Enclosure to bubble graph and NO SCAPEGOAT

SCAPEGOATING has been on, in the Global Meltdown and recession, since mid-March 2008, culminating in the Lehman bros scacrifice mid-September: sincerely,  searched for, wanted by their Padre Padrone in person, Mr Fuld (pane al pane e vino al vino).  But why should Mr Fuld become now a scapegoat, à la Far West – as  it happens in some sectors of the public opinion and scapegoating media?.

We desperately need a SUPERIOR civilisation, not going back to Far West and  homo homini wolf ones.

basic references

Girard, René 1963. Dostoïevski, du double à l’unité. Paris: Plon. (English translation: Resurrection from the Underground: Feodor Dostoevsky. Crossroad Publishing Company. 1997)

— 1972, La violence et le sacré. Paris: Grasset. (English translation: Violence and the Sacred. Translated by Patrick Gregory. Baltimore: Johns Hopkins University Press, 1977)

—  1996, The Girard Reader. Ed. by James Williams. New York: Crossroads.

—  2002, La question  de l’antisémitisme dans les Evangiles, ch. 5, pp. 181-198 in Girard 2002 (original English v., ch. 14, pp. 211-221 in Girard 1996)

—  2002,  La Voix méconnue du réel. Paris: Grasset.

Tate, Ryan (2009)      http://gawker.com/5159202/save-the-bankers

Tutu, Desmond

wiki   http://fr.wikipedia.org/wiki/Bouc_emissaire

D’origine religieuse, l’expression bouc émissaire désigne en langage courant la personne qui est désignée par un groupe comme devant endosser un comportement social que ce groupe souhaite évacuer. Cette personne est alors exclue du groupe, au sens propre ou figuré, parfois punie, ou condamnée.

La personne choisie ne l’est pas forcément pour avoir partagé ce comportement, elle peut être une victime expiatoire choisie pour d’autres raisons du fonctionnement du groupe.

http://en.wikipedia.org/wiki/Scapegoat

The scapegoat was a goat that was driven off into the wilderness as part of the ceremonies of Yom Kippur, the Day of Atonement, in Judaism during the times of the Temple in Jerusalem. The rite is described in Leviticus 16.

Since this goat, carrying the sins of the people placed on it, is sent away to perish [1], the word “scapegoat” has come to mean a person, often innocent, who is blamed and punished for the sins, crimes, or sufferings of others, generally as a way of distracting attention from the real causes.

Girard’s socio-religious theory

The Christian anthropologist René Girard has provided a reconstruction of the scapegoat theory. In Girard’s view, it is humankind, not God, who has the problem with violence. Humans are driven by desire for that which another has or wants (mimetic desire). This causes a triangulation of desire and results in conflict between the desiring parties. This mimetic contagion increases to a point where society is at risk; it is at this point that the scapegoat mechanism[6] is triggered. This is the point where one person is singled out as the cause of the trouble and is expelled or killed by the group. This person is the scapegoat. Social order is restored as people are contented that they have solved the cause of their problems by removing the scapegoated individual, and the cycle begins again. Girard contends that this is what happened in the case of Jesus. The difference in this case, Girard believes, is that he was resurrected from the dead and shown to be innocent; humanity is thus made aware of its violent tendencies and the cycle is broken. Satan, who is seen to be manifested in the contagion, is cast out. Thus Girard’s work is significant as a re-construction of the Christus Victor atonement theory.

http://en.wikipedia.org/wiki/René_Girard

René Girard (born December 25, 1923, Avignon, France) is a French historian, literary critic, and philosopher of social science. His work belongs to the tradition of anthropological philosophy. He is the author of several books (see below), in which he developed the following ideas:

  1. mimetic desire: imitation is an aspect of behaviour that not only affects learning but also desire, and imitated desire is a cause of conflict,
  2. the scapegoat mechanism is the origin of sacrifice and the foundation of human culture, and religion was necessary in human evolution to control the violence that can come from mimetic rivalry,
  3. the Bible reveals the two previous ideas and denounces the scapegoat mechanism.

