Monday, September 22, 2008
Tuesday, September 16, 2008
Bloomberg.com: Opinion
Bloomberg.com: Opinion: "Sept. 15 (Bloomberg) -- The only sure thing in the financial markets is that there is no sure thing.
It had long been conventional market wisdom that the bonds of Fannie Mae and Freddie Mac were the next best thing to U.S. Treasury securities.
The bonds were virtually guaranteed by the companies' clout as government-sponsored enterprises -- so wouldn't their profits rise forever? Banks, foreign investors and money managers everywhere thought so, buying Fannie and Freddie common and preferred shares almost as eagerly as they did their fixed- income securities.
Those stock investors can now only look at their monitors and weep. While Fannie and Freddie bonds are safe after the government takeover of the two mortgage companies the weekend before last, their common shares trade for pennies -- like those of bankrupts. Their preferred shares have been clobbered too.
Fannie Mae closed Friday at 74 cents a share. That was down from $68.60 last October and $7.04 before the federal takeover.
Freddie Mac had sunk to 46 cents a share by Friday's close from $65.88 in October and $5.10 on Sept. 5.
More tears. Fannie Mae 8.25 percent preferred stock dropped to $2.65 from $13.70 in the week after the takeover. Freddie Mac 5.57 percent preferred fell to $1.50 from $9.15 during the week. Both stocks have a par value of $25."
It had long been conventional market wisdom that the bonds of Fannie Mae and Freddie Mac were the next best thing to U.S. Treasury securities.
The bonds were virtually guaranteed by the companies' clout as government-sponsored enterprises -- so wouldn't their profits rise forever? Banks, foreign investors and money managers everywhere thought so, buying Fannie and Freddie common and preferred shares almost as eagerly as they did their fixed- income securities.
Those stock investors can now only look at their monitors and weep. While Fannie and Freddie bonds are safe after the government takeover of the two mortgage companies the weekend before last, their common shares trade for pennies -- like those of bankrupts. Their preferred shares have been clobbered too.
Fannie Mae closed Friday at 74 cents a share. That was down from $68.60 last October and $7.04 before the federal takeover.
Freddie Mac had sunk to 46 cents a share by Friday's close from $65.88 in October and $5.10 on Sept. 5.
More tears. Fannie Mae 8.25 percent preferred stock dropped to $2.65 from $13.70 in the week after the takeover. Freddie Mac 5.57 percent preferred fell to $1.50 from $9.15 during the week. Both stocks have a par value of $25."
Barclays Wins By Losing Lehman - Forbes.com
Barclays Wins By Losing Lehman - Forbes.com: "LONDON - All-American boy Bob Diamond, head of the Barclays Capital investment bank arm, is regarded by his peers as the good-at-everything man who is used to getting what he wants.
So perhaps it came as a surprise when last weekend Diamond, who is keen to see the bank's merger and acquisitions business expand internationally, saw the U.S. government refuse to act as a guarantor to Lehman's debt after Barclays approached the liquidated bank about a bid.
But according to analysts consulted by Forbes.com, the Springfield, Mass-born banker, who graduated first in his class from the University of Connecticut business school, made the right decision by pulling out of any bailout plan, which caused Lehman Brother Holdings to file for Chapter 11 to 'protect its assets and maximize value.'
'It was an entirely sensible decision,' Alexander Potter, an analyst with Collins Stewart in London, told Forbes.com. 'Barclays needs to deal with its balance sheet first, instead of going around increasing risk. It's disappointing that it engaged in conversations in the first place,' Potter said.
In a note to investors, Potter said, 'Barclays confirmed [Monday] morning it had considered and then decided against bidding for Lehman Brothers. While we take the decision not to proceed as a positive, having considered a deal does highlight management's apparent unwillingness to delever the balance sheet.'
A deal would help it escape the fate of Lehman, which sought bankruptcy protection after Barclays (nyse: BCS - news - people ) walked away from buying it. (See 'Lehman Goes To The Wall.') But according to TradeTheNews, Lehman says Barclays is still interested in its broker-dealer unit."
