Lehman Bros meltdown shakes world's markets
Al Jazeera English
Transcript
Leman Brothers is going bankrupt and financial markets from Asia to Europe are doing their utmost to prevent Monday from turning from dark to Black employees of America's fourth largest Investment Bank saw the writing on the wall late Sunday after talks to pull them back from the abyss collapsed British firm Barclay's Bank said no thanks while Bank of America decided instead to help another struggling Bank Merill Lynch in a merger deal worth over $50 billion the US government said it won't bail out Leman which last week announced more than $3.9 billion in losses shares and Leman Brothers have plummeted more than 80% in 2008 alone lhan like so many other investment Banks and Banks uh really got quite frankly caught up in the housing bubble but like every bubble the bubble ended and when now we're seeing the downside of that bubble following the same risky practices that sunk former Giants Fanny May and Freddy Mack lhan also had hand in securing America's high-risk subprime mortgages believing that the popularity and sheer volume of those loans would net huge gains but it didn't borrowers saturated the US housing market taking on enormous mortgages in spite of poor credit history as the economy cooled Americans found themselves with less cash to spend higher fuel prices did not help the result was that more Americans began missing their monthly mortgage payments as Leman Brothers secured many of those mortgages the result was more than $60 billion in losses Leman Brothers now go to court where a judge will take control of the bank until its assets are sold the implications could be profound everybody in the west at least owns a lot of people have got pensions and these pensions invest in stock market and a lot of the shares are actually the shares of Banks and when the B when Bank shares get hammered people's pensions get hammered so everybody loses when big Banks like Leman go under you know the housing market is get to suffer again um house prices are going to fall in America and Britain in Europe and so on that's going to again hit millions of orinary people meanwhile as markets everywhere react the bottom to America's Financial woses appear nowhere in sight 10 of the world's biggest banks have set up a $70 billion emergency fund to help stabilize the market and they may need it reports that American Insurance giant AIG is also seeking a US government bailout will only compound leman's Fallout Monday will be a ult day to face for leman's thousands of shareholders and more than 25,000 employees many had hoped this day would never come Clayton swisser Al jazer
Recession fears amid economic turmoil
Al Jazeera English
Transcript
Well, the big question now, are all the analysts, investors, and governments ready to say the word that they've until now considered taboo? That word recession? All the indicators certainly spell it out. And we'll discuss this more in a moment. But let's look at the cycle the world seems to be in and how it affects you, whether or not you have stocks or even watch Wall Street. Remember, this all began with a housing market crisis. People starting to default on their mortgages. The US was hit first and worst. That led to big loan providers and some banks struggling and a crisis of confidence in the banking system. Banks become reluctant to loan. People became reluctant to spend. That means cutting back on holidays, buying new clothes, and even TVs. And if companies aren't selling, they need to cut jobs to save. And the circle goes around again and again and again. Well, joining me now from our London studio is Jeremy Batstone. He's head of research at Charles Stanley Stock Brokers. Thanks for joining us live on Al Jazera. Mr. Bat stone. I mean, is it about time now that governments and banks and financial institutions actually readily admitted that we are heading towards a recession or we're in fact in a recession? Uh, I think it is about time. Uh, one has to be very careful about using the word recession. Uh, we are certainly in a recession as far as the west is concerned. The United States is growing strongly over the second quarter, but is expected to see we're expecting to see that growth slow quite marketkedly over the remainder of the year. But of course globally given the strength of Asian economies, the strength of the Middle Eastern economy as well, uh I think that the global economy is still growing reasonably positively. But it's incumbent on Western authorities to recognize the extent of the crisis both in the real economy and in the financial markets. It's incumbent on them to do something about it. We've seen this now develop over the course of the past 14, possibly 18 months if you want to go right back to the end of 2006. And yet all we have is the impression of authorities chasing their tail, playing catchup rather than trying to get on top of the situation. I think that with these collapses that we have heard about today and perhaps in particular because the concerns regarding AIG, the time for decisive action has been reached. Can I also ask that the uh international monetary fund chief um has says that the consequences of this current financial crisis are not over but the root causes are behind us. I mean would you agree with that? No. Uh I think that the residential property market continues to be in freeall uh and uh although we have periodically one month worth of reasonably more upbeat data, we need more than a single month's data to convince us that the US residential property market has turned the corner. Uh so if you consider that property is the root cause of the crisis then we're not at the bottom of it. There is also another issue to deal with. US interest rates in 2003 were cut to 1%. There was concern over moral hazard because interest rates were being cut into a strongly growing economy and rising debt or rising leverage. Now I believe the Federal Reserve can cut interest rates. Indeed, part of the market's partial recovery could be down to the fact that the markets are anticipating an interest rate cut from the Federal Reserve very very soon. Uh that's necessary. You didn't even have to stop at 1%. When we're going through a period of aggressive and prolonged delever, and we're still only really at the start of that, then you can cut rates to 1%. You can even cut them to n as happened in Japan for a while in the 1990s if you so wish. Well, for the moment there, Jeremy Batstone, thanks very much for joining us. Great analysis there. And of course, we know that we'll be able to invite you back for more analysis as and when things develop.
