Lhman Bros file for Bankruptcy

[peepinmofo]

http://money.cnn.com/2008/09/14/news/compa...thers/index.htm

 

What does this mean exactly? Why is it such a hugh deal? Im not much of an investor...

 

ETA - BofA buys Merrill Lynch too...

Edited September 15, 2008 by peepinmofo

[Randall]

MSNBC is showing employees filing out with duffle bags and boxes full of personal stuff. Great job with the economy Mr Bush. Nice job letting lobbyists write laws deregulating the banking industry.

[moneymakers]

Why do you hate America LULU?

 

Do you have an original thought?

 

Your Winer attitude is so .....

 

LULU like

[Kid Cid]

MSNBC is showing employees filing out with duffle bags and boxes full of personal stuff. Great job with the economy Mr Bush. Nice job letting lobbyists write laws deregulating the banking industry.

While the economy is in the crapper, deregulation is not an entirely evil thing. There's just some growing pains that we'll have to experience as companies that were propped up by the regulations reach their natural state.

[BLIND HOMER]

They got the money, hey

You know they got away

They headed down south and theyre still running today

Singin go on take the money and run

Go on take the money and run

Go on take the money and run

Go on take the money and run

[MrTed46]

Great Depression II?

[TimC]

Do you think their executives will pay back their hugh multi-million dollar bonuses their BOD gave each of them like reach arounds the past decade? Nope, I didn't think so.

[cre8tiff]

Do you think their executives will pay back their hugh multi-million dollar bonuses their BOD gave each of them like reach arounds the past decade? Nope, I didn't think so.

 

...and the sky shall fill with golden parachutes on that faithful day...

Enrons 9:15

[moneymakers]

Barack Obama, 6:17 a.m. Eastern: "This morning we woke up to some very serious and troubling news from Wall Street. The situation with Lehman Brothers and other financial institutions is the latest in a wave of crises that are generating enormous uncertainty about the future of our financial markets. This turmoil is a major threat to our economy and its ability to create good-paying jobs and help working Americans pay their bills, save for their future, and make their mortgage payments.

 

“The challenges facing our financial system today are more evidence that too many folks in Washington and on Wall Street weren’t minding the store. Eight years of policies that have shredded consumer protections, loosened oversight and regulation, and encouraged outsized bonuses to CEOs while ignoring middle-class Americans have brought us to the most serious financial crisis since the Great Depression.

 

“I certainly don’t fault Senator McCain for these problems, but I do fault the economic philosophy he subscribes to. It’s a philosophy we’ve had for the last eight years – one that says we should give more and more to those with the most and hope that prosperity trickles down to everyone else. It’s a philosophy that says even common-sense regulations are unnecessary and unwise, and one that says we should just stick our heads in the sand and ignore economic problems until they spiral into crises.

 

“Well now, instead of prosperity trickling down, the pain has trickled up – from the struggles of hardworking Americans on Main Street to the largest firms of Wall Street. This country can’t afford another four years of this failed philosophy. For years, I have consistently called for modernizing the rules of the road to suit a 21st century market – rules that would protect American investors and consumers. And I’ve called for policies that grow our economy and our middle-class together. That is the change I am calling for in this campaign, and that is the change I will bring as President."

 

 

 

John McCain, 8:01 a.m. Eastern: "The crisis in our financial markets has taken an enormous toll on our economy and the American people -- first the decline of our housing markets followed by the collapse of Bear Stearns, Fannie Mae, Freddie Mac and now Lehman Brothers. I am glad to see that the Federal Reserve and the Treasury Department have said no to using taxpayer money to bailout Lehman Brothers, a position I have spoken about throughout this campaign. We are carefully monitoring the financial markets, including the duress at Lehman Brothers that is the latest reminder of ineffective regulation and management. Efforts must also be focused on ensuring that the deposits of hardworking Americans are protected.