So perhaps it came as a surprise when last weekend Diamond, who is keen to see the bank's merger and acquisitions business expand internationally, saw the U.S. government refuse to act as a guarantor to Lehman's debt after Barclays approached the liquidated bank about a bid.
But according to analysts consulted by Forbes.com, the Springfield, Mass-born banker, who graduated first in his class from the University of Connecticut business school, made the right decision by pulling out of any bailout plan, which caused Lehman Brother Holdings to file for Chapter 11 to 'protect its assets and maximize value.'
'It was an entirely sensible decision,' Alexander Potter, an analyst with Collins Stewart in London, told Forbes.com. 'Barclays needs to deal with its balance sheet first, instead of going around increasing risk. It's disappointing that it engaged in conversations in the first place,' Potter said.
In a note to investors, Potter said, 'Barclays confirmed [Monday] morning it had considered and then decided against bidding for Lehman Brothers. While we take the decision not to proceed as a positive, having considered a deal does highlight management's apparent unwillingness to delever the balance sheet.'
A deal would help it escape the fate of Lehman, which sought bankruptcy protection after Barclays (nyse: BCS - news - people ) walked away from buying it. (See 'Lehman Goes To The Wall.') But according to TradeTheNews, Lehman says Barclays is still interested in its broker-dealer unit."
The Universal Appeal Of BofA - Forbes.com
The Universal Appeal Of BofA - Forbes.com: "When Wall Street goes on clearance, someone gets a bargain.
As Lehman Brothers (nyse: LEH - news - people ) hurtled toward liquidation Sunday, Bank of America (nyse: BAC - news - people ) swiftly hammered out a deal to acquire its more attractive rival Merrill Lynch (nyse: MER - news - people ) for $29 a share.
The $50 billion deal will give Bank of America the largest brokerage operation in the country, and leaves the remaining major independent brokerages, Goldman Sachs (nyse: GS - news - people ) and Morgan Stanley (nyse: MS - news - people ), looking increasingly thin compared to “universal banks” such as Bank of America and JPMorgan, with their substantial deposit-taking retail banking operations.
As possible rescuers pulled back from Lehman over the weekend--including Bank of America--Merrill Lynch was under incredible pressure to find its own buyer or face a similar fate. Last week, Merrill’s stock plunged 36.6% because many believed that the investment bank, saddled with mortgage losses, would confront liquidity problems of Lehman-esque proportions."
As Lehman Brothers (nyse: LEH - news - people ) hurtled toward liquidation Sunday, Bank of America (nyse: BAC - news - people ) swiftly hammered out a deal to acquire its more attractive rival Merrill Lynch (nyse: MER - news - people ) for $29 a share.
The $50 billion deal will give Bank of America the largest brokerage operation in the country, and leaves the remaining major independent brokerages, Goldman Sachs (nyse: GS - news - people ) and Morgan Stanley (nyse: MS - news - people ), looking increasingly thin compared to “universal banks” such as Bank of America and JPMorgan, with their substantial deposit-taking retail banking operations.
As possible rescuers pulled back from Lehman over the weekend--including Bank of America--Merrill Lynch was under incredible pressure to find its own buyer or face a similar fate. Last week, Merrill’s stock plunged 36.6% because many believed that the investment bank, saddled with mortgage losses, would confront liquidity problems of Lehman-esque proportions."
Regulators Clear Way For AIG Restructuring - Forbes.com
Regulators Clear Way For AIG Restructuring - Forbes.com: "New York state officials cleared the way for American International Group to borrow from itself as the struggling insurer tries to raise billions of capital.
Insurance regulators and representatives of New York's governor's office huddled with AIG (nyse: AIG - news - people ) over the weekend to pour over a reorganization and a plan to raise $40 billion or more in capital. The saga at AIG, coming on the same weekend as the collapse of Lehman Brothers (nyse: LEH - news - people ) and the sale of Merrill Lynch (nyse: MER - news - people ) to Bank of America (nyse: BAC - news - people ), is raising alarms that another major financial institution is about to fall.
So important is AIG's survival that New York's Gov. David Patterson appeared in a press conference Monday afternoon to announce he had cleared AIG to borrow up to $20 billion from its operating subsidiaries to cover day-to-day needs at the holding company.