René Girard’s writings cover many areas. Although the reception of his work is different in each of these areas, there is a growing body of secondary literature that uses his hypotheses and ideas in the areas of literary criticism, critical theory, anthropology, theology, psychology, mythology, sociology, economics (1), cultural studies, and philosophy.

(1) MY NOTE. On René and Political Economy:

Aglietta, Michel & Orléan, André: La violence de la monnaie. Paris: Presses Universitaires de France (PUF), 1982.

Arcangeli, Enzo F. (2009),

External links

[edit] Bibliographies

[edit] Interviews, articles and lectures by René Girard

In chronological order.

[edit] Organizations inspired by mimetic theory

[edit] Other resources

Published in: on February 25, 2009 at 2:28 am  Leave a Comment  
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Black Monday: the day after

ENGLISH ABSTRACT

Understanding Black Monday. IT IS NO “NEGATIVE BUBBLE”, as silly bulls say.

a) It’s a low fundamentals issue, STUPID !!!

From yesterday on, global markets  are anticipating the real size of the  Main Street’s REAL RECESSION. The  shadow financial  – formal finance meltdown – credit crunch – deep recession chain is working from August 2007,  WITH NO COUNTERBALANCE in terms of policies and rules. Just post factum inadequate interventions on the consequences (even them, chaotic in Europe), and nothing upon the factors: neither Obama, nor McCain of course, are dealing prospectively with them (SEE OUR subcrime key document; in sum, long run deflation from a low global effective demand, hyper – concentration of income and wealth, imbalances and over-unemployment generated by: Reaganism, US private debts system and the post- communism “2nd Great Transformation”).

Prof. Roubini confirms today the title of our blog (which was inspired, last January, by our readings of Prof. Roubini himself):

The global economy is now already in a recession (as GDP is now contracting in all advanced economies and sharply slowing down in emerging market economies). We need now to take steps avoid a global depression.

And today’s rge papers aggregation “Are We Headed Towards a Global Recession?” specifies further:

IMF: The global financial crisis may have “extremely serious” consequences – including famines – in developing countries in Africa and Latin America.

◦ IMF: Signs of deceleration are most pronounced for several Emerging Asian economies that are tightly linked to the global manufacturing cycle: Philippines, Thailand, Malaysia, Taiwan PoC, Singapore, Hong Kong SAR, and—to a lesser extent—India.

b) In Europe, an institutional factor adds up. The ususal no-EU keynesian and structural policies issue. The one, that already made EU the only 0 growth world region (Aglietta and Berrebi).

WAKING UP FROM A DREAM: the gloom understanding that European finance is not free from the consequences of the $ 10 tr. global SHADOW FINANCE MELTDOWN. As Breakingnews said yesterday (see quotation in our Black Monday  post),

” It shouldn’t have come to this. A year ago, Europe looked well placed to fend off financial ills. True, the UK had US-style problems with a housing bubble and a big trade deficit, but the eurozone had few bubbles, balanced trade, reasonably prudent governments, a firm central bank and a strong tradition of government guidance and support in banking. 

It turned out, though, that some European banks had dabbled too much in overvalued and overly complex US assets. The authorities have also been slow.”

c) POLICY IMPLICATIONS.

After Reaganism, which blend of Socialism?

We quote from our ” AAA updates on subCrimes” static page, par. 2 on policies.

The Oct. 6 BLACK MONDAY, mainly but not only in  European stock markets (worst from 1987 Black Monday) confirms thet WE WERE RIGHT ON CONDEMNING THE PAULSON – BERNANKE  hurried up plan. Markets don’t care about it, and discount the recession is on and its size is much worst than they expected. Therefore the issue moves to the alternative between:

a) a financial (pseudo-) socialism: once failed again, the finance K party will move to nationalisations and direct State and SWF re-capitalisations … . It would eventually cure the financial meltdown, not the risk of the recession giving rise to a long depression in the 2010s.

b) a Keynesian socialism: redistribute drastically  income and wealth  (through policies, rules and Robin Hood fiscal policies) in order to gradually sort out of the 1990s longrun global deflation (Aglietta and Berrebi, Chesnais).