 

"It is essential for us to make sure that the U.S. remains the pre-eminent financial market of the world. This will be a highest priority of my Administration. In order to do this, major reform must be made in Washington and on Wall Street. We cannot tolerate a system that handicaps our markets and our banks and places at risk the savings of hard-working Americans and investors. The McCain-Palin Administration will replace the outdated and ineffective patchwork quilt of regulatory oversight in Washington and bring transparency and accountability to Wall Street. We will rebuild confidence in our markets and restore our leadership in the financial world."

 

 

If I speak in the tongues of men and of angels, but have not love, I am only a resounding gong or a clanging cymbal

[muck]

1) We live in uncertain times.

 

2) The US regulatory environment for banks, investment firms, and other similar entities has been hughly ineffective for a long time. Streamlining the regulation would be a hugh step forward.

 

3) If any politician of any party thinks they're going to single-handedly fix things, they're are misguided and wreckless.

 

4) I don't know what McCain is calling for economically, but I believe that Obama is calling for a gigantic move towards socialism.

[Jimmy Neutron]

1) We live in uncertain times.

 

2) The US regulatory environment for banks, investment firms, and other similar entities has been hughly ineffective for a long time. Streamlining the regulation would be a hugh step forward.

 

3) If any politician of any party thinks they're going to single-handedly fix things, they're are misguided and wreckless.

 

4) I don't know what McCain is calling for economically, but I believe that Obama is calling for a gigantic move towards socialism.

 

Spot on.

[JoJoTheWebToedBoy]

May be a bit of a cynic here, but there is an old saying;

 

"You made your bed, now lie in it"

 

I am no genuis when it comes to Wall Street, but hell, even I saw this one coming. Did these idiots think the housing market was just going to keep going up and up? Did they not learn anything from the Dot-Com bust?

 

It was greed, pure amd simple. They went for the massive profits without a care for long term stability or their customers and shareholders. From an angry guy point of view, f@ck'em. And as for our fearless leaders from both parties.... this is what happens when your not minding the store and you let big business write the laws....

Edited September 15, 2008 by JoJoTheWebToedBoy

[Double Agent]

4) I don't know what McCain is calling for economically, but I believe that Obama is calling for a gigantic move towards socialism.

 

Bingo!

[cre8tiff]

1) We live in uncertain times.

 

2) The US regulatory environment for banks, investment firms, and other similar entities has been hughly ineffective for a long time. Streamlining the regulation would be a hugh step forward.

 

3) If any politician of any party thinks they're going to single-handedly fix things, they're are misguided and wreckless.

 

4) I don't know what McCain is calling for economically, but I believe that Obama is calling for a gigantic move towards socialism.

 

Believe what you want, but speaking against trickle-down economics is not the same as socialism. Far from it.

[moneymakers]

These guys are next

 

Prosecutors Allege AIG Scheme Cost Investors $1 Billion

By John Christoffersen

September 8, 2008

 

 

U.S. prosecutors said a scheme to manipulate the financial statements of the world's largest insurance company, American International Group Inc., resulted in a loss of more than $1 billion to investors.

 

 

Four former executives of General Re Corp. and a former executive of American International Group were convicted in February of conspiracy, securities fraud, mail fraud and making false statements to the Securities and Exchange Commission. They await sentencing.

 

The prosecution filed court papers last Friday citing a study by its expert, concluding the fraud-related losses to AIG shareholders totaled $1.2 billion to $1.4 billion. Another methodology from the expert put the losses at around $543 million to $598 million, but prosecutors said either method is reasonable.

 

The defendants are challenging the estimate, which could affect the length of their sentences. The defendants, all of whom await sentencing, are Christopher Garand, Ronald Ferguson, Elizabeth Monrad, Robert Graham, and Christian Milton.

 

Ferguson said in court papers last week that he anticipates the government will advocate a loss amount that leads to a recommendation for life in prison. But prosecutors made no such recommendation, simply concluding that the defendants should receive a "substantial'' prison sentence.

 

A report by the probation department recommends sentences of 14 to more than 17 years for each defendant.

 

In a separate set of court papers filed Friday, Garand argued that prosecutors failed to show there was any loss caused by the deal that led to the charges.

