Banks, Brokerages Prepare for Possible Lehman Bankruptcy Before Midnight

[marmar]

from Bloomberg:



Wall Street Prepares for Potential Lehman Bankruptcy (Update1)

By Craig Torres

Sept. 14 (Bloomberg) -- Wall Street prepared for a potential Lehman Brothers Holdings Inc. bankruptcy after Barclays Plc said it pulled out of talks to buy the firm and the government indicated it wouldn't provide funds in a resolution.

Banks and brokers today held a session for netting derivatives transactions with Lehman, or canceling trades that offset each other, in case the New York-based firm files for bankruptcy before midnight New York time.

``The purpose of this session is to reduce risk associated with a potential Lehman Brothers Inc. bankruptcy filing,'' the International Swaps and Derivatives Association said in a statement today. The ISDA includes 218 banks, brokerages, insurance companies and other financial institutions from the U.S. and abroad.

The step indicates that Wall Street lacks confidence that three days of talks to find a buyer for Lehman, held at the Federal Reserve Bank of New York, will be successful. Treasury Secretary Henry Paulson, who has led the talks with New York Fed President Timothy Geithner, was adamant two days ago against using taxpayer funds in a resolution.

The fourth-largest securities firm until the past week, Lehman has thousands of such trades in credit, equity, commodity, interest rates and currency derivatives.

``ISDA confirms a netting trading session will take place between 2 p.m. and 4 p.m. New York time for over-the-counter derivatives,'' the ISDA said. ``Trades are contingent on a bankruptcy filing at or before 11:59 p.m. New York time, Sunday, Sept. 14, 2008. If there is no filing, the trades cease to exist.''

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


http://www.bloomberg.com/apps/news?pid=20601087&sid=aNMh_8NRE6QM&refer=home

[Laf.La.Dem.]

1. What me worry

Do not worry the economy is sound - as per Mr. McCain:toast:

[lpbk2713]

2. Evidently McLame considers himself more of an expert that Alan Greenspan.

It was just a few hours ago that Greenspan said ....


Former Federal Reserve Chairman Alan Greenspan said the financial crisis that began with the collapse of the subprime-mortgage market last year ``is probably a once in a century event'' that will lead to the failure of more firms.

``There's no question that this is in the process of outstripping anything I've seen, and it is still not resolved,'' Greenspan said in an interview today on ABC's ``This Week with George Stephanopoulos.''


Evidently McLame knows the economy like he knows how to pick running mates. :rofl:

[ayeshahaqqiqa]

3. Please someone explain

exactly what "derivatives" are. I understand that this business is a big player in financial markets, but I'm not quite sure what they are buying and selling. Thanks in advance.

[dixiegrrrrl]

4. Here ya go

http://en.wikipedia.org/wiki/Derivative_(finance)

[ayeshahaqqiqa]

5. Thank you

but the article simply talks of mathematics. I want to know what things Lehman was buying and selling. From what I read in wiki, I'm thinking the answer is "change in the price of things" that aren't even owned by a company--in other words, gambling. Would this be a fair assessment?

[dgibby]

6. CNBC

CNBC will air a special on this @ 8:00pm tonight according to NBC News.

[Subdivisions]

7. Hey, marmar, how do you think the DOW and S&P will react tomorrow if

Lehman isn't rescued?

[marmar]

8. Like a hippo that gets pushed off the Empire State Blgd. ....

:scared:

[Subdivisions]

10. Damn! LOL. Not good then? n/t

[CatholicEdHead]

9. It will like the layoffs

I expect a short term rise, but the end of this week could get really intresting.