Goldman and Lehman Both Borrow From the Fed

Discussion in 'Wall St. News' started by THE-BEAKER, Mar 19, 2008.

  1. i suppose its good news from their point of view and good news from wall streets point of view.

    my view is this is not good news.

    im still retaining and adding to puts on these and similar banks.

    dont think we have seen the blow out trade on this mess yet.

    anyway read on:

    Lehman Brothers Holdings is unlikely to face the kind of liquidity crisis that brought down Bear Stearns over the weekend because of the Federal Reserve's decision to let Wall Street brokerage firms borrow directly from the central bank, CFO Erin Callan told CNBC.

    "It certainly takes the question of liquidity off the table," Callan said in a live interview. "I think [the Fed's decision is] the great news that happened over the weekend."

    Callan said Tuesday that Lehman Lehman Brothers Holdings which reported better-than-expected earnings on Tuesday but has faced persistent rumors of a Bear Stearns-type liquidity crisis, plans to borrow from the Fed through the discount window.

    Lehman followed up on Callan's announcement by borrowing from the window within minutes of her appearance. At 5 p.m. New York time, Lehman borrowed $2 billion, sources said -- a small amount relative to the bank's $375 billion balance sheet.

    Goldman Sachs Goldman Sachs Group also used the discount window late Tuesday, sources said, but it wasn't clear how much money the investment bank asked for.

    "It’s going to be actively used" by many brokerages, Callan said. “We’ll be a participant. It’s a great opportunity."

    The Fed announced the new lending facility for Wall Street firms on Sunday night, shortly after it helped facilitate the sale of Bear Stearns Bear Stearns Co IncBSC
    5.91 UNCH 0% NYSE

    Under the plan, primary dealers -- big Wall Street firms that deal directly with the Fed in financial markets -- would be allowed to borrow directly from the Fed for at least the next six months.

    The Fed, which normally lends through its discount window only to banks that take deposits, can lend to nondepository institutions under special circumstances. It last did so in the 1930s.

    In the CNBC interview, Callan acknowledged that Lehman has had a difficult time recently amid all the rumors that it's in financial trouble.

    "We know we're always the next name on the list," she said. “There isn’t a great appreciation for the fact that we’ve evolved our franchise dramatically over the last decade. In fact, we’ve structured our liquidity exactly for this kind of situation. So, we feel like we’re in a good spot."
  2. its bad news. Goldman said yesterday that their liquidity was strong. if so,then tell me why they had to borrow feom the fed's discount window!
  3. Daal


    they must be playing some kind of carry strategy, lehman and goldman dont have regulations on the capital rations and leverage, they can borrow at 2.5% and lend at higher rates, there are not impaired on their balance sheet like C and others so they must be trying to make money