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09-14-2008, 05:41 PM
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#1
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Recycles dryer sheets
Join Date: May 2005
Posts: 322
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The Unthinkable Happens
September 15, 2008
In Frantic Day, Wall Street Banks Teeter
By ANDREW ROSS SORKIN, BEN WHITE and JENNY ANDERSON
In one the most extraordinary days in Wall Street’s history, Merrill Lynch is near an 11th-hour deal to avert a deepening financial crisis while another storied securities firm, Lehman Brothers, hurtled toward liquidation, according to people briefed on the deal.
The dramatic turn of events was prompted by the cataclysm of losses that has shaken the American financial industry over the last 14 months.
The moves came after a weekend of frantic negotiations between federal officials and Wall Street executives over how to avert a downward spiral in the markets. Questions still remain about how the market will react and whether other firms may still falter like A.I.G., the large insurer, and Washington Mutual, both of whose stocks fell precipitously last week.
Coming just a week after the government took control of mortgage lenders Fannie Mae and Freddie Mac, the magnitude of the industry’s reshaping is staggering: two of the most powerful firms on Wall Street, Merrill Lynch and Lehman, will disappear.
The weekend’s once unthinkable outcome came after a series of emergency meetings at the Federal Reserve building in downtown Manhattan in which the fate of Lehman hung in the balance. In the meeting Federal Reserve officials and the leaders of major financial institutions were trying to complete a plan to rescue the stricken investment bank.
But as the weekend unfolded, Barclays and Bank of America, which had both considered buying all or part of Lehman, decided that they could not reach a deal without financial support from the federal government or other banks.
As a result, people briefed on the matter said late Sunday that Lehman Brothers would file for bankruptcy protection, in the largest failure of an investment bank since the collapse of Drexel Burnham Lambert 18 years ago.
excerpted from NYTimes
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09-14-2008, 06:10 PM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
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Quote:
Originally Posted by boont
September 15, 2008
In Frantic Day, Wall Street Banks Teeter
By ANDREW ROSS SORKIN, BEN WHITE and JENNY ANDERSON
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Do you understand the 9/15 date? It is only 8pm in NYC on hte 14th-what gives here?
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
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09-14-2008, 06:17 PM
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#3
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Recycles dryer sheets
Join Date: May 2007
Posts: 290
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Quote:
The weekend’s once unthinkable outcome
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Quote:
Lehman Brothers would file for bankruptcy protection, in the largest failure of an investment bank since the collapse of Drexel Burnham Lambert 18 years ago.
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Cognitive dissonance time. The writers of this NYT article declare the failure of Lehman to have been unthinkable, then point out that a failure of similar magnitude happened a mere 18 years ago? Do they read what they write?
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09-14-2008, 06:23 PM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
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Quote:
Originally Posted by bpp3
Cognitive dissonance time. The writers of this NYT article declare the failure of Lehman to have been unthinkable, then point out that a failure of similar magnitude happened a mere 18 years ago? Do they read what they write?
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No. Not part of journalism.
BTW- have markets in Japan opened yet? Can you give a report? Does AIG trade over there? How is it quoted?
ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
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09-14-2008, 06:34 PM
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#5
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Recycles dryer sheets
Join Date: May 2007
Posts: 290
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Quote:
Originally Posted by haha
BTW- have markets in Japan opened yet? Can you give a report?
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Nope, today is a holiday -- Respect for the Aged Day.
Oddly though, looking at Bloomberg.com, the futures on the Nikkei seem to be pointing upwards.
Quote:
Does AIG trade over there? How is it quoted?
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It does trade on the Tokyo Stock Exchange, but the only quote I see is Friday's close: Yahoo!¥Õ¥¡¥¤¥Ê¥ó¥¹ - 8685.t
Looks like it dropped from 8000 yen to 2000 yen over the course of Friday, according to the chart.
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09-14-2008, 06:40 PM
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#6
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Thinks s/he gets paid by the post
Join Date: Feb 2007
Location: Upstate
Posts: 2,948
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Quote:
Originally Posted by haha
No. Not part of journalism.
BTW- have markets in Japan opened yet? Can you give a report? Does AIG trade over there? How is it quoted?
ha
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I think (but am not sure) that Japan is closed 9/15 (i.e. tonight) for a holiday. As of this 8:35pm ET, Australia is down about 1.4%, but with some banks and Investment Banking firms down much more. (For example, Macquarie Group Ltd is down 8.1% as of 8:18 ET.)
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09-14-2008, 06:42 PM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
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Thanks guys for the reports.
Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
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09-14-2008, 06:48 PM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2005
Location: Central MS/Orange Beach, AL
Posts: 9,067
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Bank of America just buys Merrill. I guess that is plus for the markets tomorrow.
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Retired 3/31/2007@52
Investing style: Full time wuss.
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09-14-2008, 06:58 PM
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#9
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Full time employment: Posting here.
Join Date: May 2007
Posts: 982
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BAC paying a premium too ($29) since Friday's close was $17 or so on MER.
