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 What a difference a few days make. In the week after the federal
government took over Fannie Mae and Feddie Mac, the markets pounded
Lehman Brothers Holdings Inc., sending it into bankruptcy. Seeing the
writing on the wall, Merrill Lynch & Co. CEO John Thain partnered up with Ken
Lewis' Bank of America Corp. to avoid the same fate. The markets then
turned their attention to the remaining investment banks, Morgan Stanley
and Goldman, Sachs & Co., which both took a beating for three days until the
government finally got serious about addressing the crisis. Now, the
fog is clearing, and the prediction of the universal bank bulge bracket
may not necessarily materialize as Morgan and Goldman look like they
can march on without a partner. But what of the independence of Lehman
and Merrill?
Had Treasury Secretary Henry Paulson taken his plan to Congress a week sooner, then could have Lehman and Merrill remained independent? Now, some in the blogosphere like Clusterstock's Henry Blodget are questioning whether the two banks can undo the moves of the last week. In theory, they could. In reality, it is unlikely. A bankrupt company can certainly try to "unfile" by simply submitting with the bankruptcy court a motion to dismiss. Anthony Baldo, The Deal's managing editor of bankruptcy, notes, "It happens all the time." And with the dean of the bankruptcy bar, Harvey Miller, leading Lehman's case, anything is possible. But, we certainly shouldn't count on it, as the case is well under way, and Lehman agreed to sell a big chunk of the company to Barlcays plc. As for Merrill, the possibility of undoing Monday's merger announcement is likelier than Lehman undoing its bankruptcy filing. All that's necessary is for enough shareholders to oppose the deal and refuse to tender their shares. As Blodget notes:
So, maybe in another week or two when the details of Paulson's plan are firmly laid out, and Thain and Lewis meet on the links, they can discuss whether Merrill can take a Mulligan. - Matthew Wurtzel CategoriesComments
From: Judy,
Lehman should add to the assets of its estate the civil litigation cases it has against the short sellers who drove it out of business. These short sellers knew quite well what was opague to the rest of us. They knew all about Lehman's CDOs and CMOs and mortgage backed securities. This was material non public information. (They also knew all about the credit default swaps of AIG) They traded on it. RICO and 10b5 mail fraud and wire fraud should provide the basis for a lawsuit against the robber barons who drove Lehman into filing for bankruptcy.
Posted on:
September 19, 2008 8:38 PM
From: Angela,
We have seen inconsistency in bailout in the past week. It doesn't seem like Fed knows what it's doing. Stop free market from short selling may have strong negative effect down the road. Adding jawdropping price tag to tax payers isn't fair. The plan is very likely proposed with investment banking top dogs' own interests at heart.
Posted on:
September 19, 2008 9:53 PM
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What's to say the government can't do the same thing and walk away if the banks start pulling that