MarketWatch: Too Late for Lehman?

[marmar]

Will Lehman be forced to break up?

By MarketWatch


SAN FRANCISCO (MarketWatch) -- The forced breakup of Lehman Bros. or even its liquidation became a possible scenario over the weekend as talks dragged on unsuccessfully Saturday between top U.S. financial officials and executives at major Wall Street firms trying to forestall the collapse of the investment firm and to keep weakness among financials from spreading.

According to a report in the online edition of the Wall Street Journal citing people familiar with the matter, the outlines of a rescue plan emerged, but at the same time talks revealed that a sale of the entire firm to a big bank could probably not be managed.

The Federal Reserve Bank of New York, Treasury officials and banking executives have been meeting since Friday evening in the hopes of engineering a plan for a private-sector rescue for the once-venerable investment firm before Asian markets open for trading Monday.

Shortly before 7 p.m. Eastern on Saturday, media outlets reported that no deal had been reached over Lehman's fate but that negotiations would likely continue between the Fed and bank executives on Sunday.

As expectations of a deal swung to doubt, the Journal reported, plans emerged for firms to either buy pieces of Lehman or for an orderly winding down of the firm.

The Journal said that under one scenario, Barclays PLC or Bank of America Corp. would buy Lehman's valuable assets, such as its equities business, while the more risky real-estate assets would be merged into a another entity that would contain about $85 billion in souring assets.

Other Wall Street firms would try to inject some capital into that "bad bank" so that a flood of bad assets doesn't deluge the market, damaging the value of similar assets held by other banks and insurers, according to the report. The banks are also looking for the government to somehow support the bad bank. ......(more)

The complete piece is at: http://www.marketwatch.com/news/story/lehman-forced-break-up/story.aspx?guid=%7BECA15507%2DB7F9%2D4226%2D824D%2D14883CDBA87C%7D

[Hokie]

1. Big story - can the cons keep the ecomomy from imploding uintil after Nov.?

How much money can Treasury keep committing to prop it up before the facade comes crashing down?