Analyst: Bank of America's Merrill Move a Plus
Associated Press
Transcript
Merrill Lynch the move last night this is really a tribute to John thane's ability to come in there with a mandate to clean up shop make some difficult decisions right off the bat soon after his arrival and taking huge write Downs that at the time were cause for concern in retrospect it would appear that he got rid of a lot of the rubbish before you know before the rest of the firm started to see The Fallout Lehman Brothers had not taken as serious write downs and as a result still had the uh you know poisonous debt on their books and that may well have been a factor in Bank of America's decision to go after Merrell rather than Lehman Brothers specifically Merrill Lynch has several attractive aspects to it including their massive network of prime Brokers stock Brokers and investment managers known as the Thundering Herd over at Merrell this is uh dovetails quite well with Bank of America's operations and there is uh you know talk that Bank of America is long had its eye on Merrill Lynch for that reason so yes this removes some concern that the next Target would be Merrill Lynch the next Target of this you know horde of locusts that have been going after firms after the next one Falls so it's removed from uncertainty while at the same time shored up a future for Merrill Lynch albeit not as an independent firm
Bush: Economy Strong Enough to Handle Turmoil
Associated Press
Transcript
I know Americans are concerned about the adjustments that are taking place in our financial markets at the White House and throughout my Administration we're focused on them and we're working to reduce disruptions and minimize the impact of these Financial Market developments on the broader economy I've been in close touch with secretary Paulson throughout this weekend and this morning I appreciate the work with the treasury Department and the Federal Reserve and the Securities Exchange Commission and major financial institutions here and around the world are doing to promote stability in the systems as policy makers we're focused on the health of the financial system as a whole in the short run adjustments in the financial markets can be painful both for the people concerned about their Investments and for the employees of the affected firms in the long run I'm confident that our Capital markets are flexible and resilient and can deal with these adjustments
CEO's Talk Bank of America/Merrill Lynch Deal
Associated Press
Transcript
well you know this this really began actually in a much shorter time frame um the um the problems that with Leman over the weekend uh the fact that all of us uh have been at the Federal Reserve Friday Saturday and Sunday and the uh expectation uh for the difficulties in the marketplace uh following the Leman bankruptcy uh really led us to start to think about uh What uh what types of transactions might make sense for us and uh although this uh will sound very short actually the first conversations began Saturday morning and uh the fact that we could put this transaction together basically in 48 hours I think is a a great statement on the strengths of both of our teams but also the great strategic fit which uh from the instant we talked uh was very very clear that this transaction made a lot of sense we we thought about your question you know why not why not just wait the but but as we looked at the the Strate IC opportunity again as I said nobody pushes back on on the on the fed and and and how much it makes sense uh we don't think many people if any can ever call the bottom we do we do not think that uh we we do think that me Lynch would have seen this through if uh if they had gone if they had been independent been rough obviously uh in over this next this week probably but U and then they could have gone somewhere else there's also the the U they could have just continued on their own own secondly there's always the the the possibility of someone else making a Strategic investment and us not being included so as we weigh everything we said it is better to seize on this opportunity as we see it at the moment uh as opposed to trying to catch the very bottom and possibly not not catching it at all
Lehman Bros. Bankrupt, B of a Buys Merrill Lynch
Associated Press
Transcript
Layman Brothers says it plans to file for chapter 11 bankruptcy protection that sent Asian markets tumbling in US stock index Futures down sharply the 158 year-old Wall Street firm is plagued by bad real estate holdings and it couldn't find an investment partner to throw at a Lifeline an early morning statement says None of the Layman subsidiaries will be included in the filing the Investment Bank says it's exploring selling the broker deal operations and it's in discussions to sell the investment management unit one bank that refused to get involved is Bank of America it wouldn't step into the Layman Brothers situation that's when the government suggested Bank of America look into buying meril Lynch and Company and that's just what's happening the Charlotte North Carolina based bank will acquire Merl Lynch in an all stock transaction worth about $50 billion the transaction is expected to close in the first quarter of next year Judy boyha the Associated Press
Lehman's Demise: the Mood on the Street
Associated Press
Transcript
the walls came tumbling down on Wall Street Monday as two Financial Giants maril Lynch and Leman Brothers buckled under the real estate and credit crisis the shocking news that maril Lynch would be sold to Bank of America and the more shocking news that Leman Brothers filed for chapter 11 bankruptcy led to a 500 Point drop in the Dow Jones Industrial Average many people are stunned that the PowerHouse investment Banks couldn't weather the subprime storm well it's quite amazing like I said you know a company that can survive two world wars uh can't seem to survive the mortgage meltdown to me that's quite you know shocking for the 158 year-old Leman Brothers this latest Financial blow comes just 6 months after the collapse of be Sterns leman's filing is the biggest corporate bankruptcy filing in history like everyone else I had hoped Leman Brothers could be saved along with the jobs that employ more than 12,000 people who live in the New York area Leman Brothers has provided countless New Yorkers with an opportunity to pursue the American dream and it really is a sad day for our city to see it close its doors it's been craziness here at the Leman Brothers headquarters in New York police have set up barricades and there's nearly 100 reporters and cameramen all camped out here waiting for some type of answer on this wounded Financial giant many are wondering what will happen to the 25,000 employees everybody just uh we can't believe it it's a just a surprise everything goes really quickly it's everything happen even when week we don't know anything we don't know when you know we know that we're here supposed to come to work and that's all I know and you know what I'm going to keep on coming to work cuz as much as I'm uh dismayed about the situation that's you know that's my job while some were packing up boxes and leaving otherly men employees still had a drop of optimism like I said I've been here my entire adult life and there's a there's a there's a great group of people up there and they're going to once they get their way back into the system they're going to add value to a lot of other places a AR of Hope in leman's 60 billion real estate storm Bonnie go the Associated Press New York