The approval comes at the request of the company. AIG, with 33,000 employees, was said to have sought an emergency loan from the Federal Reserve, though it is not a bank or a primary dealer. It was also said to be in talks with Berkshire Hathaway's (nyse: BRK - news - people ) Warren Buffett.
AIG lost $18 billion over the last few quarters and raised $20 billion of capital, but it has not been enough to stop the bleeding from its exposure to mortgage securities and derivatives.
Making a bridge loan to itself buys a limited amount of time to scrounge up more capital."
Insurance regulators and representatives of New York's governor's office huddled with AIG (nyse: AIG - news - people ) over the weekend to pour over a reorganization and a plan to raise $40 billion or more in capital. The saga at AIG, coming on the same weekend as the collapse of Lehman Brothers (nyse: LEH - news - people ) and the sale of Merrill Lynch (nyse: MER - news - people ) to Bank of America (nyse: BAC - news - people ), is raising alarms that another major financial institution is about to fall.
So important is AIG's survival that New York's Gov. David Patterson appeared in a press conference Monday afternoon to announce he had cleared AIG to borrow up to $20 billion from its operating subsidiaries to cover day-to-day needs at the holding company.
The approval comes at the request of the company. AIG, with 33,000 employees, was said to have sought an emergency loan from the Federal Reserve, though it is not a bank or a primary dealer. It was also said to be in talks with Berkshire Hathaway's (nyse: BRK - news - people ) Warren Buffett.
AIG lost $18 billion over the last few quarters and raised $20 billion of capital, but it has not been enough to stop the bleeding from its exposure to mortgage securities and derivatives.
Making a bridge loan to itself buys a limited amount of time to scrounge up more capital."
Bank of America agrees to buy Merrill Lynch - Phoenix Business Journal:
Bank of America agrees to buy Merrill Lynch - Phoenix Business Journal:: "BofA also joined nine other powerful world banks Sunday, committing to make $70 billion in lending available in advance of an expected bankruptcy filing by Lehman Bros. & Co.
BofA and the other banks said each of them has committed to $7 billion for the loan pool and that any of them could borrow as much as one-third of the total. Other banks may join and the loan pool could grow, the banks said.
In addition to BofA, other banks in the group are Barclays PLC (NYSE:BCS), Citigroup Inc. (NYSE:C), Credit Suisse Group (NYSE:CS), Deutsche Bank AG (NYSE:DB), Goldman Sachs Group Inc. (NYSE:GS), JPMorgan Chase & Co. (NYSE:JPM), Merrill Lynch & Co. (NYSE:MER), Morgan Stanley (NYSE:MS) and UBS AG (NYSE:UBS)."
BofA and the other banks said each of them has committed to $7 billion for the loan pool and that any of them could borrow as much as one-third of the total. Other banks may join and the loan pool could grow, the banks said.
In addition to BofA, other banks in the group are Barclays PLC (NYSE:BCS), Citigroup Inc. (NYSE:C), Credit Suisse Group (NYSE:CS), Deutsche Bank AG (NYSE:DB), Goldman Sachs Group Inc. (NYSE:GS), JPMorgan Chase & Co. (NYSE:JPM), Merrill Lynch & Co. (NYSE:MER), Morgan Stanley (NYSE:MS) and UBS AG (NYSE:UBS)."
Bank of America agrees to buy Merrill Lynch - Phoenix Business Journal:
Bank of America agrees to buy Merrill Lynch - Phoenix Business Journal:: "Bank of America Corp. has agreed to acquire Merrill Lynch & Co. Inc. in a $50 billion deal that creates a global financial-services company.
'Acquiring one of the premier wealth-management, capital-markets and advisory companies is a great opportunity for our shareholders,' BofA Chairman and Chief Executive Ken Lewis said in a statement Monday morning. 'Together, our companies are more valuable because of the synergies in our businesses.'
Under terms of the transaction, BofA would exchange 0.8595 shares of its common stock for each Merrill Lynch common share.
The price is 1.8 times stated tangible book value.
