’s either a sign of sheer boredom on Wall Street, or an early celebration of the one-year anniversary of Lehman Brothers’ demise, but shares of the fallen investment bank were red hot today. The stock rose some 200%. Take that AIG.
  • For some inexplicable reason, shares of the bankrupt investment bank, which trade on the loosely regulated over-the-counter Pink Sheets, changed hands some 73 million times on Friday. That’s a lot of trading in a stock that’s been worthless for nearly 12 months. Indeed, on a typical day, the average trading volume in Lehman shares is about 2.6 million.
  • Then again, today’s trading surge boosted Lehman’s closing stock price to 15 cents. It had been sitting around 5 cents for months. Better yet, Lehman now has a respectable market cap of $103 million–not too shabby for a small-cap company on the Pink Sheets.
  • Of course, this trading in Lehman is just crazy. There’s not good explanation for it. Just as there is no good explanation for the big surge in shares of American International


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The Journal Beats Down Goldman

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The Journal Beats Down Goldman

Lloyd Blankfein, Goldman Sachs, Wall Street Journal

Courtesy of Tom Lindmark at But Then What?

When one of your ardent supporters likens your business model to that of Fannie and Freddie you have problems. That is how the Wall Street Journal on its editorial pages described the Goldman Sachs that has emerged from the financial crisis.

From the Journal:

Of course, if the feds do let CIT fail, this will only confirm that the only certain survivors in the current market are banks big enough that the government figures it must bail them out. Just ask the many small banks that have been rolled up by the FDIC at a rate of two a week since the beginning of the year, with eight so far in July alone. That can only strengthen the likes of Goldman, which apparently needs no help printing money anyway.

Goldman’s traders profited in the second quarter from taking advantage of spreads left wide by the disappearance of some competitors (Lehman, Bear Stearns) and the risk aversion of others (Morgan Stanley). Meantime, Goldman’s own credit spreads over Treasurys have narrowed as the market has priced in the likelihood that the government stands behind the risks it is taking in its proprietary trading books.

Goldman will surely deny that its risk-taking is subsidized by the taxpayer — but then so did Fannie Mae and Freddie Mac, right up to the bitter end. An implicit government guarantee is only free until it’s not, and when the bill comes due it tends to be huge. So for the moment, Goldman Sachs — or should we say Goldie Mac? — enjoys the best of both worlds: outsize profits for its traders and shareholders and a taxpayer backstop should anything go wrong.

The Journal goes on to suggest that Goldman’s newly acquired special status entitles the taxpayer to some say in the way the company operates which is strong stuff indeed coming from them. They suggest that absent a policy that no bank is too big to fail — an impossibility in their opinion — the rarefied atmosphere that Goldman and the other chosen few inhabit should be subject to either a proscription against proprietary trading or a special FDIC bailout tax perhaps tied to leverage.

Goldman Sachs Tower In other words either


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Phil's Favorites

Trump Tweeting As Much As Ever Amid Twitter Standoff

 

Trump Tweeting As Much As Ever Amid Twitter Standoff

By , Statista

President Trump has signed an executive order which aims to remove some of the legal protection given to social media companies, though it is expected to face significant legal hurdles. In a nutshell, it sets out to clarify the Communications Decency Act, handing regulators the power to file legal proceedings against social media companies for the way they police content on their platforms. Trump's decision to take action comes two days after Twitter attached a fact check to one of his tweets lambasting mail-in voting. He then threatened to close ...



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ValueWalk

Gold supply chain in recovery mode after pandemic shutdown

By Michelle Jones. Originally published at ValueWalk.

The gold supply chain was largely shut down as the COVID-19 pandemic spread around the world. However, things are starting to open back up, and production is beginning again. The World Gold Council studied the gold supply chain, how it was impacted by the pandemic, and how the disruption of the supply chain has affected investment demand for the yellow metal.