Money Minute: Short-selling; Interest Rates; Oil
Associated Press
Transcript
AP money minute with Wall Street in turmoil the Securities and Exchange Commission is said to be planning measures to Rin in aggressive forms of Short Selling according to an AP Source the measures likely would include removing an exception for market makers in options on stocks and a tightening of anti- fraud rules related to Short Selling short sellers bet that a stock price will fall so they can profit from it just a few days ago a rate cut by the Federal Reserve appeared largely off the table as an option but with the EXT ordinary events involving Leman brothers and Merill Lynch a growing number of economists and investors believe there is a chance the FED could reduce its rate by as much as 1/ half of a percentage Point oil prices have closed below $100 a barrel for the first time in 6 months tumbling more than $5 to $95. 71 a barrel in the midst of Monday's banking turmoil crude steep decline also came as early signs suggested Hurricane Ike delivered less damage than feared to the Gulf Coast Energy oil and gas infrastructure I'm Mark hamri with ap money minute
Paulson Says Lehman Bailout Was Never an Option
Associated Press
Transcript
concerned are you about commercial Banks and and what reassurance can you offer the American people who may be concerned about your savings account the checking account well I I I've got to say our our banking system is a safe and a sound one and since the days when we've had Federal Deposit Insurance in place we hav a had a depositor who's got less than $100,000 in an account lose a penny what blame should the Bush Administration take for the current economic situation in the United States have you been asleep with the switch and in effective well I I I would say this I'm playing the hand that was dealt me uh a lot of what I'm dealing with you know I'm dealing with the consequences of things that were done often many years ago as I said with the case to Freddy and Fanny that's Congressional Charters going back to cage that's what Washington is put in place why did you agree to support the bailout of be Sterns but not Leman yeah the the situation in March in the situation and the facts around Bear Sterns were very very different to the situation we we are looking at here in September uh and I never once considered that it was appropriate to put taxpayer money on the line W with with uh in resolving Layman Brothers the root of the problem lies in this housing correction and until we stem the housing correction until the biggest part of that is behind us and we have more stability in in housing prices we're going to continue to have turmoil in the financial markets when are we going to see the bottom of this in terms of where we are in terms of working through this I think we've got to go back to to the housing correction or where are we in the housing correction and I believe that there is a reasonable chance that the biggest part of that housing correction can be behind us in in in a number of months
Stocks Fall Hard Amid New Wall Street Landscape
Associated Press
Transcript
the stock market suffered one of its worst days in years Monday investors reacted to a stunning reshaping of the landscape of Wall Street that took out two stored names Leman brothers and Merill Lynch the Dow Jones Industrial Average lost more than 4% plummeting 504 points to settle at 10,915 the standard and pores 500 Index Dove 58 points to close at 1193 and the NASDAQ Composite tumbled 81 to settle at 217 9 Monday's plunge was the sixth largest Point drop ever the worst since the September 11th Terror attacks in 2001 investors were shaken by leman's bankruptcy filing and what was essentially a for sale of meil Lynch to Bank of America for $50 billion in stock while those company situations had reached some resolution the market remained anxious about other companies among them American International Group which is seeking emergency funding to shore up its balance sheet shares in AIG fell more than $7 approximately 60% to close below $5 a share Leman Brothers lost $344 to close at 21 cents and Merl Lynch closed up a cent to 1706 Mark Hamrick the Associated Press
Black Monday On Wall Street
CBS
Transcript
[Music] this is going to be one of the Watershed days in financial markets history it was a manic Monday in the financial markets the Dow tumbled more than 500 points after two pillars of the street tumbled over the weekend lhan Brothers a 158 yearold firm filed for bankruptcy I don't think anyone really expected a bank as big as lman to uh you know be in a position that it's in now brought down by bad mortgage Investments lhan which has 25 ,000 employees will be liquidated I'm starting to find another job meanwhile Merl Lynch fearing it could be next agreed in an act of desperation to a shotgun marriage with Bank of America Merill the country's biggest brokerage with 60,000 employees had been battered by nearly $50 billion in mortgage related losses it is definitely a very very difficult time and it's not going to get better quickly so in just 6 months three of the five biggest independent firms on Wall Street have now disappeared be Sterns which collapsed last spring Leman brothers and Merl Lynch treasury secretary Henry pson tried to reassure investors today the American people can remain confident in the soundness and the resilience of our financial system Paulson attempted to broker a deal to sell Leman over the weekend but unlike the buyout deal for Bear Sterns the government would not offer any Financial guarantees I never once considered that it was appropriate to put taxpayer money on the line W with with uh in resolving Layman Brothers it would have required an 85 billion dollar subsidy to keep a float overall I estimate it's going to cost at least $400 billion if you wanted to bail out the whole bunch