http://dealbook.blogs.nytimes.com/2008/12/16/how-the-fed-reached-out-to-lehman/?pagemode=print
"Andrew Ross Sorkin in his latest DealBook colunm, examines a mysterious $138 billion loan the Fed extended to Lehman Brothers, shortly after the investment bank went under. While that recently released document on the Fed's decision say the loan was made to help unwind Lehman in an orderly fashion, Mr. Sorkin notes that the agreement made by the Fed and the Treasury for letting Lehman collapse was that they did not have the authority to lend money to the bank. So why, Mr. Sorkin asks, did the Fed agree to do after Lehman collapsed what it refused to do before Lehman went bankrupt, sending shockwaves through the finance markets?
It is a $138 billion mystery. In the early hours of Sept 15, after the government refused to rescue the foundering Lehman Brothers, something odd happened. The Fed lent tens of billions of dollars to a subsidiary of the newly bankrupt bank. In other words, government offiicials who had refused to risk taxpayer money on Lehman before it collapsed did just that after it collapsed. On Monday the Fed lent the Lehman unit $87 billion through JP Morgan Chase. After being repaid on Tuesday, it lent another $51 billion - putting the bailout, argueably, in the same league as the initial $85 billion bailout for AIG. This mystery laon is just one piece of the larger Lehman puzzle. Who lost Lehman? Why, and how? Three months later, those questions still nag. A series of court documents that detail the Feds loan have dribbled out in recent weeks, but they raise more questions than they answer. Lehman might seem like ancient history now, some ghost of a crisis past. Lehman - that was before AIG, before the Big Three, before Madoffs securities. But no one, least of all government officials, has fully explained why Lehman, one of the grand old names of Wall Street, was allowed to fail while so many others were rescued. Many people, at least on Wall Street, have come to view the decision to let Lehman die as one of the biggest blunders in this whole financial crisis. Charles Legarde, France's finance minister, called the decision, "a genuine error". Judge James Peck, who approved the sale of Lehman's carcass to Barclays, the British Bank, said it was a shame that Lehman failed. "Lehman became a victim," Judge Peck said in bankruptcy court when he approved the sale. "In effect, the only true icon to fall in the tsunami that has befallen the credit markets and it saddens me." The authorities are investigating whether Lehman executives misled investors about the firms financial condition before the firm failed. But the authorities might be asking similar questions about executives at other banks, if, like Lehman, those institutions had been allowed to go under. The recently disclosed documents detailing the Feds loan to Lehman subsidiary cast some light on a failed effort to prevent Lehman's implosion from cascading through the financial system. The loan, according to those documents, was a "carefully thought out decision" to stabilize the market by propping up Lehman's broker-deal business, called LBI New York, so it could stay afloat long enough to "facilitate an orderly wind-down" of tens of thousands of trades with other Wall Street firms. The unit was kept out of Lehman's bankruptcy.
That might seem like a reasonable explanation. But Henry Paulson, the Treasury Secretary, and Ben Bernanke, the chairman of the Fed, have said that they did not have legal authority to lend any money to Lehman. The firm, officials said, did not have enough collateral. "We did not have the powers," Mr Paulson insisted. He also said Lehman's bad assets created "a huge hole" on its balance sheet, adding that he had actually tried to find a way for the government to provide money to help support a deal between Lehman and Barclays, but legally could not. His explanation has "evolved" over time, however. He told reporters the day after Lehman went bankrupt: "I never once consideered that it was appropriate to put taxpayer money on the line in resolving Lehman Brothers." Whatever the case, the Fed's loan to Lehman subsidiary makes all those explanations hard to square. Mr Paulson said Lehman had lacked collateral for the government to backstop a deal between Lehman and Barclays. But then the Fed turned around and lent Lehmans subsidiary's billions, based on that same collateral. People involved in the process siad that the Fed only lent the money as part of "an orderly wind down", which would have been different from lending money to an ongoing, or in this case, insolvent concern. Fed officials are not talking much about the loan. Mr Barnanke and Tim Geithner, the president of the Fed Reserve of New York and treasury secretary nominee, have kept quite on the topic. A spokesman for the New York Fed, which orchastrated the loan, declined to comment. The Fed's loans were made through JP Morgan Chase, which, as a clearing bank, acted as a conduit for the money. JP Morgan, if you recall, was the bank that bought Bear Sterns, with the governments help, as the firm was collapsing last spring.
