Lex on ‘Leh-mu’: Get the lifeboats out

Do you hear that sucking sound?, asks Lex. It’s market whirlpool swallowing not one, but two, large US banks. Lehman Brothers and Washington Mutual, each with market caps of less than $4bn against their peaks of about $45bn, are in the grip of the vortex. The time for regulators to prepare the lifeboats is approaching. For Lehman, the problem is one of confidence rather than capital. WaMu’s predicament is perhaps even more testing. Traders are demanding upfront payment to insure the thrift’s debt – dire straits in the credit default swap market. Any expectation of official assistance on the part of would-be rescuers means the authorities will have to be involved in a sale of either or both banks – an obligation of their own making. It will be another busy weekend.