they certainly not worth it it's better to let him fail Insurance giant AIG is the next name on the list of troubled companies it's looking for $40 billion in Bridge loans some people say this this doesn't stop until the housing housing hits bottom you think that's true I I think that's probably correct veteran trader art cashion believes there could be more casualties this is the the fifth time we've seen this movie and you sit on the edge of your seat and you yell at whichever character it is don't go into that Woodshed but they keep going in the Federal Reserve meets tomorrow the expectation before the events of this past weekend was that the FED would sit tight on interest rates but now some are actually forecasting another Fed rate cut tomorrow Katie and I know individual investors don't have their money in Leman Brothers it's those big corporate institutions that are most directly impacted by the bankrupcy so what will happen to the assets that are left yeah lean Katie actually has $600 billion worth of assets some of those profitable ones and there are some will get sold up the off the others will get divided up in bankruptcy court and that could take years it's important to note here Katie that one reason the fed and the treasury did not inject government money in a deal to try to save Le Leman was that they thought many of their clients had time to anticipate all this Katie all right Anthony Mason on Wall Street Anthony thank you
Bush On Wall Street's Woes
CBS
Transcript
I know Americans are concerned about the adjustments that are taking place in our financial markets at the White House and throughout my Administration we're focused on them and we're working to reduce disruptions and minimize the impact of these Financial Market developments on the broader economy I've been in close touch with secretary Paulson throughout this weekend and this morning I appreciate the work that the treasury Department and the Federal Reserve and the Securities Exchange Commission and major financial institutions here and around the world are doing to promote stability in the systems as policy makers we're focused on the health of the financial system as a whole in the short run adjustments in the financial markets can be painful both for the people concerned about their Investments and for the employees of the affected firms in the long run I'm confident that our Capital markets are flexible and resilient and can deal with these adjustments
Eye To Eye: Market Status
CBS
Transcript
hi I'm Kelly Wallace and welcome to I to ey Katie is On Assignment news of financial giant Leman Brothers bankruptcy and the maral Lynch buyout sent the stock market tumbling Jeff glor spoke to One financial adviser about what the news means for investors how bad is it you know as my father always likes to say it's never as good or as bad as you think it is so we've had a rough weekend a rough day today but this is part of being an investor this is what happens when you invest you have good times and have some bad times clients have been calling you all morning all day what do you say to them well I think the same thing that I would say to anybody which is if you are a long-term investor you don't need your money for five or 10 years ostensibly you went into this period with a diversified portfolio there you shouldn't make huge changes it's very emotional I know you feel like you want to cash out and put your money in the mattress because you don't trust an institution but that's not in your best interest if you are a long-term investor what do we do with our 401ks here's the greatest news if you are in an employer sponsored plan a 401k a 403b a 457 you're buying at a 20% discount from last year I mean really you felt fine a year ago when the market was 20% higher plowing money for your long-term Investments correct now you're at a 20% discount keep putting your money in this is the disciplined time that really means that you might be able to make more money down down the pike now I want to back up one second if you are a person who cannot sleep at night because you took too much risk going into this period then you may need to get rid of some of your riskier assets but again hopefully you went in with a diversified portfolio and remember remind yourself as much as possible don't fall prey to my emotions don't fall prey to my emotions stick it stick with your original game plan is it worth it all suspending the paycheck deductions absolutely not absolutely I'm going to I'm sorry to cut you up but you know what absolutely not this is the time where you you should be putting more money in in fact I would suggest to people here's the time you want a good tip right now put more money into your retirement plan if you haven't maxed out at the time you feel like you want to throw up because you're so scared is the time you should probably add an extra percentage or two to your 401k plan what does this mean for people trying to borrow money especially for a home you know there's a strange bit of good news here we've already forgotten about Fanny and Freddy right that was last week's news you know Fanny and Freddy's like the the old brown and now we're into the New Black Fanny and Freddy being nationalized being taken over by Uncle Sam basically has allowed mortgage rates to drop and we've had a really significant drop in mortgage rates over the past 10 days so if you're going out and shopping for a mortgage you're going to get a sub six% mortgage for a 30-year fixed rate that's great news the problem Still Remains you have to have good credit if you do not have good credit it's going to be harder and harder to get a loan it doesn't mean you won't get it it just means it becomes more costly how do institutions this big this historic fail in such spectacular fashion you know I have one word for you greed and it is not just the greed of the institution I think we had a perfect storm of greed and I don't want to point my finger at dick fold at Leman brothers or Jimmy Kane at at Bear Sterns we had a perfect storm where Regulators congressmen CEOs SE Sweet People investors borrowers lenders we all got too greedy we went to that frat party we partied our butts off and now we're paying the price and this is a big hangover so if you want to know the root of it think about your own Financial life when do I make the biggest mistakes when I get really greedy and what is the price I pay for that I move over into fear and now I'm immobilized and that's really what has happened here it will get through this we will get through this I want everyone to realize we've been through bad periods we may it may not have looked like this but we will get through this
Is Your Money Safe?
