Wednesday, September 17, 2008

SO here we are on the morning of D Day. The world’s major couterparties on the $US455 trillion derivatives market go into technical default and no one is sure what is going to happen.

Global banks brace for derivative blow-up

The likes of Warren Buffett would have it that the defaults triggered by Lehman's implosion would resound fearfully through the multi-trillion-dollar derivatives market, generating a global, capital-burning bushfire in global markets. Then there are those who believe the systemic risk in the $US455 trillion derivatives market has been overcooked. But even those who maintain a less cataclysmic view than Omaha's Oracle accept that a major default event like the collapse of the 158 year old Lehman will result in massive value burn. And there will be hot-spots in unexpected places -- like, for example, a sad selection of deluded Australian councils and public works authorities

Posted by malct @ 01:03 PM (563 views)
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One thought on “SO here we are on the morning of D Day. The world’s major couterparties on the $US455 trillion derivatives market go into technical default and no one is sure what is going to happen.

  • Lehman is/was a 14-year-old company with a 158 year-old-name. Lehman Bros sold out to AmEx in 1984 and ten years later AmEx spun off a small, undercapitalised firm called Lehman Brothers. From the start it operated like a spiv – massive leverage, aggressive deals. The CEO of the ‘new’ Lehman Brothers, Dick Fuld, played a part in the break-up of the old Lehman – he was a trader who wanted to do deals with other people’s money while the banking half of the old company wanted to use mainly the company’s own capital to do the deals. This war led to the company’s takeover by AmEx. The heads of the banking division of the old Lehman founded the Blackstone Group and did rather well.

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