'Merrill Lynch is a great global franchise, and I look forward to working with Ken Lewis and our senior management teams to create what will be the leading financial institution in the world with the combination of these two firms,' said John Thain, chairman and CEO of Merrill Lynch (NYSE:MER), in a statement."
'Acquiring one of the premier wealth-management, capital-markets and advisory companies is a great opportunity for our shareholders,' BofA Chairman and Chief Executive Ken Lewis said in a statement Monday morning. 'Together, our companies are more valuable because of the synergies in our businesses.'
Under terms of the transaction, BofA would exchange 0.8595 shares of its common stock for each Merrill Lynch common share.
The price is 1.8 times stated tangible book value.
'Merrill Lynch is a great global franchise, and I look forward to working with Ken Lewis and our senior management teams to create what will be the leading financial institution in the world with the combination of these two firms,' said John Thain, chairman and CEO of Merrill Lynch (NYSE:MER), in a statement."
Bloomberg.com: Asia
Bloomberg.com: Asia: "Temasek May Reap $1.5 Billion Gain From Merrill Lynch Takeover
By Chen Shiyin
Sept. 15 (Bloomberg) -- Temasek Holdings Pte., the biggest shareholder of Merrill Lynch & Co., may reap gains of $1.5 billion from the sale of the third-biggest U.S. securities firm to Bank of America Corp.
The biggest U.S. consumer bank said today it agreed to buy Merrill for $50 billion in stock, or $29 a share. The Singapore sovereign wealth fund paid $5.9 billion since December for about 14 percent of Merrill at an average price of $23.11 a share, based on Bloomberg calculations from exchange filings.
Bank of America's purchase price is 70 percent more than Merrill's closing price of $17.05 in New York trading on Sept. 12. The shares fell 68 percent this year, after the company reported writedowns and credit losses of more than $52 billion, the second-most among the world's largest banks and securities firms, according to data compiled by Bloomberg."
By Chen Shiyin
Sept. 15 (Bloomberg) -- Temasek Holdings Pte., the biggest shareholder of Merrill Lynch & Co., may reap gains of $1.5 billion from the sale of the third-biggest U.S. securities firm to Bank of America Corp.
The biggest U.S. consumer bank said today it agreed to buy Merrill for $50 billion in stock, or $29 a share. The Singapore sovereign wealth fund paid $5.9 billion since December for about 14 percent of Merrill at an average price of $23.11 a share, based on Bloomberg calculations from exchange filings.
Bank of America's purchase price is 70 percent more than Merrill's closing price of $17.05 in New York trading on Sept. 12. The shares fell 68 percent this year, after the company reported writedowns and credit losses of more than $52 billion, the second-most among the world's largest banks and securities firms, according to data compiled by Bloomberg."
Lehman and AIG woes pummel Wall Street | Markets | Hot Stocks | Reuters
Lehman and AIG woes pummel Wall Street Markets Hot Stocks Reuters: "By Kristina Cooke
NEW YORK (Reuters) - Stocks slid on Monday on cascading fears about the stability of the U.S. financial system after investment bank Lehman Brothers filed for bankruptcy and concerns grew about insurer AIG.
Financial services companies' shares led a broad and steep decline in major indexes as investors worried about the impact of the latest twists in the credit crisis on the economy and the outlook for profits. Lehman Brothers Holdings Inc shares dropped 95 percent to 19 cents in composite trading.
Shares of American International Group, once the world's largest insurer by market value, plunged 51 percent to $5.92. The company made an unprecedented request to the Federal Reserve for $40 billion in short-term financing. Savings and loan Washington Mutual fell 17.6 percent to $2.25.
'The turmoil continues,' said Robert Francello, head of equity trading for Apex Capital hedge fund in San Francisco.
'And it seems to be people underestimated the impact of AIG and what the fallout of that could be.'
The Dow Jones industrial average fell 271.37 points, or 2.38 percent, to 11,150.62, while the Standard & Poor's 500 Index slid 30.04 points, or 2.40 percent, to 1,221.66. The Nasdaq Composite Index was down 42.48 points, or 1.88 percent, at 2,218.79.