CBS
Transcript
let's talk more about the financial crisis that appears to be worsening on Wall Street joining us is our financial contributor Vera Gibbons good morning good morning such a good morning yeah a crazy morning indeed Wall Street Journal said this is like a level five test of the levy system of holding these Banks and banking system together you said what a financial tsunami is what I've been hearing this is this is unprecedented at least sort of in in current memory so shall we say people are hearing about these Banks and and and bankruptcy and failures on Wall Street should I be concerned about my neighborhood Bank say I think everybody should be concerned I mean this is a financial crisis that started what 13 14 months ago this whole Lehman thing reiterates the seriousness of the crisis tells us that we're in a very tough position economically and I think you should be worried it certainly does something to this like the psyche of the American who has them on edge is my money safe though in my neighborhood Bank your money is safe assuming it's FDIC insured so that's the first thing you want to do you can also check the safe and soundness rating of your bank by going to bankrate.com Vera bank will also run reports for you so there are some Services out there if you're concerned about it's not a bad idea to do some of that stuff today if you are concerned Why not do something about that today that's a very good idea if for no other reason because the news is so bad again well there's a lot of anger a lot of mistrust directed at the banks right now so if I'm okay so uh you have Bank of America buying up this giant brokerage firm sort of brokerage firm that brought Wall Street to Main Street this is a 50 billion dollar deal should I be concerned about my investments if I if I have a brokerage deal with these guys your Investments are fine you may have a tough time actually getting a broker on the phone but I mean think about these guys at Lehman had a lot of their money tied up in Company Stockton kids college tuition that's been wiped out the stock is down what 94 over the past years like a three or four dollar stock so those guys in particular are really suffering and they could ultimate lose their jobs as well we're talking about major job losses to follow as well right AIG is still on the teetering point today there could be more even later this week the interesting takeaway for this for me is this is all brought about by the credit crisis and I read last week that some some mortgage rates are actually at the lowest point ever for now for now but only problem is what kind of what kind of credit do you have to have in order to get you got to be in the 700s to get those kinds of rates one of the effects of this though is that it could be even harder to get loans because lenders don't want to assume any kind of risk any kind of any kind of risk and we haven't seen the last of these bank failures Harry we have 117 banks on the fdic's watch list on their problem list 150 Banks analysts are saying could go belly up over the next 12 to 18 months and I heard Wilbur Ross saying as many as a thousand Banks could go under all right we'll be hanging on and listening to your every word thanks so much
Lehman's Collapse Creates Chaos
CBS
Transcript
The collapse of Lehman Brothers triggered turmoil in markets around the globe. Stocks tumbled in Taiwan and India, then plummeted in Europe by nearly 5%. Japan and Hong Kong dodged the damage because they were closed for holidays. In Germany, Lehman shares nose-dived by 90%. What we've seen over the last 24 hours is an earthquake which we've been waiting and expecting for some while. Now we've got the aftershocks to come and we've got the clearing up to do. The banking sector bore the brunt of the collapse with shares in Europe's major banks tanking by as much as 9%. Fearing further losses elsewhere, the Bank of England and the Central Bank of Europe both pumped billions of pounds and euros into the system to boost confidence in the market. They are worried about the the status of the financial system and if this becomes systemic, then that's much more serious. At Lehman's European headquarters in London, they're carrying out their careers in boxes. 5,000 employees here face the fear of job losses. Do you think there's going to be very many? I think it's going to be all of us. Those now managing the meltdown at the London office predict a rough road. It's a period of of of stress and distress for people and obviously we're being careful, trying to be careful to work with them. Analysts warn further fallout is to come in the next few days. The global credit crunch may have claimed its biggest victim, but many fear it won't be the last. Charlie D'Agata, CBS News, London.
Lehman, Lynch Shake Up Market
CBS
Transcript
workers filed out of Leman Brothers carrying years of Labor in their arms the Investment Bank filed for bankruptcy this morning a shocking ending to a weekend of frantic negotiations which failed to save the company from collapse now after 158 years in business lemman is selling itself off in pieces as lemman started to wobble its Last Hope was a bailout from the federal government but having already saved Fanny May and Freddy Mack and brokered a solution for Bear Sterns this time the Fed said you're on your own yeah they are not helping us out I don't think they are going to help us out the stock market dropped by hundreds of points right from the open equally shocked by the news from Marl Lynch devastated by losses and mortgage Investments The Brokerage is selling itself to Bank of America for $50 billion it is better to seize on this opportunity as we see it at the moment uh as opposed to trying to catch the very bottom and possibly not not catching it at all it's a huge blow to the workforce about 24,000 people could lose their jobs at Merill another 26,000 at Leman Brothers we're working to reduce disruptions and minimize the impact of these Financial Market developments on the broader economy the worry now is a domino effect Washington Mutual Bank could be in Jeopardy and insurance giant AIG is gasping from massive losses and scringy without it the company could go under in a matter of days Karen Brown CBS News New York
Weathering The Financial Storm
CBS
No transcript available for this clip.