If there is a silver lining in this mysterious cloud, it is that Lehman paid the Fed back. Taxpayers did not loose a dime. As part of Barclays deal to buy Lehman out of bankruptcy, Barclay's agreed to take over the Fed's lending role and "step into the shoes of the Fed".
Still, Barclays and JP Morgan had a brief flight over the collateral posted for the loan, according to court documents. They eventually reached an agreement. The values of the collateral and the specifics are part of a confidential sealed agreement, making it difficult to determine exactly what happened. But until officials explain what happened, it remains a mystery."
Originally posted by whodeyJust to sum things up for those who hate to read long posts, the "powers that be" allowed Lehman to go bankrupt because the Fed claims they did not have the authority to bail them out. However, immediately after Lehman collapses the Fed shells out $138 billion to "unwind" the mess. So how is it they all of a sudden were given the authority? The Fed proported they were wary from shelling out such great sums of money without collateral from Lehman but then did so anyway immediately after they collapsed. Why?
http://dealbook.blogs.nytimes.com/2008/12/16/how-the-fed-reached-out-to-lehman/?pagemode=print
"Andrew Ross Sorkin in his latest DealBook colunm, examines a mysterious $138 billion loan the Fed extended to Lehman Brothers, shortly after the investment bank went under. While that recently released document on the Fed's decision say the loan was made to hel ntil officials explain what happened, it remains a mystery."
To add insult to injury, we have Mr Paulson from the Fed changing his story. Immediatly after the Lehman collapse he was quoted as saying, "I never once considered that it was appropriate to put taxpayer money on the line in resolving Lehman Brothers." Then we have Mr. Paulson much later say that he wanted to bail them out but simply did not have "the power" to do so. However, this magical power was given IMMEDIIATLY after Lehman collapsed.
If you ask me, you have one of two options. You have a government who realized they "goofed" when they let Lehman fail and then started bail outs hand over fist, or you have something much more sinister at play. So those our the options. It was either incompentancy or the powers that be targeted Lehman to fail. In fact, they were the only ones denied corporate welfare.
So who would benefit from their demise? Perhaps one of their competitors? Could it be GOLDMAN SACHS? Perhaps their demise was sealed once GS shelled out all the campaign money and then positioned themselves to make a fortune if cap and trade became the law of the land via the Chicago Climate Exchange. They not only provided the money for the politicians to get elected who desired to make cap and trade the law of the land, they also funded the mechinism by which others could make a fortune, including themselves by funding the Chicago Climate Exchange. In fact, GS contributed about 70% of their campaign funding to the Democrats but only about 30% to the Republicans. As for campaign financing for the Republicans, they only gave such funding to high ranking Republicans. You know they are the ones overseeing the current hearings on GS which will end up yeilding a big zero even though they are clearly guilty of the charges at hand.
Originally posted by whodeywho's he working for?
Judge James Peck, who approved the sale of Lehman's carcass to Barclays, the British Bank, said it was a shame that Lehman failed. "Lehman became a victim," Judge Peck said in bankruptcy court when he approved the sale. "In effect, the only true icon to fall in the tsunami that has befallen the credit markets and it saddens me."
Originally posted by zeeblebotAll I can tell ya is that he was a Bankruptcy judge of the US Bankruptcy court for the Southern district of New York. Oh yea, and he is a wife beater. Apparently it even threatened him from being able to see the case through.
who's he working for?