[firestarter]

beamofthewave,

They aren't going to collapse. There is no chance of that.

[Cashmere]

The Fed oviously cannot bail out ALL the banks,

Huh? Why not?

Treasury gives Fed money, Fed bails out.

Why not?

It's exactly what I expect.

[ColossalContrarian]

So what are the implications of the collapse of Lehman? And what can I do to prepare, and does this mean I wont have to pay my mortgage anymore if the banks collapse?

Also thanks Roccman for your support last time.

[sarcasim] No need to pay your mortgage, you got yourself a free house! Now you can use your mortgage payment to buy a new 42' TV!!! [/sarcasm]

I love these kinds of post

[DantesPeak]

The Fed oviously cannot bail out ALL the banks,

Huh? Why not?

Treasury gives Fed money, Fed bails out.

Why not?

It's exactly what I expect.

Yes, I agree. Lehman looks like a canidate for conservatorship until the legal approval from Congress (if any) is given.

After that, the Fed, FDIC, and the Treasury will have its hands full.

[beamofthewave]

I too was joking about the mortgage. And if I had any extra money I would send it to a friend of mine in the Peace Corps to help build a water system in Ghana.

[shortonoil]

Cashmere said:

seahorse2 wrote:

The Fed oviously cannot bail out ALL the banks,

Huh? Why not?

Treasury gives Fed money, Fed bails out.

Why not?

It's exactly what I expect.

In taking over F&F the US government blew up its debt by $5.3 trillion. That pushed the US debt level to almost the GDP of the country. Once the US goes over that GDP number, most likely it will lose its AAA credit rating. It has already been warned by the BIS.

If the US, which holds the world’s reserve currency, loses is pristine credit rating the whole world falls apart! Insurance, pension funds, the dollar, the whole shebang goes!

To make things even worse when the FED bailed out F&F they inadvertently cut the other banks out of the Repo market. Since those banks don’t have any capital worth anything that can be taken to the FED window, they are high and dry. Stranded and unable to get necessary working capital for their carry trade businesses.

Expect LEH, AIG and WM to soon join the legions of the dead, and neither the FED or the Treasury can do a thing about it without having Armageddon fall on their own heads.

It is not going to be pretty!

[Tapas]

In taking over F&F the US government blew up its debt by $5.3 trillion. That pushed the US debt level to almost the GDP of the country. Once the US goes over that GDP number, most likely it will lose its AAA credit rating. It has already been warned by the BIS.

If the US, which holds the world’s reserve currency, loses is pristine credit rating the whole world falls apart! Insurance, pension funds, the dollar, the whole shebang goes!

Thanks shortonoil. You have explained the crux of the problem! It's a tailspin from here.

According to the CIA Factbook the GDP of the USA was $13.84 Trillion (2007 estimate).

Our National Debt with the inclusion of Fannie Mae and Freddie Mac now exceeds our GDP.

We are toast

[dorlomin]

Barclays are apparently now out of the deal.

[TheDoctor]

In taking over F&F the US government blew up its debt by $5.3 trillion. That pushed the US debt level to almost the GDP of the country. Once the US goes over that GDP number, most likely it will lose its AAA credit rating. It has already been warned by the BIS.

If the US, which holds the world’s reserve currency, loses is pristine credit rating the whole world falls apart! Insurance, pension funds, the dollar, the whole shebang goes!

Thanks shortonoil. You have explained the crux of the problem! It's a tailspin from here.

According to the CIA Factbook the GDP of the USA was $13.84 Trillion (2007 estimate).

Our National Debt with the inclusion of Fannie Mae and Freddie Mac now exceeds our GDP.

We are toast

I just love this "F&F takeover = $5 trillion more government debt" being tauted at so many doomer sites. Things are bad, but not that bad, at least not yet. F&F are no where near completely insolvent. They have some of the better quality mortgage debt out there. They will not likely cost the taxpayers anywhere near $5T, and certainly their takeover has not cost that yet, so the National Debt does NOT yet exceed GDP. The USD has a bit more life left in her. My expectations for the next 5-10 years are for slow economic and social decline/collapse with high inflation (but not hyperinflation).

[DantesPeak]

Lehman has hired law firm Weil, Gotshal & Manges LLP to prepare a potential bankruptcy filing, according to a person familiar with the situation. The New York-based Weil has a leading bankruptcy practice and advised Drexel Burnham Lambert on its 1990 bankruptcy filing.