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09-14-2008, 07:03 PM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,708
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__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
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09-14-2008, 07:03 PM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2007
Posts: 5,596
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Quote:
Originally Posted by Lakedog
BAC paying a premium too ($29) since Friday's close was $17 or so on MER.
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How many more failures can BAC absorb? They might be getting a deal in the long run but I bet the FDIC is getting a bit concerned about their capital adequacy.
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I purr therefore I am.
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09-14-2008, 07:04 PM
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#12
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 1,543
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Quote:
Originally Posted by Dawg52
Bank of America just buys Merrill. I guess that is plus for the markets tomorrow.
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except for paper assets you can buy in BK court, what is the value in any of the ibanks? just a bunch of people you can hire away and clients you can steal
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09-14-2008, 07:30 PM
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#13
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Thinks s/he gets paid by the post
Join Date: Feb 2005
Posts: 2,032
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Quote:
Originally Posted by al_bundy
except for paper assets you can buy in BK court, what is the value in any of the ibanks? just a bunch of people you can hire away and clients you can steal
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The reason BOA bough Merrill is simple, they wanted their 20,000 brokers and all the client relationships they have. The retail business at Merrill is a huge cash machine which BOA will leverage to sell banking products to these clients. On it's own it would be a terrific business. In addition, Merrill recently sold most of their CDOs and crap loans.
Merrill also owns 40% of Blackrock which is the largest fixed income manager in the world, and now thanks to Merrill also had a huge equity business.
Lehman owns Neuberger Berman which is very profitable. They also have a very profitable business of licensing their indexes which no doubt will be hurt along with their name.
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09-14-2008, 07:38 PM
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#14
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Thinks s/he gets paid by the post
Join Date: Jan 2004
Posts: 2,049
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Overnight US futures are down >2%. Oz is down 1.7%.
Lehman is toast. The banks have no money for an LTCM style bail-in without government help. When Lehman fails, their counterparties are gonna suffer. Morgan Stanley next?
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09-14-2008, 08:51 PM
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#15
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Recycles dryer sheets
Join Date: May 2005
Posts: 322
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Behind The Scenes
"If Bank of America acquired Merrill Lynch, its capital reserves would immediately fall below the minimum requirements for bank holding companies. Federal regulators,including the Federal Reserve,would have to show lenience for as long as it took the capital markets to regain their confidence which could be quite a while."
NYTimes Sept. 15, 2008
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09-14-2008, 08:56 PM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2006
Posts: 12,483
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Quote:
Originally Posted by saluki9
The reason BOA bough Merrill is simple, they wanted their 20,000 brokers and all the client relationships they have. The retail business at Merrill is a huge cash machine which BOA will leverage to sell banking products to these clients. On it's own it would be a terrific business. In addition, Merrill recently sold most of their CDOs and crap loans.
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Watch for massive defections by large Merrill brokers to independent firms like LPL and others. Banks are notorius for cutting payouts almost immediately, and all those FLPs managing billion dollar relationships are going to bail.........
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Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)
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09-15-2008, 06:14 AM
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#17
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Thinks s/he gets paid by the post
Join Date: Jun 2006
Location: Central, Ohio, USA
Posts: 2,635
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Merrill is no longer - BOA has bought it $50B.
Lehman goes bankrupt - Fed would not bite for a $$ bailout.
CNN-Business. Futures DOWN over 300 at 8:10 EST.
CNBC is going to be entertaining today (even if you do not usually watch it).
OBTW Oil is down to about $96 a barrel - but pump prices up to as much as $5+ (taking advantage of the situation at the pump?)!
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Vietnam Veteran, CW4 USA, Retired 1979
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09-15-2008, 08:55 AM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2005
Location: Central MS/Orange Beach, AL
Posts: 9,067
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I wonder if AIG will survive? Looking pretty bleak at the moment. Just think of all the AIG annuity owners out there. I bet they are sweating it. People who bought them through Vanguard or Fidelity probably thought they were pretty safe. I know I have been somewhat open minded as to owning one someday, but this pretty much seals the deal for me. Only annuity I'm gonna own is through SS.
Maybe a deal will get done to shore up AIG or maybe they will sell off the annuity division to a solid company. I read that is one possibility.
__________________
Retired 3/31/2007@52
Investing style: Full time wuss.
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09-15-2008, 09:28 AM
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#19
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Thinks s/he gets paid by the post
Join Date: Aug 2006
Posts: 2,433
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Quote:
Originally Posted by Lakedog
BAC paying a premium too ($29) since Friday's close was $17 or so on MER.
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I have to wonder why BAC bought MER today at such a premium. Surely, they could have waited a few more days and gotten MER for less, maybe considerably less.
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09-15-2008, 09:41 AM
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#20
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Thinks s/he gets paid by the post
Join Date: Feb 2005
Posts: 2,032
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Quote:
Originally Posted by FIRE'd@51
I have to wonder why BAC bought MER today at such a premium. Surely, they could have waited a few more days and gotten MER for less, maybe considerably less.
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I think they wanted to make sure that the deal would close without any trouble from Merrill shareholders. The hedge funds were also after Merrill in a bad way the last few weeks, they may not have lasted in their present form much longer.
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