Lehman Bros. May Need Miracle To Survive

Financial Heavyweights Hold Emergency Meeting To Discuss Firm's Future

(CBS/AP)  The Wall Street firm that started the U.S. cotton trade before the Civil War and financed the railroads that built a nation might soon fade into history.

Just days after Lehman Brothers Chief Executive Richard S. Fuld tried to pitch Wall Street on a plan to save the firm by shrinking it, he's in complicated negotiations with potential buyers that may see the company sold piecemeal as soon as Sunday night, analysts said.

"Nothing short of a miracle can save Lehman as is," said Anthony Sabino, professor of law and business at St. John's University. "It is highly unlikely Lehman will be in existence on Monday morning."

Late Friday, the Federal Reserve Bank of New York held an emergency meeting with top Washington policymakers and major financial institutions to discuss Lehman's future.

Attendees included Treasury Secretary Henry Paulson; Christopher Cox, chairman of the Securities and Exchange Commission; and Timothy Geithner, president of the Federal Reserve Bank of New York.

Fed spokeswoman Michelle Smith declined to disclose what financial institutions participated or whether the group had reached any conclusion. The Wall Street Journal reported on its Web site that the group included Morgan Stanley chief executive John Mack and Merrill Lynch chief executive John Thain, among others.

Paulson is against any use of government money to bail out Lehman Brothers Holdings Inc., a person familiar with his thinking said Friday.

Other financial firms may swallow portions of Lehman's investment banking or bond trading business, analysts said. Considering the firm's deep financial problems, riskier assets like its mortgage and real-estate portfolios could be sold for just pennies on the dollar.

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.

Randy Whitestone, a spokesman for Lehman Brothers, declined to comment on the firm's situation Friday.

On Friday, Lehman's stock closed at $3.65 - an all-time low and down nearly 95 percent from its 52-week high of $67.73 as investors grew more convinced that Lehman may be auctioned at fire-sale prices.

The stock's plunge was a humiliating beating for the 158-year-old investment bank, one of Wall Street's oldest firms, and for Fuld, 62, who has run the bank through internal squabbles, the technology bust, and the 9/11 attacks that destroyed its headquarters.

The company's roots began in 1844 when Henry Lehman immigrated from Rimpar, Germany to Alabama, where he established a dry goods store that catered to local cotton farmers in Montgomery. Lehman Brothers evolved from merchandising to a commodities broker, and then later into underwriting where the firm helped finance construction of the Pennsylvania Railroad, among others.

Lehman built its reputation trading government and corporate bonds. Over his 15 years at the helm, Fuld expanded the firm's repertoire to investment banking and money management for wealthy clients. He also stretched its overseas reach to better compete with big rivals like Goldman Sachs Group Inc. About half of the firm's profit comes from outside the U.S.

As it grew, it also took on greater risk, including the kind of real estate investments that have forced global banks and brokerages to write down more than $300 billion since the subprime mortgage crisis undermined the credit markets.

On Wednesday, Lehman reported it lost almost $4 billion because of the sales and write-downs on its residential and commercial real estate assets. Its total losses for the year added up to $6.9 billion.

To shore up confidence among investors and its customers, Lehman presented a plan that called for selling its money management unit and spinning off most of its real estate investments into a separate publicly traded company.

The attempt failed, forcing Fuld to consider selling the firm he has worked at since 1969.

In March, the government helped engineer Bear Stearns' sale to JPMorgan Chase & Co. with a deal backed by a $29 billion loan from the Federal Reserve .

The difference this time is the government is not likely to provide any financial backing.

Paulson is against any use of government money in whatever deal comes together for Lehman, a person close to his thinking said Friday.

Unlike Bear Stearns, which happened swiftly and with little warning, financial markets have been aware of Lehman's troubles for a long time and have had time to prepare.

The government may also be less willing to bail out Lehman because the firm has been able to borrow money directly from the Fed through a program the central bank began after Bear Stearns imploded.

Finally, the government might not want to give investors the impression that it is the financial savior of troubled banks, analysts said.

Lehman Brothers - despite its tarnished image - has been one of Wall Street's most respected franchises.

The company's investment banking and trading operations routinely rank among the highest in the industry. For instance, Lehman Brothers is ranked eighth in the global mergers and acquisitions so far this year, advising on deals with a total value of $105 billion, according to financial data provider Dealogic.

Fuld said during a conference call Wednesday that the firm's core businesses remains healthy.

