Fannie Mae Files $15.8 Billion in Claims in Lehman Brothers Bankruptcy
Now we are getting more information on the OTC derivative market and the different liabilities that the different players had with their counter-parties. The more I am reading about these products (got a nice book on the subject that was written in 1993) and the more I read the more derivatives sound like insurance.
You know what that means? It means they should be regulated like an insurance product and that means the companies issuing this insurance needs strict capital requirements and their capital can only be invested in the safest financial instruments which we used to call “AAA” before the quality rating became a backroom Wall Street joke.
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Lehman Brothers bankruptcy filing may have wiped out $75 billion from creditors
No doubt everyone looking back will think that Lehman should of been saved from their current fate but that is now in the past and we have to deal with the current situation. I think some hard questions will need to be answered when we look early in this meltdown on why certain companies were saved when others were not even days apart? I am suprised no real criminal investigation have really been announced other than Madoff.
News:
Lehman Brothers Holdings Inc’s emergency bankruptcy filing wiped out as much as $75 billion of potential value for creditors, The Wall Street Journal reported on Monday, citing an analysis by the bank’s restructuring advisers.
A more planned and orderly filing would have allowed Lehman to sell some assets outside of bankruptcy court protection and would have given it time to unwind derivatives positions, according to the analysis by Alvarez & Marsal.
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Lehman gets 8.2 cents on the dollar in debt auction, shows CDS losses to counter-parties
A domino has now been tipped. This has serious implications for counter-parties who were backing Lehman’s debt and now are going to cover these obligations and make them good. We will see negative effects if companies can not payout. That will not help us get more confidence into the market.
Release:
Sellers of insurance on bonds issued by bankrupt Lehman Brothers Holdings Inc. are now likely to face demands that they pay out more than 91 cents on the dollar to buyers of those insurance contracts. That’s the upshot of an unusual auction process Friday that established the price for defaulted Lehman debt, and in turn potential claims payouts on insurance protecting that debt, known as credit default swaps.
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Lehman’s Cash Crunch Caused by Lender JPMorgan, Creditors State
This is interesting. It looks as these proceedings take place, more details and facts are coming out to see how the collapse of these major financial institutions took place in such a quick fashion. Lehman Brothers’ creditors claimed that JPMorgan had $17 billion dollars of their asset in safekeeping when they had the “freeze” and then subsequent takeover.
News Piece:
Lehman Brothers Holdings Inc.’s main lender and clearing agent, JPMorgan Chase & Co., caused the liquidity crisis that led to Lehman’s collapse, creditors said.
JPMorgan had more than $17 billion of Lehman’s cash and securities three days before the investment bank filed the biggest bankruptcy in history on Sept. 15, the creditors committee said in a filing Oct. 2 in bankruptcy court in Manhattan. Denying Lehman access to the assets on Sept. 12, the bank “froze” Lehman’s account, the creditors claimed.
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Credit-Default Risk (CDS) Soars After Lehman Brothers Files for Bankruptcy
Much uncertainty on Wall Street today. According to Bloomberg, Lehman was a top 10 dealer in CDS or credit-default swaps. First fallout with a major market maker going under is the amount counter-parties are demanding for debt insurance has gone up 50% overnight in many cases.
Bill Gross of Pimco made this comment ““The immediate problem is the derivative default swaps market, in which a plethora of institutional accounts and dealer accounts are at risk,” “It induces a tremendous amount of volatility and uncertainty.”” In this article they stated if a company insured $2 trillion in debt and went under it would induce 36-47 billion dollars in losses. This is not good and we might finally be over the edge with no way back.
CDS Article:
Bond-default risk soared worldwide as the collapse of Lehman Brothers Holdings Inc. sparked concern than the $62 trillion credit-derivatives market will unravel.
Benchmark gauges of corporate credit risk rose by a record in Europe, and traded near an all-time high in North America, driven by a rise in Goldman Sachs Group Inc., Morgan Stanley and American International Group. U.S. two-year Treasuries climbed, pushing yields below 2 percent for the first time since April, as investors sought the relative safety of government debt.
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Derivatives market trades on Sunday to cut Lehman Brothers counter-party risk
Unprecedented, this must be a signal that things are worse than most people think. Opening a Sunday session for Smart money to unwind their derivative position. This week should be a rollercoaster ride.
News Release:
Major players in the $455 trillion global derivatives market rushed Sunday to scale back exposure to a potential bankruptcy filing by investment bank Lehman Brothers in a rare emergency trading session. Trading took place as U.S. regulators and bankers were making last-ditch efforts to prevent toxic assets from ailing Lehman Brothers spilling into global markets and rupturing investor faith in the international financial system.
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Lehman Brothers Said to Prepare Bankruptcy as Buyers Withdraw
Tomorrow morning (Monday) will be very telling on is to come. This announcement could have major implications going forward. The first thing that comes to mind is what exposure is our their for CDS against Lehman debt or how much of this paper are they the counter-party and if there is major exposure on either or both, what position does that put in companies in when they file bankruptcy protection?
My gut feeling is this is going to send shock-waves throughout the markets. Gold has already jumped 2 1/2% in the Asian market at the time of this writing on a Sunday night.
Release:
Lehman Brothers Holdings Inc. prepared to file for bankruptcy after Barclays Plc and Bank of America Corp. abandoned talks to buy the U.S. securities firm and Wall Street prepared for its possible liquidation.
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