Q1 2020 hedge fund letters, conferences and more

Disruption to the gold supply chain

The World Gold Council said the gold supply chain is entirely global because the metal is mined on evert continent except Antarctica and refined in nume...



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Biotech/COVID-19

Antigen tests for COVID-19 are fast and easy - and could solve the coronavirus testing problem despite being somewhat inaccurate

 

Antigen tests for COVID-19 are fast and easy – and could solve the coronavirus testing problem despite being somewhat inaccurate

Antibodies are incredibly good at finding the coronavirus. Antigen tests put them to work. Sergii Iaremenko/Science Photo Library via Getty Images

Courtesy of Eugene Wu, University of Richmond

In late February, I fell ill with a fever and a cough. As a biochemist who teaches a class on viruses, I’d been tracking the outbreak of...



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Zero Hedge

Ted Cruz Accuses Twitter Of Violating Sanctions Against Iran, Demands DoJ Probe

Courtesy of ZeroHedge View original post here.

We've mentioned in nearly every single one of our posts about this week's dustup between the president and Twitter that the Ayato...



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Kimble Charting Solutions

Tech Indicator Suggesting A Historic Top Could Be Forming?

Courtesy of Chris Kimble

Tech stocks have been the clear leader of the stock market recovery rally, this year and since the lows back in 2007!

But within the ranks of leadership, and an important ratio may be sending a caution message to investors.

In today’s chart, we look at the ratio of large-cap tech stocks (the Nasdaq 100 Index) to the broader tech market (the Nasdaq Composite) on a “monthly” basis.

The large-cap concentrated Nasdaq 100 (only 100 stocks) has been the clear leader for several years versus the ...



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The Technical Traders

M2 Velocity Collapses - Could A Bottom In Capital Velocity Be Setting Up?

Courtesy of Technical Traders

M2 Velocity is the measurement of capital circulating within the economy.  The faster capital circulates within the economy, the more that capital is being deployed within the economy to create output and opportunities for economic growth.  When M2 Velocity contracts, capital is being deployed in investments or assets that prevent that capital from further circulation within the economy – thus preventing further output and opportunity growth features.

The decline in M2 Velocity over the past 10+ years has been dramatic and consistent with the dramatic new zero US Federal Reserve interest rates initiated since just after the 2008 credit crisis market colla...



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Lee's Free Thinking

US Southern States COVID19 Cases - Let's Give Credit Where Due

 

US Southern States COVID19 Cases – Let’s Give Credit Where Due

Courtesy of  

The number of new COVID 19 cases has been falling in the Northeast, but the South is not having the same experience. The number of new cases per day in each Southern state has been rangebound for the past month.

And that’s assuming that the numbers haven’t been manipulated. We know that in Georgia’s case at least, they have been. And there are suspicions about Florida as well, as the State now engages in a smear campaign against the fired employee who built its much praised COVID19 database and dashboar...



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Chart School

Is this your local response to COVID 19

Courtesy of Read the Ticker

This is off topic, but a bit of fun!


This is the standard reaction from the control freaks.








This is the song for post lock down!







What should be made mandatory? Vaccines, hell NO! This should be mandatory: Every one taking their tops off in the sun, they do in Africa!

Guess which family gets more Vitamin D and eats less sugary carbs, TV Show



...



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Digital Currencies

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

 

Blockchains can trace foods from farm to plate, but the industry is still behind the curve

App-etising? LDprod

Courtesy of Michael Rogerson, University of Bath and Glenn Parry, University of Surrey

Food supply chains were vulnerable long before the coronavirus pandemic. Recent scandals have ranged from modern slavery ...



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Members' Corner

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

 

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

No matter the details of the plot, conspiracy theories follow common patterns of thought. Ranta Images/iStock/Getty Images Plus

Courtesy of John Cook, George Mason University; Sander van der Linden, University of Cambridge; Stephan Lewandowsky...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Promotions

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Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

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Mike will show off the TradeExchange's new platform which you can try for free.  

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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