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’Do you believe in netting? — Part 2
In Part one, FT Alphaville asked whether there was reason to doubt the netted derivatives exposures reported by banks. Here, we discuss how netting works (or doesn’t, ahem) when counterparties collapse.
Do you believe in netting? — Part 1
On Friday, Jeffrey Snider of Atlantic Capital Management argued that finance now exists for its own exclusive benefit. The thrust of his argument is that derivatives have allowed banks to escape the bounds of actual cash assets and the real economy.
Effectively controlling assets, MF Global edition
MF Global lost ‘effective control’ of its sovereign bond assets. This gifted the broker some rather favourable accounting treatment. The broker’s clients, meanwhile, wanted to keep effective control of their own assets,
Lehman in SCDO trial down under
Bloomberg reports Wednesday on the first day of an Australian trial involving a long-running dispute with potentially interesting consequences for notions of fiduciary duty:
Wingecarribee Shire Council,
Cuomo’s coruscating complaint
Who ever said legalese was dull?
The complaint filed by Andrew Cuomo is a ripsnorting romp through the sordid business of Repo 105.
The main allegations against E&Y are well known via Anton Valukas’s March 2010 report into Lehman’s bankruptcy,
Cuomo files suit against Ernst & Young [updated]
It’s official — Repo 105 will have its day in court (flash from Reuters):
Accounting firm Ernst & Young was sued by New York regulators on Tuesday, accused of helping to hide financial risks at Lehman Brothers Holdings Inc before the Wall Street firm’s 2008 collapse.
About that Lehman call…
It’s no secret that equity analysts tend to be an optimistic bunch, and that they didn’t exactly cover themselves in glory with their forecasts leading into the financial crisis.
Some decidedly egregious examples have now been posted by Economics of Contempt,
Igor, Igor! It’s alive, it’s alive… it’s ALIVE!
…and Dicktor Fuldenstein’s monster will walk the earth once more. Or will it? We simply couldn’t resist giving you more details of the restructuring plan for Lehman Brothers — filed in New York late on Monday,
America is Lehman-fied
Last month FT Alphaville mentioned that Europe had become Lehman-fied in terms of CDS liquidity.
That is, its Fitch Solutions liquidity score was lower than it had been in September 2008, after Lehman collapsed.
[The Lehman Anniversary] The BBC’s Lehman Towers
Did the BBC mean for their dramatisation of the last days of Lehman Brothers to be utterly, cringeworthingly hilarious?
If they didn’t, they certainly did a good job making it look like they did.
In short:
Citadel sells $423m claim against Lehman to Credit Suisse
The same day that Citadel Solutions – fund administrator – is appointed to look after around $50bn in complex assets still owned by the US Lehman bankruptcy estate, Citadel Investment Group – hedge fund,
Markov switching and financial watersheds
Not so long ago there was a small debate here on FT Alphaville about the consequences of the Lehman collapse back in September 2008, and whether it really did constitute – for lack of a less hackneyed phrase – a paradigm shift.
Financial crisis, UK payment system edition
CHAPs. That would be the UK’s ‘Clearing House Automated Payment System’, which is used by account holders the nation over for the completion of large transactions, facilitating such things as house purchases and other large payments etc.
The Kanjorski meme and the end of the world, redux
It looked on Wednesday last week like Felix Salmon had had the last word on what he earlier dubbed the Kanjorski meme – a little piece of web flotsam alighted upon by a number of blogs, among them FT Alphaville – the gist of which went something like this:
Defending Dick Fuld
Dealbook notes that Dick Fuld has a friend. It’s Harvey Miller of US law firm Weil, Gotshall & Manges, who defends the former Lehman CEO in the filing below – a motion in opposition to the NY State comptroller’s appointment of a bankruptcy examiner (Anton Valukas).
In defence of hedge funds
…kill the bad HFnds + heavily regulate the rest.
That’s Dick Fuld, recounting the position of the US Treasury towards hedge funds. The phrase comes from an email between Fuld and Lehman’s general counsel,
The Squeezing of the Bears – an FT Alphaville competition
(7.30am reprint – keep the entries flowing, make sure you leave a name and feel free to add a decimal point to predictions.)
Just before 7pm on Monday night, City Index prices (see box at right) were pointing to a 100 point rebound on the Footsie on Friday morning.
The Bill Gross effect
Bill Gross’s Pimco seems to be at the heart of nearly every financial crisis nowadays. That’s because he’s manager of the world’s biggest bonds fund you say? Probably.
News today that Gross has guaranteed $760m of debt issued by AIG – you know,
FSA statement on Lehman…
…says nothing at all. Why bother?
Today, Lehman Brothers Holding Inc (“LBHI”), a U.S. investment bank, announced that it intends to file a petition under Chapter 11 of the U.S. Bankruptcy Code.
Lehman Brothers is a U.S.
The Lehman Capitulation
One of the nasty little UXBs Eliot Spitzer left buried on Wall St before he opted for a more private life was a little annotated chart which, following the post-dot-comedy reforms covering analysts’ research,
From Korea, with love
Ah, so many potential buyers, so little… credibility. The Lehman clearance sale.
As the FT has reported, the Koreans are indeed the current frontrunners in the Lehman sack race. The Korean Development Bank (KDB) confirmed talks on Tuesday:
Lehman’s travails
Down 11 per cent in Monday trade – closing below $20 a share.
As Yves Smith has noted in the past, there’s still a lot of baggage at Lehman – and plenty of reasons still to be suspicious. The nature of the cash-raising “asset sales”
Hollowing out, Tokyo-style (1)
There is a creeping feeling of unease taking root in Tokyo’s investment banking and hedge fund circles, punctuated at increasingly regular intervals with the false bonhomie and back-slapping of farewell bashes for departing staff.
Losing Lehman
What is Lehman doing?
Yves Smith at Naked Capitalism thinks it is one of the most irresponsible financial actions she’s seen in quite a while. “It” being the bank’s remarkable volte face: yesterday morning Lehman was mulling a $4bn rights issue,
Lehman in huge hedging loss
Lehman Brothers lost about $600m on a single hedging position in the second quarter, adding to a likely larger-than-expected loss that may force the bank to raise more capital. Together, the hedging failures are likely to create a quarterly loss – the first since Lehman went public in 1994 – several times the predicted $300m-$500m.
S&P downgrades Wall Street
While not dramatic, the fact that S&P cut the ratings of three of Wall Street’s biggest investment banks last night is another grim portent of hard times ahead.
Lehman, Merrill and Morgan Stanley all dropped a notch on the rating scale.
Pulling a sword from a stone
Lehman in trouble? Not so fast.
Another €2.17bn ($4bn) raised: Lehman has just closed a large commercial real estate CDO, named Excalibur. All in, it’s the same trick Lehman pulled with its stagnant LBO debt.
Chart of the day: Lehman and Merrill CDS
Up… but still way off highs.
Related links
Another bearish call on Lehman – Dealbook
“There’s not much more the Fed can do…” – Martin Feldstein (NBER)
Aprés TAF, le CLO déluge?
One interesting chart doing the rounds right now shows the Fed’s reserve holdings on July 18th last year and compares them to their current composition. Whereas in the summer of ’07, nearly 90 per cent of the balance sheet was in Treasuries,
CDS report: retailers feel the pain
The cost of protecting retailers’ debt against default rose on Thursday after DSG International, the European electrical goods retailer, issued its second profit warning in three months.
First quarter earnings season has kicked off on a sour note on both sides of the Atlantic,