Chicken, Wall Street Style - In Frantic Day, Wall Street Banks Teeter

Discussion in 'Trading' started by Jahajee, Sep 14, 2008.

  1. Chicken, Wall Street Style

    This weekend’s talks at the New York Fed may end with a deal that makes everyone happy, but for now it looks like both sides are playing chicken.

    Wall Street may insist that values are ridiculously cheap, but the investments firms have no desire to take additional risks in that area by taking over part of Lehman’s book. They might need their capital to avoid becoming the next Lehman.

    The government is worried about systemic risk, but the prospect of having to bail somebody else out every weekend is not appealing. So it does not want to be treated like a patsy.

    The result could be a bankruptcy filing, which might stem the immediate pressure on Lehman but would lead to issues about how others would value their exposures to Lehman.

    September 15, 2008
    In Frantic Day, Wall Street Banks Teeter

    In one the most extraordinary days in Wall Street’s in history, Merrill Lynch is near an 11th-hour deal to avert a deepening financial crisis while another storied securities firm, Lehman Brothers, hurtled toward liquidation, according to people briefed on the deal.

    The dramatic turn of events was prompted by the cataclysm of losses that has shaken the American financial industry over the last 14 months.

    The moves came after a weekend of frantic negotiations between federal officials and Wall Street executives over how to avert a downward spiral in the markets. Questions still remain about how the market will react and whether other firms may still falter like A.I.G., the large insurer, and Washington Mutual, both of whose stocks fell precipitously last week.

    Coming just a week after the government took control of mortgage lenders Fannie Mae and Freddie Mac, the magnitude of the industry’s reshaping is staggering: two of the most powerful firms on Wall Street, Merrill Lynch and Lehman, will disappear.

    The weekend’s once unthinkable outcome came after a series of emergency meetings at the Federal Reserve building in downtown Manhattan in which the fate of Lehman hung in the balance. In the meeting Federal Reserve officials and the leaders of major financial institutions were trying to complete a plan to rescue the stricken investment bank.

    Rush Is On to Prevent A.I.G. From Failing

    Published: September 14, 2008

    The American International Group, the insurance company, is planning a major reorganization and a sale of its aircraft leasing business and other units to stabilize its finances, a person briefed on the company’s strategy said on Sunday.