More in our .pdf –  subcrime key document.

SLATE

TODAY’S PAPERS

Drowned World Tour

By Daniel Politi
Posted Tuesday, Oct. 7, 2008, at 6:29 AM ETIt’s a new week, and the bad news keeps getting worse. “The global financial crisis has taken a perilous turn,” declares the Wall Street Journal. Hopes that the massive bailout package approved by Congress last week would give investors some breathing room were quickly dashed as soon as the markets opened. And pretty much the whole world is feeling the pain. Markets in Asia, Europe, and Latin America closed deep in the red yesterday, a pattern that was repeated in the United States. The Dow Jones industrial average plunged 800 points, or 7.7 percent, before rebounding late in the day to close down nearly 370 points, or 3.6 percent. It marked the first time the Dow fell below the 10,000 mark since 2004. USA Today helpfully puts it in perspective and points out that the Dow has lost nearly 30 percent since Oct. 9, 2007.

The New York Times and Washington Post highlight word that the Federal Reserve is considering a plan to buy large amounts of unsecured short-term debt–so-called commercial paper–in an effort to revive the financial system. This “radical new plan” (NYT) would essentially make the Fed “a major funder of a wide range of U.S. businesses facing imminent cash shortages,” explains thePost. While the growing financial crisis is putting pressure on government officials to act, the Los Angeles Times points out that if there’s a clear message from yesterday’s worldwide sell-off it’s that investors are increasingly concerned“that government intervention won’t be enough to stave off a potentially severe global recession.”

CRONACA DI OGGI

TENGONO LE BORSE EUROPEE, ma non recuperano il crollo storico di ieri, mentre a NY il Dow Jones scende di oltre  il 5%, S&P del 5.7%, a conferma della bocciatura del, e sfiducia nell’ affrettato ed elettorale Piano Paulson. I titoli finanziari di NY al loro minimo dal 1997 (solo oggi -25% Morgan Stanley e BoA). In caduta libera le grandi banche inglesi (-50% in 2 giorni  HBOS e RBS), forzando un Piano Straordinario di Gordon Brown tra i $60 e 90 bn. Paul Krugman commenta:

Britain leads the way?

 

According to the FT,Gordon Brown, the UK prime minister, on Tuesday night ordered a massive taxpayer-backed cash injection to rebuild the balance sheets of Britain’s high street banks, in effect part-nationalising the sector at a cost of tens of billions of pounds.

DA LEGGERE OGGI:

Marco Onado su Il Sole 24 ore.

– la autocritica del CEO UniCredit, Aless. Profumo, in una lunga intervista a La Repubblica: abbiamo fatto il passo più lungo della gamba e sottovalutato il financial meltdown. Il fatto: gli azionisti (le fondazioni bancarie) che ricapitalizzano la prima banca italiana, al momento si guardano bene (in piena crisi e tentativo di rilancio, risanamento) dal dimissionare Profumo (responsabile di una strategia di crescita del tutto azzardata e FUORI TEMPO rispetto al ciclo mondiale, come lui stesso e’ costretto ad ammettere POST FACTUM), ma lo mettono SOTTO TUTELA. Escludendo le liquidazioni, nel 2007 e’ il manager più pagato d’Italia.

– DA IERI, ripreso oggi in Italia su La Stampa, l’incredibile udienza parlamentare di Mr Fuld PADRE-PADRONE di Lehman Bros (che i nostri lettori conoscono MOLTO BENE).

