Banking Crisis: The next domino stones are falling

Certainly when you were watching the news today or read a newspaper this morning you could not avoid learning that the next “most prominent” victims of the current banking crisis were biting the dust.

I was quite interesting what kind of nonsense was pushed around in the mainstream media to calm down Mr & Ms Jones concerns about their money in the bank - one commentator / self-proclaimed expert was even thickheaded enough to say that “…nothing to fear, only those directly invested in stocks of the bank might be loosing some money…”. Well you clown, only a minute before they where showing intra-day losses of almost 90%. Those so-called experts are even loosing their entertainment value the more of the mess is pushing up through the gullies.

With regards to the Merrill Lynch / BofA merger (Who??? is buying whom???) we will see over the next months if that move will allow BofA to make some of the dirt in their nostro / portfolios / liabilities disappear or if there are some more really bad surprises within Merrill Lynch’s books.

Regarding Lehman much could be said about the change of corporate values (e.g. after the Shearson - Lehman - Amex merger, if the 2003 SEC settlement hasn’t told you enough), about greed and the never ending tulip trade. But what did surprise us a bit was the sheer size of the debt accrued by Lehman as reported in the Chapter 11 filings. And that of course was nowhere mentioned in the mainstream media.

For those interested in the facts here’s a link to an overview of the filing at Bloomberg.

Some core details:

• Biggest Bankruptcy in US history
• more than $613 billion of debt
• Lehman owes its 10 largest unsecured creditors more than $157 billion

From the Bloomberg article:
“…Fuld, the longest-serving CEO on Wall Street, attempted to shore up the firm’s finances in the second quarter by raising $14 billion of capital, selling $147 billion of assets, increasing cash holdings and reducing reliance on short-term funding to create a buffer against a bank run….

More information:
Lehman Brothers entry at Wikipedia
The Bloomberg article

the image above depictures Emanuel and Mayer Lehman, the founders of Lehman Brothers