Monday, September 15, 2008

We have to believe the numbers, ” he said. “If we can’t, we can’t restore confidence

Lehman collapse means all bets for the financial system are now off

According to experts, Lehman has $150bn of debt outstanding. By comparison, US telecoms group WorldCom - the largest debt default until today - had $23bn to $30bn (depending on whose estimates you use) when it went bust in 2002 Fears about other banks' exposures to Lehman and renewed uncertainty as to where the crisis may strike next will freeze the wholesale markets up again. The crunch is back with a vengeance. It's not hard to see why. Lehman's collapse into bankruptcy protection is the biggest corporate debt default in history and, in the complex interwoven world of modern banking, no one properly understands where the risks lie. In other words, about $70bn of Lehman debt held by other institutions has been wiped out.

Posted by malct @ 01:01 PM (1079 views)
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6 thoughts on “We have to believe the numbers, ” he said. “If we can’t, we can’t restore confidence

  • cont. The scale of the potential crisis is exacerbated by the credit default swap (CDS) markets. CDS’s are insurance contracts for holders of corporate debt that guarantee to pay back the loan in the event of the company’s bankruptcy.

    Most of these products are offered by other banks to low-risk institutions like pension funds. Sandy Chen, a banks analyst at Panmure Gordon, reckons this is “where the real stress will come from”.

    He estimates that the “CDS market as a whole had notional contracts worth four times greater than the underlying debts issued”. By his calculations, which differ slightly to the credit analyst’s above, that would make “$350bn in CDS’s written on Lehman debts

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  • In translation, what today means is that a morgage market that had already halved will half again by Christmas. In HPC world that means only 100% cash buyers are going to be able to buy for sometime to come!

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  • Phrophetic Words by Ruby
    RGE: If Lehman collapses expect a run on all of the other broker dealers and the collapse of the shadow banking system
    It is now clear that we are again – as we were in mid- March at the time of the Bear Stearns collapse – an epsilon away from a generalized run on most of the shadow banking system, especially the other major independent broker dealers (Lehman, Merrill Lynch, Morgan Stanley, Goldman Sachs). If Lehman does not find a buyer over the weekend and the counterparties of Lehman withdraw their credit lines on Monday (as they all will in the absence of a deal) you will have not only a collapse of Lehman but also the beginning of a run on the other independent broker dealers… Then this run would lead to a massive systemic meltdown of the financial system.

    Posted by stevie dee @ 01:39 AM 0 Comments

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  • The article doesn’t mention personal misery. There was a lot of that at Worldcom, when that went down. Trying to get alternative employment as an accountant was a joke.

    I guess a lot of pain is about to come about, with no big handouts for leavers….

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  • Whostolemyendoment says:

    See the video clip on this article…like to know what’s in the boxes…..and who is taking it out. Incriminating documents, or just all their desk plack? ‘If I’m out of a job, this stapler’s mine dude!’.

    http://news.bbc.co.uk/1/hi/business/7615931.stm

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  • Well as Morrisey said… The Headmaster’s ritual again. They will however never learn, no matter how bruised their backsides are afterwards!

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