In a Lehman bankruptcy, the firm's brokerage units would have to enter a Chapter 7 liquidation, in which a court-appointed trustee would take over, liquidate the firm's assets and get Lehman customers back their money. In general, securities that a customer holds at a brokerage firm are legally the investor's property and aren't exposed to the claims of the firm's creditors.

September 14, 2008 1:56 p.m.
Dow Jones


Things to not look good. Apparently no one wanted that bad bank hot potato.

I still don't think the US will let Lehman go down in bankruptcy, but there is a more than a small chance of that happening.

[section451]

Barclays have quit negotiations

http://news.bbc.co.uk/1/hi/business/7615712.stm

[Byron100]

There is no wealth to redistribute left. Most of that what we are calling "wealth" now will fall into disrepair and ultimate ruin within several decades.
Mansions, SUVs, private jets, road network, cities, you name it...

You're completely wrong here my friend. The GDP if the US is greater than it has ever been before, and so is the GDP per capita. Actual real people produce actual real goods and services.

The problem is that the capital is controlled by a very small number of people. The richest 1/10,000 are extremely rich.

The richest 30 Americans probably have assets around $1 trillion. Think of that the next time someone complains that there is no way we can build 200 GW nuclear capacity in the US. With the expense of only 30 bullets you have assets to triple the size of the US nuclear reactor fleet.

Thank you for brightening my day. This is exactly the kind of thing I've been saying for years and years...if we manage to "lose" the top one-hundredth of one percent and use their wealth to build nuke plants or whatever, we'd be about halfway to solving the peak oil crisis. Go down to one-tenth of one percent, you could solve the health care crisis in one fell swoop. Get the idea? I just can't wait for the day when the American body politic catch a clue and start voting in folks that'll do the right thing, instead of the madness we have going on now.

Of course, international cooperation is paramount...we can't have these vultures taking our money outside the borders of the US...uh uh, ain't gonna let that happen...

[DantesPeak]

Advanced preparations for Lehman default are in progress.

Fears that Lehman would be forced to file for bankruptcy by the end of the day intensified when the International Swaps and Derivatives Association opened an emergency trading session among Wall Street dealers with Lehman.

The trading session, due to last two hours, is designed to minimise the risk associated with a Lehman bankruptcy – an event that could have wreaked havoc on Lehman counterparties and the global derivatives markets. The trades will be void if Lehman does not file for bankruptcy by midnight.

FT

http://www.isda.org/

LEHMAN NETTING TRADING SESSION PROTOCOL
ISDA confirms a netting trading session is taking place between 2 pm and 4 pm New York time today for OTC derivatives. Product classes involved are credit, equity, rates, FX and commodity derivatives. The purpose of this session is to reduce risk associated with a potential Lehman Brothers Holding Inc. bankruptcy filing. Trades are contingent on a bankruptcy filing at or before 11:59 pm New York time, Sunday, September 14, 2008. If there is no filing, the trades cease to exist. These trades are subject to a protocol which is being distributed by ISDA (International Swaps and Derivatives Association). Traders should execute the protocol and email a copy of the signature page to Mark New at ISDA ([email protected]) with LEHMAN PROTOCOL in the subject line.

[TonisD]

And another one bites the dust. Both Barclay and BoA out of the picture, Lehmann is gone.

[DantesPeak]

ISDA extends special Lehman derivatives trading until 6 PM.

Not good.

As word that a Barclays deal was off filtered across Wall Street, credit derivative traders scrambled to unwind their outstanding contracts with Lehman and shift their positions to other banks. CDS traders at many Wall Street firms were told to come to work immediately.

With many trading desks open, investors rushed to buy credit default swaps tied to other brokerages and corporations, sending the cost of protection on investment banks such as Goldman Sachs and others sharply higher. One senior trader said Bank of America is offering to face Lehman's counterparties in CDS trades, as long as the swaps don't reference Lehman's own debt.

WSJ

[roccman]

TF

Got XLF puts?

[threadbear]

I think we should just all relax. We need a good holiday, Roccman....a bank holiday, that is!

[roccman]

Bloomberg link

``Trades are contingent on a bankruptcy filing at or before 11:59 p.m. New York time, Sunday, Sept. 14, 2008,'' the ISDA said. ``If there is no filing, the trades cease to exist.''

[ColossalContrarian]

Lots of talk about rate cuts to "soften the blow"...

[Spanktron9]

Rocc in the 5 ring...again.