Banks such as Bank of America may be interested in Lehman's investment banking division.

With Bank of America, for example, a deal with Lehman Brothers would instantly catapult it to the top ranks of investment banking. For Barclays, buying Lehman would instantly boost its presence in the U.S. and give it a stronger position in stock and bond markets.

Whoever buys Lehman or its individual assets will have their own knot of problems to untangle, however.

"The damage is done," Sabino said. "The house has been burned to the ground, now you're just picking through the ashes."

[shanev137]

Of course they won''t bail out Lehman! And do you know why? Because Lehman is the Arch-Rival of Paulson and the others at the top of the Treasury food-chain. This is fraudulent. The FBI should come in and find out what is happening here. The bailout of Freddie Mac and Fannie Mae with no consequences to those running it is an outrage.


They make all the money they can and then skip town? ***?

These politicians need to be held accountable. And if they knowingly made these bad deals with the people in charge of these companies (which was made as profit from this fraud) should be CONFISCATED and rebated to the American taxpayer!!!!!!!!!!!

[pinewalker-2009]

Sky_Five is right. Over inflation of market speculation along with irresponsible lending by banks and basically fiscal irresponsibility by everyone from buyer to government has led to this catastrophe, Bear Stearns before and probably a number to come soon. Too bad, so sad. Wait for the bottom to drop out on the U.S. dollar like the Russian ruble in 1991 and then just see what happens. "Hang onto your butts!!" as the guy says in Jurassic Park. I''m gonna look for real estate on Mars. LOL.

[pinewalker-2009]

Hey, in real life, I''ve never seen nor heard of a train going wide open towards an abyss or collision successfully come to a stop before crashing or plummiting. This (blatant housing market overinflation) is no suprise to anyone with common sense. One has only to look at other countries that have tried this stunt. They have all had to re-evaluate the value of their currency. The difference with us is we were supposed to be one of the ones that others re-adjusted too, not the other way around.

[pinewalker-2009]

I absolutely concur with DeckardBR and Sky_Five, greed has driven the priveleded few to scam the many below with deceptive, co-ercive, appealing deals to enrich their (please read CEO''S) lives. This is sick and sad in my book. The masses in this great country are taken advantage of by a few. Does "Pyramid Scheme" look familiar to anyone? Or am I totally wrong here? Does MCI or Enron ring a bell? Maybe I''m wrong. I bet not!!!!! May something help us little people from those that opress us, please!!!!!!

[tmn]

Anyone for even LESS regulation? Then things can REALLY take a freefall!

[pinewalker-2009]

This is just an idea, that I know will not work because too may have too much to loose, but how about going back to the original system of trade/barter system. I (You) have something to trade for something you (I) need or visa versa. Fair and equitable if both agree. No futures (Read: Investment and futures trading beyond our control) conjuring hopes involved. Then we wouldn''t be in this calamnity at all. No system of loss w/o consent unless you are an idiot, and everything''s fair. End of subject. N''est Pas? Non? Escuse'' s''il vous plait. IT''s not. Excuse me if you please?

[pinewalker-2009]

Regulation or de-regulation are both mixed bags of folly. One (Regulation) invites extra help from an outside source (i.e IRS or other Government). The other (De-regulation) attracts every opportunist that comes down the road because "Big Brother" aka the IRS and US Government don''t trust us to report income, therefore with de-regulation there would be less acountability and as a consequence, less revenue to fund wars abroad as we go further in debt.

[shanev137]

Isn''t it great that a handful of super-rich and powerful people pull the strings that run our country.

[gop_will_win]

I bet the CEO will still get his million dollar bonus while the company goes down the tube. They should serve jail time.


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Posted by Armor371
=============================
Your statement is typical liberal class warfare. This is a capitalists society, only the poor should pay.

[republic1776]

These guys get away with it because they kick money to both parties.
America, should NOT allow donations to come from anybody but private citzens.

[closethippy1]

nYour statement is typical liberal class warfare. This is a capitalists society, only the poor should pay.
Posted by gop_will_win at 08:34 AM : Sep 13, 2008

If this is a "capitalist society", sir, then don''t bail out anyone.
You freak b.astards rightwing i.diots like to talk a big game about survival of the fittest in a "capitalist society" but when the corporate geniuses destroy themselves because of their savage greed then they run to the government like a two year old baby crying for his mommie.
The corporate world needs to be placed in a cage and watched like the animals they are to make sure that in the future this doesn''t happen again.
They truly couldn''t care less if they bring down the entire country with them as long as they get their taxpayers'' money to bail them out so they can get the hell out and live in their 7 mansions around the world.
And people like gop_will_win and his ilk will be more than happy to follow their corporate bosses around so they can shine their shoes and dance for them when told to do so.

