Thursday, September 11, 2008

Shot-gun wedding or arranged marriage with dowry?

Give me an "L", a "T", a "C", an "M"

What's that spell? Lehman Brothers!

What's that spell? LEHMAN Brothers!!
What's that spell? LEHMAN BROTHERS! YEAH!!

Dearly beloved, we are gathered here today...
Is that the ticket? Is the Fed playing marriage broker to Lehman? That's the rumor. The Fed apparently is fighting that perception. This is not going to be a Bear Sterns sort of thing. But how about an LTCM. The Fed was in the room, but what was its role?

BofA as the purchaser of Lehman? BofA+Countrywide+Lehman= Behemoth. Behemoth of America; it Is the real estate market.

Was/Is Lehman too big to fail? NO.

Was/Is it too interconnected to fail? NO.

Does it have stuff on its balance sheet that the Fed does not want to see the light of day in market repricing framework? Oh yeah.

So Bank of American is becoming really appropriately named. The Bank that IS America.

Is it a 'fit' or just cheap?
One wonders how all these businesses are going to mesh together if this deal comes off. There are a lot of cultures blended together here and investment banks are not exactly commercial banks. But Lehman needs a bid. So does the market. The market needs for Lehman to be sold. Lehman's counterparties have been hanging in there. But since last Friday Merrill Lynch, Wamu, Lehman and AIG have seen a real slippage in their respective stock price. No one likes the notion that there is no bid for Lehman's real estate portfolio at any price. And the price has gotten very low.

Rodney Dangerfield...
Lehman's recovery plan garnered no respect. It was a plan without a bidder. But late on Thursday when a name of some credibility was uttered in the same breath with 'Lehman' and 'bid' the markets went nuts. The markets want a deal. And the Fed seems to be playing the role of Monte Hall. But what's behind the curtains? A suitor or a guarantee?

Shotgun wedding or arranged marriage with dowry?
Hold on! The situation may be more complicated. Some of the reporting says buyers are looking for Bear Stearns-like assurances. And were assurances to be given we might find a lot more suitors and those might include foreign institutions. Interesting. Would the Fed or Treasury give assurances to a foreign acquiror? Enquiring minds - as well as acquiring minds- want to know. I hope not. I hope that such an acquisition would deemed as having a cost. Barclays PLC, HSBC, Deutsche Bank and Banco Santander are names that are in the mix. Who knows? With guarantees maybe Goldman would have interest? But that name has not emerged. I hope we are done with guarantees. This is not a guarantee sort of thing. Its a shotgun marriage. Do it or begone. Stop whining for support. Cut the price and get the transaction done.

We'll see if this gets done. The next pressing question is who is next? Once Fannie and Freddie were 'saved' pressure mounted on Lehman, immediately. Who will be next? Wamu is already damaged goods with such a low share price is it the next big name to become the walking dead? Is the market like a pack of wolfs circling a herd of buffalo waiting to pick off the stragglers... whoever they may be? Is there no end to this is sight? IF BofA buys Lehman, who will buy Wamu?

It's always something

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