– IERI SERA ottimo dibattito alla morente LA 7 (che la Telecom vuol chiudere), all’Infedele, con parterre de rois che includeva dei Grandi come Marcello DeCecco ed un lucido, mordace Tony Negri. Peccato che, dopo averla tenuta a bagnomaria con Tronchetti Provera, ora la chiudano di brutto. L’ultima voce libera, troppo ose’  per la thanato-politica cavalier-leghista.

ORA LEGALE 13: il punto.

MERCATI VOLATILI. Abortisce un primo tentativo di rimbalzo delle borse europee in mattinata, che dura appena un’ora. A mezzogiorno nuova spinta verso il positivo, MENO CHE  A  MILANO. Qui Piazz’affari appesantita specie da una  UniCredit senza pace. Le ammissioni a denti stretti di Profumo (intervista cit.) non rassicurano molto: costui ha sbagliato proprio tutto,  con una iper-crescita non proporzionale alla capitalizzazione, in tempi di deflazione mondiale strutturale e di evidente (ad ogni osservatore onesto) preparazione della catastrofe della shadow finance, con tutte le conseguenze che oggi si dipanano.

Alle 13: Milano sullo 0%, resto Europa + 1%. UniCredito -4.4%, Telecom – 5,5% e  sotto gli E 0,9, Impregilo – 7%, e sospesa per ribasso Tiscali (-15%).

Nel pomeriggio escono i 3 Nobel della Fisica: gli svedesi hanno fregato il Gabibbo, e dato il Nobel a 2 giapponesi che avevano sviluppato la sua scoperta. Che figura di merda ci fanno a stoccolma!

CHIUSURA BORSE

Come avevamo previsto, oggi nessun nuovo tonfo ne’ recupero dell’abbassamento fundamentals-driven di ieri, LUNEDI NERO. A Milano (-0 .6%) problemi specifici:

– LA POPOLARE continua a tonfare (qualcuno deve sapere perche’),

– UniCredit insensibile alle dotte auto-critiche EX POST, perde un altro 4% perche’, mentre ieri S&P aveva mantenuto il rating stabile, questo pomeriggio Moody l’ha abbassato.

– Pianto greco del CFO Telecom: a queste quotazioni frazionali sotto €0.9, improbabile si facciano vivi gli  investitori potenziali, come SWF libici, Q8 e russi.

Lehman failure likely: Bear Stearns no.2 story

THIS IS A SHORT REMINDER >>> sending to the June 3 post on the same issue.

Please go to our – DAILY UPDATED – June 3 post, timely dealing with the current Lehman Brother involution and its next catastrophe.

A major step was June 12 revolution in LB top managemet, CEO & CFO: too late and ineffective, since it confirms that Lehman stands only on the tyranny of his benefactor, Mr. Fuld; but he can’t cope with THIS crisis and – as Breaking Views has  pointed out – there is no plan for his succession.

In the short run, the left purely financial US banks will be only 3 (not necessarily the LR final equilibrium): Morgan Stanley, Goldman Sachs and Merrill Lynch.

Published in: on June 15, 2008 at 2:00 pm  Leave a Comment  
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A run on Lehman Brothers might come at any time

In the dawn of the subcrime meltdown, Dick Fuld said

“Do we have some stuff on the books that would be tough to get rid of? Yes,” he said, referring to commercial and residential mortgage assets. “Am I worried about it? No. If you have some repricing of these things will we lose some money? Yes. Is it going to kill us? Of course not.”

Lehman has taken $17 billion in write-downs since last year: not so many as Citi (41 bn) or UBS (38), but on much smaller shoulders. Under Bear Stearns death by ritual sacrifice  pressure, it sold $130 billion of assets during the second quarter, but that doesn’t mean at all it won’t have more write-downs in progress. Wrong, rotten subcrime assets still in their hands are est. another $65 billion. They made 2/3 of the road, but at the end there is a sale.

