Lehman Brothers Struggles To Survive

Fourth-Largest Investment Bank Will Sell Prized Assets To Raise Money Amid Credit Crunch

(CBS/ AP)  Struggling to survive the credit crisis, Lehman Brothers Holdings Inc. plans to sell a majority stake in its prized investment management division, slashed its dividend and may even consider selling the entire company.

Lehman, whose shares have plunged more than 80 percent this year as investors lost confidence in the financial services firm, also said Wednesday it lost $3.9 billion during the third quarter. The company, like others on Wall Street, suffered from wrong-way bets on mortgage securities and other risky assets.

The company did not name a buyer for a 55 percent stake in its prized investment management business, which includes Neuberger Berman. And it plans to spin off to shareholders $25 billion to $30 billion of its commercial real estate portfolio into a publicly-traded company called Real Estate Investments Global early next year.

The company also plans to slash its annual dividend to 5 cents from 68 cents weighed on stock futures.

It said it would consider all alternatives to boost shareholder value, often a reference on Wall Street to a company's willingness to consider a sale.

"This is an extraordinary time for our industry, and one of the toughest periods in the firm's history," Chief Executive Richard Fuld said in a statement.

The unusual steps come as Korea Development Bank confirmed Wednesday it has ended investment negotiations with Lehman Brothers "due to differences in transaction terms with Lehman and in consideration of the domestic and international financial market situation."

Speculation that talks with KDB were failing caused shares of Lehman Brothers to plunge 45 percent to $7.79 on Tuesday. The drop puts Lehman's market value at just $5.4 billion, down from $36 billion one year ago and well below that of smaller rivals like discount brokers Charles Schwab Corp. and TD Ameritrade Holding Corp.

The sell-off stoked a sense of urgency that Lehman must demonstrate to Wall Street that it has enough liquidity to survive a year-old credit crisis that has cost it $8.2 billion in write-downs and credit losses. Analysts believe Lehman will lose between $2 billion and $4 billion during the third quarter as it contends with $70 billion of troubled real estate assets.

Wall Street remains skittish about financial stocks since the near-collapse of Bear Stearns Cos. in March. Like other investment banks, Lehman has been hit hard by deterioration in the credit and mortgage markets since the middle of 2007. Global banks have so far lost more than $300 billion from mortgage-backed securities and other risky investments.

Lehman has approached a broad range of possible investors, including banks in Korea and Japan. Private-equity firms in the U.S. have also been contacted about investing in a spin-off of the firm's investment-management business, which includes Neuberger Berman.

Besides Neuberger Berman, the unit also includes everything from private client services to private equity components. Analysts believe it could fetch up to $10 billion, or that Lehman might spin-off half of the business to an outside investor much like how Merrill Lynch & Co. owns a 49 percent stake in asset manager BlackRock Inc.

There is also talk that Neuberger's management might get an opportunity to buy back all or part of the company. Lehman bought the firm in 2003, and Neuberger executives have expressed interest in completing such a deal, according to several media reports.
Fuld, whose own job is said to be on the line, is trying to avoid the same circumstances that caused the near collapse of Bear Stearns. In March, Bear Stearns' share price plunged amid rumors that it did not have enough liquidity to stay in business, leading to its acquisition by JPMorgan Chase & Co.

However, in this case, Lehman Brothers is said to be having no credit or counterparty risks. Spokesmen for Merrill Lynch, Goldman Sachs Group Inc., JPMorgan Chase & Co., and Morgan Stanley all said late Tuesday that they are still conducting business with Lehman.

In addition, analysts believe that the government is closely monitoring Lehman's position and would act if necessary to not let the company simply fail.

"Let's recognize that the Federal Reserve is supporting the funding of four surviving large capitalization brokers, so the sharp decline in Lehman stock (Tuesday) is an equity issue, not a credit or counterparty issue," said Sanford C. Bernstein analyst Brad Hintz, who was a former chief financial officer for Lehman before becoming an analyst.

[wardoglrs]

Amazing how a very small few people can do so much damage and crime and get paid for it. Makes bank robbers look like Mr Pickles

[bobnjersey]

[No, the ship is just Lehman Bros. And it''''ll be another one in a week or two. The lie is that it''''s our whole economy. If this was a free market system the investment banks that invested badly or were over-leveraged would just go bankrupt. But it isn''''t a free market system. It''''s a "heads I win, tails you lose" racket of privatizing gains and publicizing losses.]
[Posted by gce65 at 07:41 PM : Sep 10, 2008]

is bear stearns it''s own ship ... how about fannie mae and freddie mac ... are they their own ship too?

is every entity within the economy a lone ship too?

do you believe there''s any point where enough of these ... or a particular instance of a specific degree would reach beyond itself and effect the broader system which it exists within?

[skyk239]

Wow! So do we all want 4 more years of this PIG? LOL Go ahead people vote for someone who has NO plan and intends to keep the SAME Economic Policies in Place... GO AHEAD and YOU deserve what you get!!

Endless wars + Endless debt Endless stupidity = End of Empire

[apprxam]

This investment bank should float down the river and into the drain just like the millions of American families that are losing their homes every year, and just like BearSterns, Fannie Mae and FreddieMac should''ve. Enron wasn''t the only evil empire trapsing the halls of power ill-gotten.

If these organizations are too big to fail, then maybe, just maybe they should''ve been allowed to get so big in the first place. American businesses and banks knew exactly what they were getting into and just could''nt pull themselve away from the fraudulent and easy money. But they, too, were tripped up and should be allowed to fail on the merits.

[whitemale08]

Lehman Brothers trying to sell off their worthless assets might as well be called Lemon Brothers because they are worth less then a car that''s an old beat up lemon.

