Category Archives: Wall Street takes a huge shit
From The Telegraph this morning, what the financial honcho’s of the world think of Lehman Bro’s filing bankruptcy:
US investment bank Lehman Brothers has announced that it will file for bankruptcy this morning, after a weekend of rescue talks, overseen by Henry Paulson, the US Treasury Secretary, failed. Lehman had incurred losses of billions of dollars in the US mortgage market, amid the global economic crisis. Here are some initial reactions from figures across the globe.
Michael Holland, chairman and founder of Holland and Co:
“I’ve been on Wall Street for many years and I’ve never seen a weekend like this one. We are unwinding what has been years of silliness in the financial markets and the silliness is being vaporised as we speak.”
Peter Kenny, managing director at Knight Capital Group:
“The tectonic plates beneath the world’s financial system are shifting and there is going to be a new financial world order that will be borne of this. It’s an ugly and painful process.”
Peter Sorrentino, of Huntington Asset Management:
“The fact that no one wanted to step up with Lehman means that there’s no incentive to be a hero at this point. If you buy this stuff and it’s worse than you thought, they’ll take you out and shoot you.
“The only way they can restore confidence is to find the cancer and tear it out as quickly as possible.”
Shane Oliver, head of investment strategy at AMP Capital Investors:
“Investors will be looking around at other US vulnerable financial institutions. Investors are likely to remain fairly risk averse, which is good news for Treasuries and government bonds and bad news for corporate debt.
“Government bonds are probably a good place to be at the moment. Opportunities will open up and we’ll see a good rally once this settles down a bit later this year.”
John Kattar, chief investment officer at Eastern Investment Advisors:
“We don’t think it’s the of the world, but what’s happening in the financial sector is unprecedented and the signs of stress continue to mount. We see the recession continuing into next year and a sluggish recovery from there.”
David Bloom, chief currency strategist at HSBC:
“The worst situation for the dollar would be if people lost confidence in the US government. However, there has been a massive rally towards government bonds and this is a situation involving a private company so it shouldn’t be too harmful for the dollar.
“There will, of course, be a knee-jerk reaction in the markets, but on the plus side, this and the situation at Merril Lynch are rather like dominos being taken out of a bad chain – meaning fewer should fall in their wake.” Ian Stannard, currency strategist at BNP Paribus:
“The dollar is under broad-based pressure, but as time goes by this will be emphasised against the lower yielding currencies such as the yen and the swiss dollar. I expect there to be a mixed picture against the euro and today’s reaction to be short-lived.”
The markets will right themselves and there will be less selection for those who still want to invest their money in risky undertakings.
Unless the Bush Administration wants to save their friends….then the fed bails you out. We, the taxpayers will absorb the fucking risk. From the NYT writeup:
Early Monday morning, Lehman said it would file for Chapter 11 bankruptcy protection in New York for its holding company in what would be the largest failure of an investment bank since the collapse of Drexel Burnham Lambert 18 years ago, the Associated Press reported.
Questions remain about how the market will react Monday, particularly to Lehman’s plan to wind down its trading operations, and whether other companies, like A.I.G. and Washington Mutual, the nation’s largest savings and loan, might falter.
Indeed, in a move that echoed Wall Street’s rescue of a big hedge fund a decade ago this week, 10 major banks agreed to create an emergency fund of $70 billion to $100 billion that financial institutions can use to protect themselves from the fallout of Lehman’s failure.
The Fed, meantime, broadened the terms of its emergency loan program for Wall Street banks, a move that could ultimately put taxpayers’ money at risk.