Weighing The Lehman Collapse
CBS
Transcript
joining us is Liz Clayman from the Fox Business Network good to have you with us in the studio this morning I'm going to go back to Friday Hank pson runs into town he's got the guy from the New York fed he's got everybody with him brings in these bankers and says the spigot is dry there's no more bailout this is not going to be Freddy Mack this is not going to be Fanny May this is not going to be Bear Sterns you have to survive on your own what was that like as a message to these Banks down in Wall Street over the weekend can you imagine what it would be like for Hank Paulson to see Leman Brothers drowning and pull back his arm and say can't help you here wow he probably felt and this is the impression that we are all getting that he just couldn't after having opened the spigot for Bear Sterns Bear Sterns virtually went under and was taken over by JP Morgan after saving Fanny and Freddy billions and billions of dollars a message had to be sent this was probably his thinking that we can't continue to do this that people who pulled themselves up to the rul that table Harry right can't be expected to be saved by the rest of us here the taxpayers in the end footing the bill for all of all of these bailouts how would you describe the mood today in this city and especially downtown I don't know if you've been just a couple of blocks away outside Leman brother's satellite trucks you saw that you showed the video of people it is horrifying this is like bar Stern's Redux where you had people leaving on a Sunday not sure if they could even pull their resumés out of their computers down there it's terrible Wall Street very very nervous because you've got to imagine as you just heard from Jeff your reporter down there that what you have is a situation where people don't know what's going to happen although the Futures which give us an indication of how the markets will open are down 300 350 points depending on the moment so it will be tough at the open nobody knows at the close and on top of this AIG giant Insurance firm they're begging for cash they're literally out with a Tin Cup and then you have these other big Banks reporting earnings this week Goldman sack bear uh Morgan Stanley what's what what's what is this week going to be like what are we are we going to be is there still going to be a Wall Street by Friday when you talk about the proverbial dust settling people said after March 17th when be Sterns went under whoa that's it this is not going to happen again you can't see where the dust is going to settle because here we are today A day that will go down in history as gigantic pillars of Wall Street AIG Leeman Brothers Mara Lynch right Mara Lynch is being bought by Bank of America that's almost the subtext today but it's any other day this would be FR Amer stock broker exact exactly so you don't know what's going to happen weeks down the road and the problem was with most of these people they didn't do that worst case scenario risk assessment imagine the worst thing that can happen they never did and today the worst is in front of their faces there claiming great Insight this morning thank you so much you bet [Music]
Bush 'confident' in markets
CNN
Transcript
I know Americans are concerned about the adjustments that are taking place in our financial markets. At the White House and throughout my administration, we're focused on them. And we're working to reduce disruptions and minimize the impact of these financial market developments on the broader economy. I've been in close touch with Secretary Paulson throughout this weekend and this morning. I appreciate the work that the Treasury Department and the Federal Reserve and the Securities Exchange Commission and major financial institutions here and around the world are doing to promote stability in the financial systems. As policymakers, we're focused on the health of the financial system as a whole. In the short run, adjustments in the financial markets, can be painful, both for the people concerned about their investments and for the employees of the affected firms. In the long run, I'm confident that our capital markets are flexible and resilient and can deal with these adjustments.