In June,  a tug-of-war has exploded between David Einhorn (leading short sellers) and the beautiful, celebrated Lehman CFO  Eric Callan. She lost, since she was wrong; or, she was wrong since she lost (in financial herding, you know, prophecies are self-fulling beyond a critical mass; as testified the Bear Stearns boss to the Senate, on April 3). She was right, in her last CFO words:

Ms Callan admitted that the issue of the firm’s long-term business model had been vexing top management.

Yet she added that Lehman had concluded it would be able to boost returns with lower leverage by charging more for other services, particularly in markets where few banks are able to provide credit to companies. (FT, June 9)

In a few weeks or months, LEH will be sold to the best buyer: after a Korean deal did not take off at the moment, believed to be possibly Barclays (not immediately, since the UK group is now raising $4 billion new stock).

Fuld and 14 years of Lehman sharesJune 16 update.

Lehman chief accepts blame for $2.8bn loss

By Ben White in New York

June 14.

Breaking Views intervenes, with its usual independence, on the WSJ.

Up in the Heir at Lehman

In a Crisis of Confidence, Investment Bank Must Have A Plan for Life After Fuld

What is Lehman Brothers Holdings Inc.’s plan for life after Richard Fuld? (…) confidence in the company’s ability to remain an independent concern is shrinking fast. And the demotions Thursday of Lehman’s president and chief financial officer merely highlighted its apparent lack of a succession plan. (…)  Lehman’s share price decline is now worse than those of UBS AG, Wachovia Corp., Merrill and Citigroup Inc. — all of which showed their bosses the door.

June 13

LEH shares up today 13.7%, to $25.8 (it was $37 at end of May).

MORAL HAZARD AT WORK IN BOND & CREDIT MARKETS

Fed unofficially warns, but Fed critics already foresaw this bias

HEARD ON THE STREET, by David Reilly and Peter Eavis
from The Wall Street Journal.

The good news about Lehman Brothers is that it’s no Bear Stearns. The firm won’t disappear overnight. The bad news is that its survival will still be pretty painful for shareholders. (…)

So Lehman may have some breathing room, perhaps even enough to allow Chief Executive Richard Fuld to continue fighting against a sale of the firm. But, with the credit crunch continuing to bite, it is tough to see how Lehman can earn its way out of its current predicament.

dealbreaker.com

Government Officials Worry About Bond Market’s Muted Reaction To Lehman News

Investors bid up Lehman Brothers’ bonds yesterday after news broke that the company was replacing two top executives. The price of protection on Lehman bonds also declined. This reaction–which starkly contrasts to the decline in Lehman’s share price yesterday–has government officials concerned.

Government officials who spoke to DealBreaker on the condition of anonymity said they are worried that the market is convinced the Federal Reserve won’t let a major US securities firm collapse. This is a cause for alarm because it indicates that investors are not taking into account full range of risks faced by investment banks, which could in turn remove an important market check on risky behavior. Although Lehman and its rivals have been pushing down debt levels recently, cheap debt that is unlinked to institutional risk could encourage a new round of re-levering, one official warned.

“What we saw yesterday was moral hazard in action,” the official said.

The price of credit default swaps for Lehman is now half of what it was in March, the Wall Street Journal pointed out this morning. That can be looked at as a dramatic demonstration of the value of having the Federal Reserve’s implicit guarantee of Lehman’s credit worthiness. In recent weeks, officials from the Federal Reserve have publicly remarked on the dangers created by this guarantee. On Wednesday, Treasury department undersecretary Robert Steel went out of his way to stress that the window was not a permanent guarantee for securities firms.

Are Lehman Investors Confident In Fuld Or In A Sale?

When Lehman announced it was firing chief financial officer Erin Callan and president Joseph Gregory yesterday, there was a lot of speculation about whether investors in its recent $6 billion sale of common stock and preferred shares might try to pull out. Couldn’t these top level changes trigger some sort of material adverse change that would let investors back away?

Several big investors have now indicated that they are staying on a Lehman. BlackRock, former American International Group CEO Hank’ Greenberg and New Jersey’s pension fund have all indicated, either publicly or privately, that they are sticking with their investment commitments despite the fact that the share price has fallen well below the levels at which they agreed to buy. Blackrock has gone on record with comments supporting Lehman’s “leadership,” which these days basically means chief executive Dick Fuld.