[hypnotoad72]

Well, get Indian, Chinese, and Russian taxpayers to pay for it. They''re the only ones not being screwed over. Yet.

[iphyt4u]

Another economic debacle created by the Bush administration. And just like Bear Stearns, Fannie Mae, and Freddie Mac, all the negative news is deliberately leaked out on a Saturday morning. But don''t worry, the deal will be finalized by Monday. A multi billion dollar deal hammered out in minutes. If you people believe what this republican administration is telling you, well then you deserve to have your tax dollars stolen.

[marshall_nee]

Another weekend of no golf for the Plunge Protection team.

[ddaryl1]

now everyone go out and vote republican... [sarcasm]

all of our tax monies have been completely wasted for the last 8 years. Jobs are dissapearing faster, wages are down, not one single thing done to help with healthcare, but 100''s of billions wasted on a BS war and bank bailouts.

Screw the government, and screw America if this is what it has become.

[pollroller1]

I have a dumb question to ask. If you used Lehman Bros as a broker to handle your portfolio and they go under, what happens to your stocks, bonds, ETC? I guess if you had anything in a money fund with them, thats gone.

[cdfoxtrot3]

"Lehman Bros. May Need Miracle To Survive". May be a tough one. All the Christo-fascists are busy praying for Palin.

[cdfoxtrot3]

I have a dumb question to ask. If you used Lehman Bros as a broker to handle your portfolio and they go under, what happens to your stocks, bonds, ETC? I guess if you had anything in a money fund with them, thats gone.

Posted by pollroller1


Those accounts are not covered by FDIC insurance. However, Lehman doesn''t own them and the stocks would be held in the account holders name, most likely by a custodian appointed by Lehman. I believe the accounts are safe, in terms of what is happening to Lehman.

[mcv57]

Seems like the taxpayers will bend over again, while executives will get their fat bonuses.
How about some prison time and fines for their actions.

Posted by funzie50 at 12:21 PM : Sep 13, 2008

Never happen. The fat-cat execs are the political contributors. It''''s the "I"ll pay you money if you let me steal it" game.
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Posted by DeckardBR

Be not deceived, this is exactly why U.S. government intervention and communism/ socialism is futile - GOVERNMENT CORRUPTION!

I say the taxpayer should demand any or all bail-out be placed on the ballot. The White House is playing socialism while pulling the rug over the public''s eyes.

If Bank of America takes-over Lebermann, I am pulling my money out, and burying it somewhere!

[cfin5]

Too bad, let them sink. I could have declared bankruptcy a couple of times, but I do not believe in cheating anybody so I stuck it out and a shinier economic day came at the right time. Nobody helped me, neither did I ask a mortal for it. Did I deserve to fail? Probably so, yet sometimes its just good to keep your attitude to the grind stone. The hurt is great to teach a man/woman to be wise with mammon. The "Economic University of Hard Knocks",......its free to ALL fools, especially me.

[gce65]

A miracle???
Quick! Let''s all get on our knees and pray to the God of Wall Street: Hank Paulson.

What a joke! Let Lehman Bros DIE!

[ontheleft]

They took a risk and invested in subprime mortgages. Well, their risk did not pay off. So in steps corporate welfare to the rescue.

[usgnrl]

.
LET LEHMAN FAIL!!!!!!!!!!!!!!!!!
NO MORE BAILOUTS FOR INCOMPETENT CEOS!!!!!!!!!!!!!
NO MORE TAX DOLLARS FOR INVESTORS!!!!!!!!!!!!!
STOP PAULSON FROM RAIDING THE TREASURY AGAIN!!!!!

ENOUGH IS ENOUGH.

/

[williewomper]

Next....''Welcome to Taxpayer Bank of the Bailout..Lehman Brothers you say...why sure we''ll take care of you and tell your CEOs that yes, they will get their bonuses...We aim to please at Taxpayer Bank of the Bailout....Next...General Motors, Ford..which of you is next in line?''

[harrymorley]

all this was caused by idiots lending idiots money. I don''t think it could be any more clear as to what caused their collapse