Lehman Bros. 'expendable'
CNN
Transcript
This is a big mess on both sides of the water. Oh, the size and scale of this mess is quite breathtaking, John. Let's just listen to and recount what we've just heard from that press conference. You're talking about administration. Really, when you talk about Lehman Brothers in the City of London, we're talking about liquidation. The various people from Price Waterhouse were quite clear. Their future task is to run down the asset book. Now, what that means in Lehman's language, take all the assets they can find, flog them off for as much as they can, and pay the creditors whatever's left over. The size and scale of this and the ramifications is very serious. Right the way from what it means to trading strategies of other banks that have partnership relationships or they are on the opposite sides of deals with Lehman Brothers, to the employees. You will have listened, I know John, carefully when he was talking about something as basic as paying payroll salaries. Whether or not employees need to bother coming to work. One particular phrase I noted during that press conference. Some employees were being told they would not be needed for the future. That's a very polite way, John, of saying that you're fired. Don't bother coming back. And not only don't bother coming back, John, there probably isn't any money to pay your bonus, your salary, or even your salary. There's a lot of money to pay for your back wages. Now we heard them say more than once that they had just taken control of Lehman in the UK and the various companies. It had just been a few hours that they've been looking at things. This couldn't be a surprise to anyone in the city. Well, no. And the interesting thing, actually, if you listen, there was one bit just about five minutes before we left that press conference. Ten minutes. He said one of the one of the administrators said, we've been we've only been looking at the books for about 48 hours. Now that tells me they knew this was coming just maybe before the weekend or certainly by the time the weekend was on. The administrators had been warned. You don't put this thing together overnight. They knew what was happening. And that's why on Saturday, for instance, we saw those pictures of John Thane of Merrill Lynch turning up at the U.S. Federal Reserve in New York at the New York Fed office. We knew there were negotiations taking place at the New York Fed. And of course, everything. Everything. Everybody was waiting to see. But it is a classic, classic house of cards. The moment it starts to tumble, it will come down very fast indeed. And that's what happened. It's all about confidence, John. When the confidence goes, people head for the door. When they head for the door, then everybody else goes. It's like crying and calling fire in a crowded theater. Are we seeing that now in the United States? The Dow Jones industrials are down, but they're not down as much as many people had feared. There isn't widespread market panic. We're not seeing that in Europe either, are we? No, but the markets are much more sophisticated than they were. The Dow down 231 points, 11, 194. But the markets are more sophisticated. We're waiting to hear. I believe the President of the United States is due to speak this afternoon. They're waiting to see what's going to be said. They're waiting to see what happens. They're waiting to see, does this firewall hold? But you don't need to have. I mean, we have a phrase in the market. It's known as salami slicing. And it basically is pretty much as it sounds. You don't need to lose 20% in a day as you did in the 1987 Black Monday, 22%. Instead, you get this 2% a day, 3% another day, 1%. And the salami slow and the market slowly loses value over a period of time. And the importance of what we are seeing today is that the market is trying to work out. Where is that firebreak? Is that firebreak Lehman Brothers? We know from Bear Stearns when they decided to rescue Bear Stearns, it was too important to the bond market. It was too systemically and structurally important. Putting it in crude and blunt terms, John, Lehman Brothers, let it go. Let it go. Don't waste the money on it. Wait and see what happens. Let's concentrate on Merrill Lynch and Bank of America, AIG, big structurally, systemically important institutions to the financial world. So that's what's happened. They basically said, Lehman Brothers, we can afford to let it go. Let's see who is next and whether or not we have to stand behind. Save our powder. We might need it tomorrow. Well, Richard, stay with us because Merrill Lynch was feared to be next. But as you mentioned, as we've been reporting, Bank of America is organizing a $50 billion deal to buy Merrill Lynch. A short time ago, we heard from the CEO of Merrill, here's what John Thain had to say about the deal that's underway to sell the firm. This is a transaction that makes tremendous strategic sense. We think it gives us great opportunities, both on the Bank of America side and on the Merrill Lynch side. The combination of our businesses, the fit of our businesses, the opportunity, both in the United States and around the world, just makes all the sense in the world to us. You know, the reaction, both internally and externally, has been incredibly positive. And so we're very, very excited about the prospects going forward. Richard, question. So, Chris, he makes it sound like they were delighted to sell themselves off to Bank of America. I guess they're delighted that they're not going to be the next casualty. No. I mean, what a day for anybody like myself who's been covering these markets for some time. Yes. I mean, you've got two vast announcements. On any given day, they would just dominate. Merrill Lynch and Bank of America, Lehman Brothers goes bust. We've got Alan Greenspan saying this is the once-in-a-generation, 50-hundred-years sort of event. That tells you something of what the significance of all of this. Now, let's just look at this Merrill, Bank of America. Remember what I said about a firebreak. Who is going to be allowed to go to the walls, wash their hands, let them go? Lehman Brothers has gone. But Merrill and Bank of America, Merrill's too important. It's psychologically too important to Main Street America. And that's why you had those meetings over the weekend. That's why pressure was brought to bear. And yes, Bank of America picks up an asset at a reasonable price and the deal is done. That is why that is too significant to the structure. We're now at the game of making sure the structure doesn't collapse, John.