But are these investors really backing Fuld and his newly announced team?

Our comment: Good question. Neither of the 2. They bet on a sale of LB to a big buyer: JP Morgan again, not likely, rather: 1) Bank of America (alhough Karl Lewis might prefer to eat Merrill Lynch); 2) a big overseas bank like Barclays (rumours)  or HSBC  (the FT suggested 1 month ago): this would be OK for a bank like Lehman, still too reliant on domestic fixed-income revenues, even after wide efforts lead by Fuld to diversify in late years. Becoming the US financial arm of a big European, or Asiatic universal bank.

Betting on a sale backed-up by the Fed, otherwise there would be no buyer, or the price would soon be close to zero: perhaps a little less cheap and dramatic than Bear’s bailout (during the Presidentials, it’ll be a POLITICAL FIGHT). Problems aggravating MORAL HAZARD  into a potential FINANCIAL SCANDAL (that might explode when something will leak out).

SOMEONE in the FED  and\or the US GOVT. is apparently protecting and guaranteeing SUBCRIME VULTURES.

Ask the Lehman new investors:

Cummings illustration

How can they guess  NOT TO LOSE A LOT OF MONEY in the deal?

Who told them the Fed is gonna backing up a Lehman sale?

Would they throw away a few billion USD, without an INSIDER INFO about a Fed bailout?

This is the REAL mistery! Of course: in the LR Lehman didn’t perform differently from rivals, but it is just precipitating now (see the graphic above – June 14 post update – from the WSJ).

 

FT

Man in the News: Dick Fuld

By Ben White

Lehman is a dead bank walking, say its critics who argue the reason it has not yet suffered the same fate as Bear Stearns is the emergency facility that allows it to borrow from the US Federal Reserve. “Lehman is propped up now by the US taxpayer and nothing else,” said one financial services industry chief executive. “When the Fed window goes away, so does Lehman.”

Mr Fuld .. may come under private pressure from regulators, eager to take away the temporary borrowing facility, to get Lehman’s house in order and pursue a sale to a larger institution as soon as he can, either to a big US bank or a foreign buyer. The problem is it goes against every fibre of his being, especially as he would be selling from a point of weakness.

 

June 12

DRAMATIC SHAKE IN LEHMAN GOVERNANCE, TWO  MORE SACRIFICIAL LAMBS AT THE ALTAR: NO WAY.

THE MARKET KEEPS BETTING FOR A BANK RUN, ACQUISITION OR BAIL OUT. IN 10 CRISIS DAYS, SHARES FELL FROM $36 TO 22.70 (today’s closure). 1 year ago the highest value, before subcrime, was $82.05.  Now Lehman’s capitalization is below  $13 billion, a tiny fraction of rivals’. Goldman Sachs Group has a value of about $65.8 billion, Morgan Stanley of $43.4 billion and Merrill Lynch of $36.2 billion.

FORBES

Can Lehman Last?
Liz Moyer06.12.08, 12:30 PM ET

Maybe it just buys time. Foreign banks, particularly Barclays (nyse: BCS– news – people ) in the United Kingdom, have been rumored to be interested in buying a chunk or all of Lehman.

FT

Lehman short-sellers consider ending run

By Aline van Duyn, Michael Mackenzie and Anuj Gangahar in New York

Published: June 12 2008 22:16 | Last updated: June 12 2008 22:16

Investors with short positions in Lehman Brothers shares, who have profited from the sharp decline in the Wall Street companies’ share price, are considering ending the bet that share prices will drop further.

This week’s revelation by Lehman of a $2.8bn quarterly loss gave further clout to the views of short-sellers such as David Einhorn, founder of Greenlight Capital, who has made the case since last July that the assets on Lehman Brothers’ balance sheet are vastly overvalued.

