Feds, Wall Street race to try to save Lehman (banks want taxpayer bailout)

[UpInArms]

Source: Associated Press

NEW YORK - The field of possible buyers for Lehman Brothers narrowed Saturday, but the parties involved in the discussions over the wounded investment bank's future were at loggerheads over how to finance the rescue.

An investment banking official said Bank of America Corp. and Britain's Barclays Plc have emerged as the front runners for Lehman Brothers after a possible cash injection from its rival Wall Street banks and brokerages.

<snip>

The investment banking official, who asked not to be named because the talks were ongoing, said the investment houses were balking at paying to polish up Lehman's balance sheet so Bank of America or Barclays could buy a financially clean firm.

He said the investment banks were angling for the government to provide some money, as it did when it helped JPMorgan Chase & Co. buy Bear Stearns in March, because they would get little to nothing in return for their help.

Read more: http://news.yahoo.com/s/ap/20080914/ap_on_bi_ge/lehman_brothers

---

More lipstick on pigs - wanting taxpayer dollars to clean up the mess that their overpaid/compensated CEOs and Boards of Directors have made, while taking all the loot and hiring lobbyists to shove money into crooked republicans pockets so that those very same republicans can rip off the taxpayers.

:nuke:

[mrJJ]

1. McCain & GOP Scewed America

The GOP Scewed America

Gramm-Leach-Bliley Financial Services Modernization Act.

53 Republican Senators plus one Democrat - AYE

44 Democrats no Republicans - NAY

The Gramm-Leach-Bliley Act, also known as the Gramm-Leach-Bliley Financial Services Modernization Act, Pub. L. No. 106-102, 113 Stat. 1338 (November 12, 1999), is an Act of the United States Congress which repealed the Glass-Steagall Act, opening up competition among banks, securities companies and insurance companies. The Glass-Steagall Act prohibited a bank from offering investment, commercial banking, and insurance services.

The Gramm-Leach-Bliley Act (GLBA) allowed commercial and investment banks to consolidate. For example, Citibank merged with Travelers Group, an insurance company, and in 1998 formed the conglomerate Citigroup, a corporation combining banking and insurance underwriting services. Other major mergers in the financial sector had already taken place such as the Smith-Barney, Shearson, Primerica and Travelers Insurance Corporation combination in the mid-1990s. This combination, announced in 1993 and finalized in 1994, would have violated the Glass-Steagall Act and the Bank Holding Acts by combining insurance and securities companies, if not for a temporary waiver process <1>. The law was passed to legalize these mergers on a permanent basis. Historically, the combined industry has been known as the financial services industry.
...
Economist Robert Kuttner has criticized the repeal of the Glass-Steagall Act as contributing to the 2007 subprime mortgage financial crisis.<6> Economists Robert Ekelund and Mark Thornton have made similar criticisms, arguing that while "in a world regulated by a gold standard, 100% reserve banking, and no FDIC deposit insurance" the Financial Services Modernization Act would have made "perfect sense" as a legitimate act of deregulation, under the present fiat monetary system it "amounts to corporate welfare for financial institutions and a moral hazard that will make taxpayers pay dearly".

"John McCain voted FOR the bank laws that led to the current credit crisis. John Mccain's economic advisor WROTE the law. 53 Republicans voted YES to the law. When you're in danger of losing your house, can you take a chance on more of the same from those who wrecked out economy?"

[blue sky at night]

2. not sure....

but I think when the government has to own all of the banks and means of production...you know "bail out" this and that, isn't that what we called in the OLD Days SOCIALISM??? Where are the defenders of Free Market Capitalism on this issue??? Come on boys, it's time to sink or swim...and we all know they can "pull themselves up by their bootstraps" without help from anyone, especially the Federal Government.

[UpInArms]

3. shall we begin calling them "Welfare Bankers"?

:hi:

[bemildred]

5. "Incompetent Frauds" is what comes to my mind.

But "Welfare CEOs" would work, and yours too.

[dchill]

13. Nah, when you legalize the theft of everyone's money...

it just plain fascism. Everybank wants its "bailout." If one bank gets a bailout and another doesn't, "it's not fair!"

[Pale Blue Dot]

4. Everyone's between a rock and a hard place here.

If the Fed can't get someone to buy Lehman's less-than-worthless junk, the market will crash tomorrow (probably taking several more major financial firms with it). Nobody wants to buy, however, unless the Fed takes on the liabilities. The Fed knows it can't keep bailing these companies out forever and will have to let one of the giants fail eventually - but, when that giant fails, the markets will crash. And so we go round and round.

My prediction is that the Fed will blink first and pray that everything magically gets fixed this time. It won't. There will be a day of rejoicing before the markets discover that this hasn't really solved anything. Then it will be on to the next crisis next weekend.

[mrJJ]

6. The FED will blink

You are correct. The FED will blink. The key word is PERCEPTION via US and World Markets.

[Nay]

12. And don't forget, the situation has to hold together until AFTER the election --

then it can be all the Dems' fault.

[kirby]

11. When you are spending our grandchildrens money...

When does the pain of just writing another bailout check sink in? The fact they did it the first time has now created a scenario where anyone wanting to buy is stomping their feet because they want the same deal Bears Stearns' buyer got -- absorb the company while spinning off the bad stuff to the taxpayer.

