Lacker & Plosser: No Deal! (at least none funded by US)
Lacker & Plosser:
Richmond Fed President Jeffrey Lacker and his Philadelphia counterpart Charles Plosser raised concerns about moral hazard in June, urging that lines be set for any central bank intervention. U.S. regulators reluctant to backstop another investment bank may point to the fact that speculation about Lehman's potential failure hasn't generated as much concern among investors as Bear Stearns's implosion.
Lawrence Meyer:
"What would be best is to alter the precedent with Bear Stearns,'' said former Fed governor Laurence Meyer, who is now vice chairman of Macroeconomic Advisers LLC, an economic forecasting firm in Washington.
CNBC:
Sources says no government money in resolution of Lehman's situation; Two things will make this deal different: 1) the market has been aware of the situation and has had time to prepare; 2)Fed's primary dealer credit facility now exists to allow for orderly process
See also:
Lehman's Fuld Races to Sell Firm as Fed Balks at Deal
Yalman Onaran
Bloomberg, Sept. 12
http://www.bloomberg.com/apps/news?pid=20601087&sid=a3RwHXFSLl2E&
Friday, September 12, 2008 | 09:28 AM | Permalink
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Sorry to be off-topic here, but can we please encourage a moratorium on the word "unexpected" or its derivatives?
AP
"Retail sales unexpectedly drop in August"
Sorry, no.
Buster Douglas KOs Mike Tyson - now that was unexpected. Retail sales falling in a consumer-led recession, I don't think so...
Posted by: Winston Munn | Sep 12, 2008 9:40:50 AM
Re your LEH no gov’t money post, think about this:
If there’s no government money, it would seem to me the bondholders take a bath of sorts, at any rate—how much I have no clue. But recall how much short term debt the financials have to roll over in by year end, my memory’s shot, but some number like $200 billion+ is correct. If debtholders see themselves at serious risk, a haircut on the Lehman deal doing that without question, one of two things happens. Price goes way way up, and/or they have to sell assets, which will drive prices way down, require marks on level 2 and 3—big time disaster, imo.
Posted by: Scott | Sep 12, 2008 9:49:13 AM
The government says "NO" and the stock market starts crying and wailing about...
It seems the government is setting up that Minsky moment....
Lehman defaults....who wrote the CDS against Lehman...were those CDSs properly marked? Who owns LEH preferred? What's that going to be worth.
AIG getting hammered right now....I guess they wrote some of the CDS?
Who wrote the derivatives on AIG? Where are those marked on someone's books?
This thing has the very real potential of cascading in a wicked spiral as the ponzi scheme of derivatives and phony capital gets unwound.
- AT
Posted by: Andy Tabbo | Sep 12, 2008 10:06:15 AM
paaaaaleaaase!!!! no bailout??? no way they fail. paulson can do whatever he wants and has proved it repeatedly. no one is going to stand up to this transfer of wealth from the tax payers to big business....................
Posted by: jodie the berry picker | Sep 12, 2008 10:23:14 AM
Thank God the government kept the checkbook closed. Remember, we are living in a post-Bear Stearns world, where the discount is now open to investment banks. If Lehman needs short-term liquidity, it's there. That in large part eliminates the risk of a run on Lehman's cash reserves. Otherwise, at least the next proud owner of Lehman Brothers won't be Paulson & Co.
Posted by: Alex Sharp | Sep 12, 2008 10:30:03 AM
inflation UNEXPECTEDLY rose 10% overnight as government reported their real numbers
dow jones UNEXPECTEDLY tanked 1000 points, as the PPT computers were hijacked amidst LEH, AIG, WaMu meltdown
houseprices UNEXPECTEDLY dropped 30% nationwide in august, as the banks forclosed those that were into foreclosure
GDP UNEXPECTEDLY contracted as the government started telling the truth
list goes on and on...
this would maybe be a better use of the word..
Posted by: NOR | Sep 12, 2008 10:40:36 AM
This thing has the very real potential of cascading in a wicked spiral as the ponzi scheme of derivatives and phony capital gets unwound.
- AT
AT has it tabbed.
People should thank Maslow and start at the Base.
http://chiron.valdosta.edu/whuitt/col/regsys/maslow.html
If you're battened down for Cat5, you'll think 130 mph winds are a Gift.
Posted by: Mark E Hoffer | Sep 12, 2008 11:52:40 AM
You keep referring to Paulson as a socialist, but that's inaccurate. What Ben & Paulie are about is fascism, not the NAZI kind but the Mussolini "Corporate State" kind. With socialism, in theory, what the powers that be try to do, however misguided they are, is for the good of ordinary people. What our boy's are doing, is what is good for their cronies. This is a huge difference.
Posted by: Harry Weitzel | Sep 12, 2008 1:43:47 PM
Harry:
Actually, Hitler wasn't that different from Mussolini in corporatism, just more extreme. He was supported by the industrialists who made tons of marks by supplying the military machine and benefiting from slave labor.
Krupp, which has survived into modern times, as part of ThyssenKrupp AG, was paid huge amounts for supplying all sorts of weapons and munitions.
Bayer made good money selling Zyklon B for the gas chambers and records were discovered that they had even bought 150 female prisoners "for experimental purposes".
Hitler himself took no vow of poverty. He was paid millions of marks as royalties for his book.
Posted by: Mike in NOLa | Sep 12, 2008 2:54:32 PM
"This thing has the very real potential of cascading in a wicked spiral as the ponzi scheme of derivatives and phony capital gets unwound."
That is because it IS a ponzi scheme, from a material wealth standpoint.
As for LEH not benefiting from state-funded sponsorship, it boils down to their rank in the "Federal Reserve" scheme; "small enough to fail."
I.E. not a member of the executive club.
Posted by: Yves | Sep 13, 2008 1:15:42 AM