[whitemale08]

It is impossible to believe that this could be true, so average people will willingly prop up the system out of fear and ignorance. You get what you pay for, and you are paying for your own economic slavery.


--------------------------------------------------------------------------------

Posted by random_radar at 08:31 PM : Sep 10, 2008--

The ''SKY IS FALLING'' AND IT IS ''END OF THE WORLD''!!!

The problem with your argument is that our whole way of sustaining ourselves within a domestic economy has been gutted.

Thanks to the British East India Company and Wall Street, we replaced a self-sufficient industrial economy with a import service-sector based economy.

So if we just do nothing we will literaly starve to death and walk around barefoot. So what do we do?

Goto larouchepac.com and learn how the entire Federal Reserve System has to be brought into "recievership" not "conservatorship" but "bankruptcy" so we can maintain banking operations for the distribution of foods and services.

However under "receivership" we set aside all of these phony "debt assets" and "derivatives" and the whole "credit and debt markets" to deal with later or maybe not deal with at all.

That''s what has to be done because this GLOBAL FINANCIAL CRISIS IS GOINT TO END VERY BADLY BY THE END OF THIS FALL IN PARTICULAR AFTER SEPT 30th!!!!!

[random_radar]

People say that if the big investment banks fail, our economy would be destroyed. How so? Would your house disintegrate? Would your job skills disappear? Would the world end?

No--the world would go on, and you would actually come out better off. Why? Because you would not be saddled with paying to keep rich people rich.

But the rich would suffer horribly for their mistakes. As long as you listen to the rich tell you that your world will end if theirs does, you will keep them rich on your back. If you let them fail, you will prosper in the long run.

It is impossible to believe that this could be true, so average people will willingly prop up the system out of fear and ignorance. You get what you pay for, and you are paying for your own economic slavery.

[txpatriot4us]

Just more of Dubya Friends on Wall Street Getting Drunk!

[jydavis1]

it''s great to see ELITE street eat itself .. unfortunately, middle America is paying for the meal.

[gce65]

[Stay afloat? Lehman Bros basic culture and model are unsound. ABANDON SHIP!!!]
[Posted by gce65 at 04:06 PM : Sep 10, 2008]

if this is so ... then this is a condition that nearly every entity in the investment and banking sector suffer from ... and the reason why the government isn''''t allowing anyone to abandon ship ... because ''''the ship'''' is our economy.

Posted by bobnjersey at 04:21 PM : Sep 10, 2008
---------

No, the ship is just Lehman Bros. And it''ll be another one in a week or two.
The lie is that it''s our whole economy. If this was a free market system the investment banks that invested badly or were over-leveraged would just go bankrupt.
But it isn''t a free market system. It''s a "heads I win, tails you lose" racket of privatizing gains and publicizing losses.

[iphyt4u]

8 more years of foreclosurers, bankruptcies, ridiculous wars, corrupt government officials, pardons for convicts, and big oil bending you over backwards. Vote republican, and lets destroy this country together!

[gce65]

Oh, and meanwhile.....

CNN reports 2 Russian long range bombers have just landed in Venezeula for military exercises...

And the BBC reports: US Bolivia Ambassador ''Expelled.''

Why no mention in the major US news?

[gce65]

They missed the action on the market! Maybe the Lehman dudes should have gotten in on the Sexxx For Oil Scandal at the Dept of the Interior!

Republican family values! Ha! Ha! Ha!

[jgunther7]

Russia has been looking for markets to invest its huge foreign exchange surplus, and three weeks ago they were said to have $65 billion invested in the US money and housing markets. Since then George Bush has threatened to punish Russia and there were rumors that he might freeze their bank accounts. Since then Fannie & Freddie May have collapsed and now Lehman Brothers. Did that Russian money disappear overnight?

[bobnjersey]

[and the more companys we build to pay people to take (or that we are paid to take), the more well off we are.]
[Posted by toowhere at 04:41 PM : Sep 10, 2008]

i have no idea what this means. and that goes for the rest of your response as well.

so we''re ''more well off''[sic] w/ lost jobs to labor markets that are well below our living wage ... jobs that aren''t likely to ever come back to this country?

alan greenspan ... is that you posting online again?

[toowhere]

"
"outsourced"

most of those jobs are not "outsourced". most of those jobs are gone. which doesn''''t make them gone, it just makes them "bought" by a lowest bidder. (as opposed to having been rented by the lowest bidder, a condition prone double the already doubled liability).
"

sorry, i was wrong. forwarding companys to low bids is a less liable thing than forwarding them to a high bid. more well would be to pay someone to take them. and the more companys we build to pay people to take (or that we are paid to take), the more well off we are.

[toowhere]

"outsourced"

most of those jobs are not "outsourced". most of those jobs are gone. which doesn''t make them gone, it just makes them "bought" by a lowest bidder. (as opposed to having been rented by the lowest bidder, a condition prone double the already doubled liability).

[bobnjersey]

[Stay afloat? Lehman Bros basic culture and model are unsound. ABANDON SHIP!!!]
[Posted by gce65 at 04:06 PM : Sep 10, 2008]

if this is so ... then this is a condition that nearly every entity in the investment and banking sector suffer from ... and the reason why the government isn''t allowing anyone to abandon ship ... because ''the ship'' is our economy.

[toowhere]

"If this were a private company, the government would let it fail"

if this were a private company, the government would not have to go down with it

and if the governmnet were a private company, the people would not have to go down with it (nor it with the people)

governments can''t tax people that don''t volunteer to be taxed; else, we would each be paying taxes to every country in the world. alas, we are stuck paying just the one or few we choose (if any).