I agree with what you are saying 100%. To add to it, I do not think the Fed really cares if the market crashes locally. I think their major concern is that if all these defaults occur they will no longer have as good credit standing with China and Japan. I think they are scared to death that China and Japan will stop buying Treasuries which we need to fund our massive debt (and war).

[The Backlash Cometh]

7. Wall Street has absoluteluy no incentive to mend its ways if it doesn't share the pain.

Why isn't it forced to pay a share of the bailout? If it did, maybe it would be a better watch dog of its own financial institutions?

[whistle]

8. Of course investment banks want taxpayers to bail them out for their gross misconduct

...and gambling debts, that's the whole purpose of creating and sustaining a dysfunctional relationship.

Just say no congress and instead focus on stabilizing home mortgage foreclosures and protecting chartered banks from going under. Implement a modified and more functional version Hillary Clinton's Home Mortgage and Bank Foreclosure Protection Act extending any freeze on foreclosures up to five years. There must also be an immediate Economic Recovery Program developed such as was implemented by FDR in his first 100 days back in 1933 that would create jobs and get educational and training programs implemented to create the productive skills for Americans to be again the most productive workers in the world.

Obama could begin structuring such a program now and incorporating the details in all of his speeches creating a vision for voters to see the real differences between an Obama Administration and a McCain war party moving toward election day. As each facet of the program is developed and presented the McCain campaign would be completely thrown off balance turning "lipstick" and personalities into the political nonsense which these represent.

[sharesunited]

10. I'd love to see and hear that from Obama. Leave McCain with nothing but "pro growth" platitudes.

[Pierogi_Pincher]

19. Would be a smart strategy. n/t

[ozymandius]

9. A pox on on all their houses for wanting to mug the taxpayer.

If you cruise the econ blogs and threads here at DU you will hear/see/feel utter outrage over the poker game that bankers desperately want to win. The endgame boils down to "keeping Lehman's dissolution orderly".

Lehman is finished. The bank is about to be sold either in small pieces or huge chunks - even down to the opened boxes of paperclips. An orderly dismantling of Lehman will allow declarations to be made of "we meant to do that" and "how talented we are."

Disorderly liquidation threatens a run on all the banks; even the stronger firms like Goldman. Nouriel Roubini and Mike Shedlock warn of contagion spreading throughout the shadow banking world should disorder take over.

Paulson is correct to play hardball with these welfare CEOs. This is their mess. There needs to be a defined limit to how much the public should be held liable for their greed and stupidity.

[Pierogi_Pincher]

16. Not just on DU

but responses to this latest 'bail out or no' appear to be somewhere at 8 out of 10 eliciting a "let them go under".

It is understandable that no one (those who would be most severely affected) relishes the undoing of the country's economic stability (what's left); the problem people are having is how far will it go & where does it end?

So ya know, I read your SMW every chance I get, & thx for that.

P_P

[Elidor]

14. People in hell want ice water n/t

[NeoConsSuck]

15. Barclays Abandons Talks to Buy Lehman, Citing Potential Losses

Barclays Plc, the U.K.'s third- biggest bank, said it abandoned talks to buy Lehman Brothers Holdings Inc., contending it couldn't obtain guarantees to protect against potential losses at the U.S. securities firm.

Barclays, which had emerged as a leading candidate to acquire all or parts of Lehman, pulled out amid a third day of emergency negotiations led by the U.S. Treasury and Federal Reserve, Leigh Bruce, a spokesman for the London-based bank said in a phone interview today.

http://www.bloomberg.com/apps/news?pid=20601087&sid=abNGaeBmMNYw&refer=home

[Pale Blue Dot]

17. Tomorrow on Wall Street could be terrifying.

A lot of us will be watching the Asain markets closely tonight.

[mdavies013]

18. I am a REALTOR and I have some questions...

1. Why are we only bailing out the banks? We can spend the same $$$ and save families from foreclosure, stabilize the local real estate markets and keep the financial markets from going under.

THE ANSWER IS...THOSE IN POWER ONLY CARE ABOUT THOSE WITH POWER AND MONEY. OR TO PUT IT ANOTHER WAY THE REPUBLICANS HATE 98% OF AMERICANS.

2. Why are we allowing failed executives to receive golden parachutes (millions of dollars) for destroying the company? And we the taxpayers will fund this.

SEE ANSWER ABOVE - ALWAYS PROTECT YOUR CONTRIBUTORS.

3. Why are Republicans always saying that the free market is best for the everyone? Failing companies should be allowed to go under and market will reward those who are principled.

THE MANTRA IS THAT YOU SHOULD LIFT YOURSELF BY YOUR BOOTSTRAPS...UNLESS YOU ARE A COMPANY. PRIVATIZE PROFITS = SOCIALIZE LOSSES. IS THAT NOT SIMILAR TO COMMUNISM???

4. If republicans love this country so much then why are they the ones pushing us toward Fascism and Communism?

IF IT MAKES ME MONEY...THEN THAT IS ALL THAT MATTERS.

[mbperrin]

20. Let 'em go under.

Perhaps then investors might get the idea that a little due diligence might be in order. No one here would clamor for keeping the shit in a feedlot intact - we'd want to clean it out. There's only one way - tell 'em to grab a shovel and dig! If we give them anything, they'll just turn it into more shit.

[Pierogi_Pincher]

21. K'd & R'd n/t