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Lehman Brothers Obtains $2 Billion Bank Credit Line

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March 14 (Bloomberg) -- Lehman Brothers Holdings Inc. obtained a $2 billion credit line as the investment bank tried to blunt the stock's worst drop in almost eight years and assure investors the firm isn't short on cash.

The unsecured, three-year facility from 40 banks replaces an existing credit line, New York-based Lehman said today in a statement. JPMorgan Chase & Co. and Citigroup Inc., also based in New York, led the effort, the firm said.

you'd think in normal times it would be secured.

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Guest Shedfish

WORD ON STREET: Lehman is likely the next Bear Stearns


Lehman is on the other side to a lot of transactions where Bear is the counter-party, and the main worry here is that if Bear does have to stiff other firms, even for a day, Lehman will probably fall below required capital ratios.


Finance Debt Risk Rises as Bear Stearns Fuels Failure Concerns


The biggest risk that faces the financial system is counterparty risk: if some large commercial or investment bank has a serious issue,' said Mark Grant, managing director of corporate syndicate and structured products at Southwest Securities Inc. in Fort Lauderdale, Florida. 'And here we're seeing a serious issue.'...

...Bear Stearns was the 12th-largest counterparty to credit- default swap trades in 2006, according to Fitch Ratings. Contracts linked to $45.5 trillion of debt were outstanding at the end of June, according to the International Swaps and Derivatives Association...

...'Bear Stearns is a big counterparty in the credit derivatives universe,' said Jochen Felsenheimer, head of credit strategy at UniCredit SpA in Munich. 'If it were to default, definitely that situation is a horror. There would be huge distortions in the market. That is why the monetary authorities are trying to avoid any failure of banks.'

Barclays Capital analysts last month estimated that if a financial institution that had $2 trillion in credit-default swap trades outstanding were to fail, it may spark between $36 billion and $47 billion in losses for those that traded with the firm. That doesn't include 'large, potentially concentrated' market value losses others would face, the analysts, led by Arup Ghosh in London, wrote on Feb. 20.

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To quote Goldfinger, this is only the tip of the sh$tberg.

Tomorrow will be interesting.

Edited by CrashingPumpkin

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  • 298 Brexit, House prices and Summer 2020

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