“We, like others in the market, have been following the tug-of-war between David Einhorn and Lehman over the past few weeks,” said Steven Gross, principal at Penso Capital Markets, a hedge fund. “It now looks the shorts have been right and we have seen a capitulation by Lehman this week.” (…) 

“We now know the playbook after March 17, and a forced sale of the bank could occur. If there is a buy-out, credit spreads and volatility could collapse. The risk reward of shorting Lehman is much less clear at this stage,” Mr Gross said.

LEX

The shake-up indicates the level of pressure Mr Fuld is under to restore credibility. However, coming after so many defiant messages against Lehman’s naysayers, it sends a mixed message. On the one hand, heads have rolled, so something is being done. On the other, sudden moves like this raise the question: is there worse news that we do not know?

That uncertainty is Lehman’s central problem. Having raised new money and with the Federal Reserve’s credit facility to hand, a Bear-like meltdown looks unlikely. However, there are still too many unanswered questions regarding the estimated $65bn of troublesome assets still sitting on Lehman’s books, such as the marks taken on various property investments.

WSJ:

Callan, Gregory Out at Lehman

By JED HOROWITZ
June 12, 2008 6:18 p.m.

NEW YORK — Lehman Brothers Holdings Inc., hustling to rebuild confidence about its financial credibility, replaced its president and its chief financial officer Thursday.

Chief Executive Richard Fuld, 62 years old, the longest-serving head of a big investment bank, named 48-year-old Herbert “Bart” McDade to replace longtime colleague Joseph Gregory as president and chief operating officer.

He also removed Chief Financial Officer Erin Callan, 42, who he named to the post just seven months ago, replacing her with Ian Lowitt, a low-profile administrative and finance executive. (..)

In spite of her assertions about its capital strength, Lehman raised $12 billion of new capital between February and the end of May, and this week issued a stunning denouement by saying it is raising $6 billion of new equity and will likely report a second-quarter loss of about $2.8 billion — the first loss since it went public in 1994.

Ms. Callan blamed the loss on hedges that went awry on Lehman’s real-estate portfolios and additional write-downs in the value of its real estate, loan and securities holdings.

Lehman’s shares fell 26.4% from Monday through Wednesday in the wake of the plan to dilute stock holders by about 30%. Thursday’s shakeup appears to have done little to reassure investors. Lehman shares fell as much as 7% after the announcement, and have careered back and forth since, recently trading down 1% to $23.66. (…)

Mr. Fuld, a tenacious executive who has been heralded for his ability to overcome firm-threatening crises and keep a loyal coterie of lieutenants around him for decades, may have made sacrificial lambs of Ms. Callan and Mr. Gregory, some observers said. (…)

Lehman also on Thursday said it has closed its $6 billion new stock offering, which includes $4 billion of common shares that analysts say dilute current shareholders by about 30%, and $2 billion of mandatorily convertible preferred stocks. Insurance executive Maurice Greenberg, the former CEO of American International Group, has publicly said that he invested in the offering because of his confidence in the company’s leadership.

 

June 9

LEHMAN ABOUT TO ANNOUNCE A 08Q2 $2.8b LOSS, AND RAISING $6b TO POSTPONE A RUN

Sources: AP, WSJ.

One week ago the Lehman crisis started, since its expected $0.3 bn loss in 08Q2 were about to come much bigger: they are now est. $2.8 bn! As a consequence of its unsustainble exposure to the subcrime financial meltdown (asset write-downs and hedges used to offset losses in real estate and other securities). Lehman shares are down again at March crisis level: they fell under $30 in premarket trading today ($82 one year ago).