Lehman, weighed down by losses spawned by the U.S. mortgage crisis, sought bankruptcy protection on Monday following a scramble over the weekend in which it failed to find a buyer.
Merrill Lynch, meanwhile, agreed to be bought by Bank of America Corp, the No. 2 U.S. bank. Merrill's stock jumped 13.6 percent to $19.37 but Bank of America shares dropped 18 percent to $27.65."
NEW YORK (Reuters) - Stocks slid on Monday on cascading fears about the stability of the U.S. financial system after investment bank Lehman Brothers filed for bankruptcy and concerns grew about insurer AIG.
Financial services companies' shares led a broad and steep decline in major indexes as investors worried about the impact of the latest twists in the credit crisis on the economy and the outlook for profits. Lehman Brothers Holdings Inc shares dropped 95 percent to 19 cents in composite trading.
Shares of American International Group, once the world's largest insurer by market value, plunged 51 percent to $5.92. The company made an unprecedented request to the Federal Reserve for $40 billion in short-term financing. Savings and loan Washington Mutual fell 17.6 percent to $2.25.
'The turmoil continues,' said Robert Francello, head of equity trading for Apex Capital hedge fund in San Francisco.
'And it seems to be people underestimated the impact of AIG and what the fallout of that could be.'
The Dow Jones industrial average fell 271.37 points, or 2.38 percent, to 11,150.62, while the Standard & Poor's 500 Index slid 30.04 points, or 2.40 percent, to 1,221.66. The Nasdaq Composite Index was down 42.48 points, or 1.88 percent, at 2,218.79.
Lehman, weighed down by losses spawned by the U.S. mortgage crisis, sought bankruptcy protection on Monday following a scramble over the weekend in which it failed to find a buyer.
Merrill Lynch, meanwhile, agreed to be bought by Bank of America Corp, the No. 2 U.S. bank. Merrill's stock jumped 13.6 percent to $19.37 but Bank of America shares dropped 18 percent to $27.65."
RLPC-Lenders assess Lehman fallout on Europe leveraged loans | Markets | Markets News | Reuters
RLPC-Lenders assess Lehman fallout on Europe leveraged loans Markets Markets News Reuters: "By Tessa Walsh
LONDON, Sept 15 (Reuters) - Bankers are grappling with the implications of Lehman Brothers' (LEH.N: Quote, Profile, Research, Stock Buzz) demise for European leveraged lending as they scrambled to contain their exposure to the failed U.S. bank.
The fallout from Lehman, which filed for bankruptcy protection earlier on Monday, will affect primary leveraged loans, any new underwriting commitments and the trading of existing loans in the secondary cash market and synthetic leveraged loan credit default swap (LCDS) market, senior banking sources said on Monday."
LONDON, Sept 15 (Reuters) - Bankers are grappling with the implications of Lehman Brothers' (LEH.N: Quote, Profile, Research, Stock Buzz) demise for European leveraged lending as they scrambled to contain their exposure to the failed U.S. bank.
The fallout from Lehman, which filed for bankruptcy protection earlier on Monday, will affect primary leveraged loans, any new underwriting commitments and the trading of existing loans in the secondary cash market and synthetic leveraged loan credit default swap (LCDS) market, senior banking sources said on Monday."
A top Lehman exec’s lament - Postcards
A top Lehman exec’s lament - Postcards: "A top Lehman exec’s lament
“It didn’t have to go this way,” a devastated Barbara Byrne, a vice chairman at Lehman Brothers (LEH), told me this morning. Like a lot of senior folks at the now-bankrupt firm, she spent most of the weekend at the office, hoping, praying, and consoling the rank and file. “Talking to a single mother of two, a secretary, in tears is the hardest thing,” she said."
“It didn’t have to go this way,” a devastated Barbara Byrne, a vice chairman at Lehman Brothers (LEH), told me this morning. Like a lot of senior folks at the now-bankrupt firm, she spent most of the weekend at the office, hoping, praying, and consoling the rank and file. “Talking to a single mother of two, a secretary, in tears is the hardest thing,” she said."
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