Since posting about Lehman brothers troubles - Wednesday, June 11, 2008 Lehman Brothers investments exposed as losses pile up..Alpha female CFO Ms Erin Callan NYPD cop's daughter's is on the case things have got worse.No.No. Things were bad, just how bad we now realise.
On Friday Lehman Bros. shares US$22 when the above was written, closed on Friday 16.5% down on the day at US$16.56 and had been as low as US$14.
Credit Default swaps are a fancy financiers name for a bet on the chances of Lehman's bonds being paid. Lehman's credit default swap spreads widened 35 basis points to 320 basis points on Friday. That means folks were happy to pay US$320,000 per year for five years to insure $10 million in debt.
The Market capitalisation is about twice what the balance sheet shows as nett assets - assuming the figures can be believed.
With the problems of Fannie Mae and Freddie Mac, Bernanke and Paulson are loking for a solution. This means they need to line up lawyers, financiers, legislators and shareholders. The authorities cannot allow these 3 major institutions to simply declare bankruptcy.
Expect the New York Stock Exchange to close Monday whilst they try to sort this out.Maybe even longer. Maybe other markets will follow.
The cost will be US$trillions to the tax payer, the mortgage holders, and equity markets and the US$ will plumb new depths against the Euro and oil will probably hit US$170.
Time to dust off Presidential Decision Directive 67 (PDD 67), issued 21 October 1998, which relates to enduring constitutional government, continuity of operations (COOP) planning, and continuity of government (COG) operations... plus National Security and Homeland Security Presidential Directive / NATIONAL SECURITY PRESIDENTIAL DIRECTIVE/NSPD 51/HOMELAND SECURITY PRESIDENTIAL DIRECTIVE/HSPD-20 which President Bush issued on May 7th 2007. which includes function (g) Protecting and stabilizing the Nation's economy and ensuring public confidence in its financial systems; ???? .....more
Sunday, May 20, 2007 NSPD/51- Prudent Planning for "Catastrophic Emergencies" ?
Or go to one of our favourites Signs of the Economic Apocalypse
Making matters worse: The gaping U.S. current-account deficit -- the amount by which the value of goods, services and investments bought in the U.S. from overseas exceeds the amount the U.S. sells abroad -- and the low levels of domestic savings means that foreigners must purchase more than $3 billion every business day to fund the imbalance.
Since roughly half of the nation's nearly $10 trillion national debt is held by foreigners, mostly in Treasury bills and bonds, such a withdrawal could have enormous consequences.