Breakin' Up is Hard to Do - Those Lehman Brothers to Split

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This is astounding. We didn't get our Friday surprise. I guess we didn't get the announcement of Lehman on Friday simply because they cannot work out the details to hide or cover another failure and now it appears they are planning on breaking Lehman Brothers up and selling it off.

We'll have to call it the Monday surprise which I'm sure they will try to delay for assuredly markets will tank.

Lehman Forced To Break Up?

Also, WaMu is wobbling, latest rumours.

What about the ban on naked shorts? With this kind of carnage going on why would they allow naked shorts? WSJ reports:

Academic studies and the SEC's own observations have led the staff to conclude the emergency act cut down legitimate short selling, according to a person familiar with the matter.

An SEC spokesman said the staff's analysis of the data suggests that extending the terms of the order across the market would make legitimate short selling too difficult for smaller, less liquid stock

Who believes that?

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House of Cards

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It looks like AIG is now in trouble due to selling derivatives on credit debt obligations as credit swaps.

Anyone care to map out this Medusa of exotic investment vehicles and how they work?

AIG could be the biggest of all

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AIG owns a half trillion dollars in CDS.
When Fannie and Freddie were rescued by the Treasury it triggered a "credit event". Thus all the CDS associated with Fannie and Freddie, and that means trillions of dollars worth, had to be unwound.
AIG was already losing billion. Now they are being forced into extreme measures.

New York - US insurer AIG, suffering from a declining share price and facing a possible downgrading of its credit rating, is being forced to extreme measures, including perhaps selling off subsidiaries to extricate itself from billions of dollars in losses, the Wall Street Journal reported in its online edition Sunday. Citing an AIG insider, the respected US business journal said AIG was considering a teleconference with analysts on Monday, at which the process of restructuring would be outlined.

AIG, which has a worldwide presence in the insurance industry, has suffered a 45-per-cent drop in its share price over just a few weeks.

The company lost more than 18 billion dollars in the last three quarters due to enormous write-offs from the ongoing US credit crisis.

Dr. Doom

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Roubini (middle column) is saying if Lehman is allowed to fail it will be like dominoes and he isn't even mentioning AIG. Are we looking at the big one here?

Barkleys pulls out of buyout, Sovereign Wealth Sits It Out

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Barclays pulls out of Lehman sales talks.

Also apparently standing on the sidelines of the Lehman debacle are the world’s sovereign wealth funds, which devoted billions from their massive and still-growing pools of capital to shoring up the likes of Citigroup, Merrill Lynch and Morgan Stanley, only to see the value of their investments plummet as the financial crisis widened.

“The sovereign wealth funds have decided they’re not going to come to the rescue of every embattled financial institution,” said John Habib, a lawyer for Washington firm Kalbian Hagerty in Abu Dhabi

Traders prepare for Lehman bankruptcy

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It just keeps getting worse

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.

We are looking at a very Black Monday.

Even worse interview Mike Whitney

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on Debt. I guess he is Kucinich's chief economist (Kucinich had an economist?)

Look at this observation:

The Treasury emphasized that it was under a Sunday afternoon deadline to finalize the takeover details before the Asian markets opened for trading. This concern reflects the balance-of-payments and hence military dimension to the bailout. The central banks of China, Japan and Korea are major holders of these securities, precisely because of the large size of Fannie Mae and Freddie Mac – their $5.3 trillion in mortgage-backed debt that you mention, and the $11 trillion overall U.S. mortgage market.

It probably isn't helping all of us posting the biggest doom scenario analysts on the web. But, hey, since when has unfettered and corrupt Capitalism not led to Panics?

Paulson against Gov. public funds bailout

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Lehman had foreign investors walk away earlier so this might explain why he is against it.

Midnight, the bell tolls

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Supposedly Lehman is now preparing for Bankruptcy by midnight.

And....Greenspan is now calling this the worst financial crisis in 100 years. Right, I think he's just trying to cover his ass since he most assisted in making this mess.

$24B taxpayer cost for WaMu bailout

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Boy the hits just keep on coming, Bloomberg:

Washington Mutual Inc., the country's biggest savings and loan, may cost taxpayers as much as $24 billion in the event of a U.S. government bailout, according to Richard Bove, an analyst at Ladenburg Thalmann & Co

While I'd claim one of the most major economic disasters is potentially unfolding before our eyes.....the press is all about Palin and bogus talking head opinions as well as Hurricane Ike aftermath. Not a word on what's happening on TV.

BofA and Merrill merger talks

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One less bailout?

Bank of America is in advanced talks to buy Merrill Lynch for at least $38.25 billion in stock, people briefed on the negotiations said on Sunday, as a means to preserve that investment bank while Lehman Brothers looks likely to collapse.

The move suggests a desperate effort at triage on Wall Street, as Bank of America works to shore up the likely next victim of the credit crunch. A deal, valued at between $25 a share to $30 a share, could be announced as soon as Sunday night, these people said. Merrill shares closed at $17.05 on Friday.

they are scramblin'

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My question is how long can they all hide all of this bad debt? Looks like they are moving it around, dumping it on the taxpayer, hiding it through acquisitions.....

CNBC 8pm-10pm EST

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Finally, CNBC is going on air 8PM EST to cover Lehman and latest developments.

Who here is disgusted with cable news and their phony pundits with their phony issues filling up hours and hours of air time?

Lehman Brothers HQ

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CNBC has a live camera on the building and all sorts of people are going in with boxes and walking out with their arms full.

Primary reserve fund falls below $1/share

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Bloomberg:

Reserve Primary Fund, a money-market mutual fund with $64.8 billion in assets as of Aug. 31, fell below $1 a share in net asset value because of losses on debt issued by Lehman Brothers Holdings Inc.

Investor redemptions will be delayed as long as seven days, the fund's owner, New York-based Reserve Management Corp., said today in a statement. Withdrawals requested before 3 p.m. New York time today will be paid at $1 a share

I've never heard about this before, but it appears to be some sort of money market for banks, investment firms.

Barkleys buys part of Lehman for $1.75B

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details

So after they declare bankruptcy Barkleys swoops in and buys the U.S. assets.

What's wrong with this picture? Normally when a corporation is bankrupt there is a hearing, it has to go through the courts...there are processes and creditors who are first up in obtaining value...

They are paying $250M for the US assets and the rest is securities.

I see a major lawsuit from shareholders at least in the works.

Let's just hope they keep the 10,000 employees involved.