Lehman Bros. to file chapter 11
CNN
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Francis Lund, General Manager, Fulbright Securities, joins us from there. Thank you very much indeed for joining us. We're getting all these reports through and there's a lot of hearsay involved here, isn't there? And the markets largely are closed across Asia, but can you just give us an idea about how the markets that are open are reacting? Well, this is the bad news that nobody wants to hear. I think within one day, two of the most renowned names, Merrill Lynch and the Lehman Brothers, are probably going to disappear from sight, especially for Lehman Brothers. They haven't done enough to save themselves, now they are going into liquidation. I think for the financial markets in Asia, it is like an earthquake and a tsunami going together. It is the real problem. It is really the ultimate Big Bang. And I think tomorrow when the major Asian markets open like Hong Kong, China and Japan, I think you can look forward to a 2-3% drop or even worse. It's no great surprise, is it, though, that Lehman Brothers was in trouble. There's no great surprise really that there's talk about it going into bankruptcy and it may come back from bankruptcy. So why is there such a shock to the markets now? Well, it's a big question. Well, I think that partly stems from the first rescue of the two Macs, Freddie Mac and Fannie Mae. So everybody assumed that it would be like Bear Stearns. The Treasury will be the ultimate borrower of last resort. And the Treasury will engineer some kind of rescue like Bear Stearns. So it was a shock that finally, Hank Paulson just said, the buck stops here. We're not going to waste any taxpayers' money on another investment bank. So if the taxpayers are not paying for it, then the private businessmen are paying for it. So it means the shareholders of these financial institutions are paying for it. So this will have a profound effect on the equity markets worldwide. I think that is why the futures are down sharply, down 3%. I think that's why Asian equity markets will be down. And the equity markets will be down tomorrow when they open. And the big concern as well is that we're not going to really find out straightaway what the impact will be because Lehman Brothers is involved in all sorts of deals with all sorts of different banks. It's a very complex system right now, isn't it? So how long until we know how other banks will be affected by what's happened at Lehman's? Well, I won't be too shocked at that because like earlier this year, the association around within a space of one month simply went into bankruptcy. And the financial market, the weather, they're stormed. I think for Lehman Brothers, the big concern is really the $60 billion portfolio of mortgage-related securities. And from the early signs are that they will get $0.60 to the dollars. And actually, that is much, much better. So what did Merrill Lynch get from their mortgage-backed securities? They got only $0.28 to the dollars. So if they can get $0.60 to the dollars, I think there is a good chance that Lehman Brothers can emerge from bankruptcy. So maybe bankruptcy is a better way to resolve the problem than selling it off to others at the bargain-basement prices.
Lessons learned from Lehman
CNN
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You were down outside Lehman's last night watching what was going on. Just tell us about it. Well, it was really a most unusual spectacle, Andrew, kind of a once-in-a-lifetime thing, although that, I should correct myself, we saw that with Bear Stearns six months ago, so maybe it's not such a once-in-a-lifetime thing, but it is the fourth largest investment bank in the world, and watching dozens and scores and up to hundreds of employees coming out with their boxes, paintings, umbrellas, flowers, some of them almost giddy, just glad to be getting out in the street, others really feeling the pain and that it's etched on their faces, some of them mad and yelling out at the crowd, jackals at the people who are watching. So it was an extremely emotional experience. You've been following this story, obviously, from the start when the subprime first raised the situation, this ugly head, but at the heart of the layman's story, what went wrong? Well, most simply put, this is a company that leveraged up, took on too much debt, and thought the good times would never end. That's in its most simplistic terms. The company sold all sorts of derivatives and subprime mortgages, and then underlying those subprime mortgages were real American householders, and when those teaser rates ended and they went up, they were unable to pay back these mortgages. That plus, as the housing market deteriorated, people started to default on their mortgage, which made the investments that Lehman Brothers held worthless. So they could not pay back their creditors. That's exactly what happened to them. Okay, now let's take Lehman, likely at this stage to go into liquidation. Merrill's has been rescued by the Bank of America. AIG may get a lifeline, may not get a lifeline, but they're still in the process of getting out of debt. Some people are saying, now we have all this sort of bad news out there and being dealt with, there could be a bottom, we could be seeing the turn, if you like. What's your feeling, and what's the street's feeling on that? Is there perhaps some bounce now? You know, unfortunately, Andrew, I am not so optimistic right now. There is still more bloodletting to be done. For instance, the AIC, the American Bank, the Federal Reserve, they're still in the process of getting out of debt. They're still in the process of getting out of debt.
Lehman Shares Sink Friday
VOA News
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you sold it's been an unnerving week for us financial markets first the massive Federal bailout of mortgage lending Giants Fanny May and Freddy Mack and now the potential collapse of Leman Brothers once the fourth largest investment firm in the US Fortune Magazine editor Andy serwer it's a sad um turn of events because you know Leman Brothers an institution it's 157 years old and uh here we are you know they are on the rank analysts say the bank's future is in doubt after it reported a loss of nearly $4 billion in the last quarter Leman Brothers has suffered heavy losses as a result of the US housing slump and it's not alone Washington Mutual fired its CEO after shares in the Seattle based Bank lost nearly half their value this week Business Week editor Adrien Carter says financial markets are on edge right now there's a crisis of confidence going on with both Leman and Washington Mutual and the question right now is whether they the money to stay in business the other question is whether the federal government steps in the US Treasury Department and the Federal Reserve are said to be working closely with Leman Brothers to find a buyer but analysts say it's unlikely the central bank will guarantee leman's assets especially so soon after bailing out Fanny May and Freddy Mack Forbes Magazine editor Jack Gage says without the fed's backing potential investors could shy away the lowest hanging fruit has fallen off of the tree um now that lean br others appears to be on the cusp of uh you know a conclusion to what's been a very trying period for the company um The Fanny Freddy news that the government has stepped in and explicitly guaranteed uh and taken over its operations was a relief to the market this has rattled its sum because it was so unexpected a new report on the mortgage crisis does little to ease investor concerns a firm that tracks real estate Trends in the US says the number of foreclosures is up 27% from a year ago milar Sega vaa news