 

Milton also filed court papers Friday, saying he was not personally enriched by the scheme as defendants were in other recent corporate scandals.

 

"This case stands in contrast to recent high-profile cases (such) as Enron, WorldCom, Adelphia and Cendant, in which defendants received severe and lengthy sentences,'' Milton's attorneys wrote.

 

"Those cases involved massive frauds which personally enriched the defendants by conduct that destroyed public companies and the lifetime investment of shareholders,'' they wrote.

 

Prosecutors said the defendants participated in a scheme in which AIG paid Gen Re as part of a secret side agreement to take out reinsurance policies with AIG in 2000 and 2001, propping up its stock price and inflating reserves by $500 million.

 

Reinsurance policies are backups purchased by insurance companies to completely or partly insure the risk they have assumed for their customers.

 

General Re is part of Berkshire Hathaway Inc., which is led by billionaire investor Warren Buffett of Omaha, Nebraska.

[dmarc117]

AIG looking ugly as well. front month vol is bid. once again fellas, keep your finances in check and curtail you spending. we could be in for some hard times for the next few years. spend wisely.

[DemonKnight]

“Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone. ”

 

— John Maynard Keynes

 

43.35% of the people in the Forbes magazine "400 richest individuals" list were already rich enough at birth to qualify.

 

Noam Chomsky has argued that the asymmetric application of free market principles creates a "privatized tyranny": "The talk about labor mobility doesn't mean the right of people to move anywhere they want, as has been required by free market theory ever since Adam Smith, but rather the right to fire employees at will. And, under the current investor-based version of globalization, capital and corporations must be free to move, but not people, because their rights are secondary, incidental." Further, he emphasizes that it can matter what entities have rights in the market—"Do they inhere in persons of flesh and blood, or only in small sectors of wealth and privilege? Or even in abstract constructions like corporations, or capital, or states?"—and remarks that of what he sees as the three tyrannical systems of the 20th century, Bolshevism, and fascism have "collapsed", but "private corporatism… is alive and flourishing… [a] system of state corporate mercantilism disguised with various mantras like globalization and free trade."

 

Chomsky argues that the wealthy use free-market rhetoric to justify imposing greater economic risk upon the lower classes, while being insulated from the rigours of the market by the political and economic advantages that such wealth affords. He remarked, "the free market is socialism for the rich—[free] markets for the poor and state protection for the rich."

 

Our market economy is far from "free" in its current incarnation.

[budlitebrad]

When asked whether the Democrats “deserve some responsibility” regarding the economic crisis, Pelosi responded: “No.”

 

Well there you have it.

[darin3]

Another Lehman article

[wiegie]

The Federal Reserve has basically just directly bailed out and taken 80% ownership in AIG. This is very unusual (and may be unprecedented--I need to check on that).

 

Edit to add: According to this NY Times article, it is unprecedented:

 

Fed Readies A.I.G. Loan of $85 Billion for an 80% Stake

 

By MICHAEL J. de la MERCED and ERIC DASH

Published: September 16, 2008

 

In an extraordinary turn, the Federal Reserve was close to a deal Tuesday night to take a nearly 80 percent stake in the troubled giant insurance company, the American International Group, in exchange for an $85 billion loan, according to people briefed on the negotiations.

 

All of A.I.G.’s assets would be pledged to secure the loan, these people said, and in return, the Fed would receive warrants that could be exchanged for an ownership stake. Stock of existing shareholders would be diluted, but not wiped out.

 

If the Fed takes a controlling stake, it is likely that it would want to replace A.I.G.’s board as well as its chief executive and chairman, Robert B. Willumstad.

 

The Fed’s action came after Treasury Secretary Henry M. Paulson and Ben S. Bernanke, president of the Federal Reserve, went to Capitol Hill on Tuesday night to meet with House and Senate leaders. Mr. Paulson called the Senate majority leader, Harry Reid, Democrat of Nevada, about 5 p.m. and asked for a meeting in the Senate leader’s office, which began about 6:30 p.m.