Lehman is actually trying hard to raise $6 bn in ordinary shares (a sum equal to all the fresh capital raised in one year to now, mostly in the last quarter). The WSJ and FT name South K. sources (public Korea development bank, and a commercial bank: likely Kookmink Bank, Korea First Bank or  Woori financial group; plus less strategic capital from Korean Pension Service and Korean Investment Corp, the government-controlled fund that invested in Merrill Lynch), and today the WSJ is referring to:

“the New Jersey Division of Investment, which manages the state’s $80 billion of pension funds and recently invested in Merrill Lynch & Co., and from C.V. Starr, the investment vehicle of Maurice R. “Hank” Greenberg, former chairman and chief executive officer of American International Group Inc. A significant foreign investment remained a possibility.”

As quoted above, American Internationa Group also joined the investors league.

Original June 3 POST.

A LEHMAN CRISIS IMPLODES,

FOR HIGH 08Q2 LOSSES

As we had analysed in depth in mid-March (Bear Steans bail out, END OF FREE MARKETS days), on Fitch original data and a precious help by rge-monitor (always the best site on macroeconomics and finance), Lehman Brothers is the weak point, the first one to be under attack, among the 4 left purely financial US banks.

Therefore we read with no surprise this: its shares are now falling every day, from Monday June the 2nd.

WSJ

Lehman Is Seeking Overseas Capital

As Its Stock Declines, Wall Street Firm Expands Search for Cash, May Tap Korea
By SUSANNE CRAIG
June 4, 2008; Page C1

Lehman Brothers Holdings Inc., facing a sharp decline in its stock that will make it more difficult to raise fresh capital, may look to a foreign land for a strategic partner.

Still, the stock has fallen 18% in the past three sessions.

It was unclear how much stock Lehman Brothers bought back, but with shares trading at roughly 22% below its book value at the end of the first quarter, the buying could be seen as a vote of confidence by management.

WSJ, HEARD ON THE STREET

Decision Time for Lehman

Balance-Sheet Woes
Most Likely to Force
Big Strategic Shift
By PETER EAVIS and DAVID REILLY
June 4, 2008; Page C18

It is time to sort out the Lehman problem.

With its stock falling two days in a row, investors see Lehman Brothers Holdings Inc. as the latest firm weighing on financial stocks.

The problems in Lehman’s balance sheet could force the firm to issue a large amount of equity — or to sell part, or all, of itself to a larger financial firm. (…)

Lehman’s first option is to raise a large amount of capital. The Wall Street Journal reported Tuesday that Lehman was weighing whether to issue as much as $4 billion in new stock. But Tuesday’s drop in Lehman’s share price — the stock was down about 15% at one point during the day — makes it harder to sell new stock. (…)

There is another important reason why Lehman may need new capital: It likely needs extra cash to forestall another downgrade by ratings agencies.

(…)  Lehman’s other option is to sell a stake to another firm or to sell out completely. The problem here is that the credit crisis has left few prospective buyers.

WSJ, PAGE ONE

Losses Push Lehman
To Weigh Raising New Capital

By SUSANNE CRAIG
June 3, 2008; Page A1
June 3, 2008 — 7:04 a.m. EDT
      

Banks and Wall Street
Aren’t Out of the Woods

By JOSEPH SCHUMAN
THE WALL STREET JOURNAL ONLINE

It was a sobering day for anyone optimistic enough to think the shake-out for Wall Street and big banks was over, and today isn’t starting out any better.

The Wall Street Journal is reporting that Lehman Brothers, the smallest independent Wall Street firm still around after the Bear Stearns collapse, will soon report its first quarterly loss since the firm went public and is looking at ways to raise perhaps $3 billion to $4 billion in new capital to strengthen its balance sheet. Lehman was the subject of apparently unfounded credibility doubts right after Bear Stearns was bailed out and essentially sold, and Lehman executives continue to say the firm’s in good shape to handle the credit-market uncertainty. It has also already raised $6 billion in the past year, and has access to the Federal Reserve’s new borrowing facilities for investment banks, as the Journal notes. “Nonetheless, some investors remain concerned that relative to its size,Lehman is holding more securities tied to both residential and commercial real estate than any other big Wall Street broker,” the Journal says, citing Bernstein Research.