 

The Federal Reserve and Goldman Sachs and JPMorgan Chase had been trying to arrange a $75 billion loan for A.I.G. to stave off the financial crisis caused by complex debt securities and credit default swaps. The Federal Reserve stepped in after it became clear Tuesday afternoon that the banking consortium could not be able to complete the deal in time.

 

Without the help, A.I.G. was expected to be forced to file for bankruptcy protection.

 

The need for the loans became necessary after the major credit ratings agencies downgraded A.I.G. late Monday, a move that likely to have forced the company to turn over billions of dollars in collateral to its derivatives trading partners worsening its financial health.

 

Until this week, it would have been unthinkable for the Federal Reserve to bail out an insurance company, and A.I.G.’s request for help from the Fed of just a few days ago was rebuffed.

 

But with the prospect of a giant bankruptcy looming — one with unpredictable consequences for the world financial system — the Fed abandoned precedent and agreed to let the money flow.

 

Attending the meeting on the Capitol Hill were Democratic Senate leaders that included Charles E. Schumer of New York, Richard Durbin of Illinois, Christopher J. Dodd of Connecticut and Kent Conrad of North Dakota A contingent of Republicans was led by Mitch McConnell of Kentucky, the minority leader, and included Richard Shelby of Alabama, John Kyl of Arizona and Judd Gregg of New Hampshire. House leaders included John Boehner of Ohio, the Republican leader; Spencer Bachus, Republican of Alabama; and Barney Frank, Democrat of Massachusetts. Members of the leaders’ staffs were asked to leave the meeting shortly after it began.

Edited September 17, 2008 by wiegie

[darin3]

The Federal Reserve has basically just directly bailed out and taken 80% ownership in AIG. This is very unusual (and may be unprecedented--I need to check on that).

 

Edit to add: According to this NY Times article, it is unprecedented:

 

Whoa. Well, AIG is the largest insurance company in the world, no? My wife's company (works in the insurance realm) is going to be inundated with work because of the AIG events. Yikes.

[dmarc117]

The Federal Reserve has basically just directly bailed out and taken 80% ownership in AIG. This is very unusual (and may be unprecedented--I need to check on that).

 

Edit to add: According to this NY Times article, it is unprecedented:

 

 

the govt had to bail them out.

[Egret]

1) We live in uncertain times.

 

2) The US regulatory environment for banks, investment firms, and other similar entities has been hughly ineffective for a long time. Streamlining the regulation would be a hugh step forward.

 

3) If any politician of any party thinks they're going to single-handedly fix things, they're are misguided and wreckless.

 

4) I don't know what McCain is calling for economically, but I believe that Obama is calling for a gigantic move towards socialism.

Wouldn't a gov't buyout of AIG be even closer to socialism.

[Clubfoothead]

Wouldn't a gov't buyout of AIG be even closer to socialism.

 

It is only socialism when the government helps American people. When it helps big multinational companies it's called replacing the outdated and ineffective patchwork quilt of regulatory oversight.

[muck]

It is only socialism when the government helps American people. When it helps big multinational companies it's called replacing the outdated and ineffective patchwork quilt of regulatory oversight.

 

This wipes out 80% of the equity value of the stock holders ... and ... promotes financial stability in the US and abroad.

 

As with FNM and FRE, I would expect that the US Gov't will wind down the balance sheet of these companies and sell them to the public at some point down the road. I would guess that there is better than a 50% chance that (i) all loans get repaid in full with interest ... and ... (ii) the US Gov't sells it's equity in all entities for a gigantic profit.

 

If the profit is realized, I am hopeful that it would be used to shore up medicare / medicaid and/or be used for a partial privatization of social security. Maybe something like, everyone with a SS account would receive a portion of their SS account at IPO prices of a combined FNM/FRE and in AIG ... which they could sell and reinvest ... or keep ... and merge the SS distribution into their existing IRA or 401(k) to continue tax efficient growth.

 

This approach would have the triple benefit of (i) providing stability in the times of great distress ... (ii) reminding capitalists everywhere that bad business practices will not be tolerated without repurcussions ... and ... (iii) reducing the future SS / medicare / medicaid costs to the system.