[picking up in progress at 9:15 p.m.]
CNBC: What AIG is asking for from Fed is bridge financing for asset sales…if so, it will then have confidence from pe firms to buy…KKR and TPG interested
AIG trying to raise $40 bn in capital…has to come up with plan to do by tomorrow morning to keep rating agencies from downgrading.
Gasparino: Fed pushed ML to do deal with BofA…talked to Morgan Stanley but Fed stepped in at end
CNBC’s Bertha Coombs at Lehman headquarters: 5 year vet in credit derivatives…packing up desk…[speaking to CNBC on camera…]
Lehman employee: people are hopeful for next prepping for worst…saw stock slide…don’t know what will happen…like any other day but with dram news on horizon
people at Lehman should walk out proud knowing they contributed in very large way
BC: 158 years of history at Lehman…do you think Fed or Treas. should have stepped in?
Lehman employee: Is it fair Bear got 10, ML got 29 and we get zero? Maybe…Fed’s doing what they can.
CNBC: We’re so lucky we have Bernanke and Paulson…Lehman employees better show up tomorrow…it’s not going to disappear…it’s going to wind down
Harvey Pitt on now: SEC has an obligation to make sure markets are protected and investors are protected and capitol markets are assisted by government.
I think there are serious problems with how we’ve gotten to where we are…result of people over leveraging and not following best-business practices.
Recap of Fed changes
Harvey Pitt back: People who invested in these markets were over-leveraged 100 to 1…no one understood how much leverage that was…the problem is that these were bad biz decisions and no transparency and there has to be transparency going forward.
Live shot of Lehman headquarters
Treasury and Fed reserve working to ensure orderly operations of markets
Merrill deal 75% premium
During break SEC put out statement: making sure Lehman customers not adversely affected by turn of events..on site at US broker-dealer and staying there…working with regulators around the globe to coordinate their actions
Fed making statement during commercial break: expanding collateral offering at lending window…expanding treasury securities lending facility…expanding by $25 billion to $300 billion…another interim rule separating banks and investment banks…relaxing rule separating banks from affiliates
Bertha Coombs back, by herself…6 mo. to day from Bear Stearns collapse…again seeing employees packing up…younger employees sanguine and disappointed but veteran employees really suffering because earnings stuck in stock
taped report with 23 year vet…institutional equities salesman…doesn’t know what he will do know…never thought it would come to this…
people still expected deal to be done
another expert: news affecting dollar’s performance
ABX out 6.5 points…tainting the entire credit space…as soon as wake up in morning…new set of prices..
Down big tomorrow…
Hank Paulson’s statement: strongly supports actions by SEC and Fed…their initiatives crucial to ensuring liquid smooth markets…today we’re looking forward…he’s lending support to everything we’ve seen today
CNBC: Dollar sell-off…will people change where they put money?
expert’s response: this is more of a financial event than an economic event…if I was was going to have a crisis would rather have a financial event affecting economy…we’re skinning down this firm
Maria Bartiromo on Merrill deal: Hank Paulson did not pressure Merrill in deal…expecting deal to close in 3-4 months…Merrill board voted unanimously to do deal…very skiddish about AIG news…looked at what was happening with Lehman…looking to close by January…given landscape best situation for shareholders according to Thain
8 am analysts call with Thain and Ken Lewis
Press conference at 9:30 with both
Don’t know Thain’s role at bank going forward or what will happen with Merrill name…will stay with private wealth biz…but no other components to have name
Heavy short position going into Merrill tomorrow am
Prob. press release imminent from Merrill
Commercials…Citi never sleeps ad…nice consolation for fact that firm keeps getting slighted by CNBC’s summary of remaining big banks on air.
Charlie Gasparino: fate of Thain in speculation…likely stay in transition and then leave…clearly Fed pushed Merrill…chyron saying the same…CNBC clearly standing by CG’s reporting…
What about fact that Dick Fuld said we were ok?
Back…extraordinary turn in Western finance…Lehman history…expected to file for bankruptcy before open…Merrill and AIG recap
Don Drapkin, vice chairman Lazard by phone: Merrill deal terrific for market…whoever thought shortsellers didn’t have an affect on market should recheck their sanity…Merrill and AIG announcement should calm markets for tomorrow…none of these cos should have been leveraged 30 or 40 to 1
report will keep going ’til 11 p.m.
Now called “Is your money safe? The fall of Lehman Brothers”
without government assistance…Lehman downfall would have a major affect on market…President keeping close eye on developments
Futures market looking bad…dow down 260 points…nasdaq composite also down as is s&p
Disollution of 3 of 5 major banks
Gasparino: Ken Lewis might be king of wall street taking crown from Jamie Dimon…Dimon always wanted a sales force…best sales force at Merrill and now to BofA
Michelle Caruso: various banking consortium (10 banks including Deutsche and Citi and several others) establishing collateralized borrowing facility containing $70 billion…7 billion each…with more banks size of facility would grow…designed to enhance Wall Street liquidity
Steve Liesman: like a private sector Fed window…a way that if you’re short of money or need money…can put in and take out
Dylan Ratigan: Lehman didn’t have enough assets to qualify for Fed window
Liesman: Never thought we could get in liquidity crunch in world where you buy securities…Fed expanded ability to borrow at investment facilities…relaxed Chinese wall between investment and commercial banks
Back. Bertha Coombs at Lehman…people hoped Lehman would be bought out…don’t know what will be next…employees still showing up…a lot of onlookers and tourists think a celeb may be coming out of Lehman brothers…police trying to do crowd control…[downside of bank near Times Square]…those who were vets hurt the most…wealth tied up in company stock…don’t know what will happen after bankruptcy
futures and dollar down
Steve Liesman talking to Carlos Mendez: what is happening right now with AIG insurance against those bonds
CM: banks calling for collateral…market ratches down on value of those securities…
Andy Brenner: what we need is more liquidity…but the real problem here is the oversupply of housing.
DR: government has already put taxpayers balance sheet at risk in context of this entire process…what should government do pertaining to unsold homes or homes going into default…speculators need to go in and take foreclosed or unsold homes…government orchestrated fire sale of private homes…get the oversupply of homes off the marketplace
Gasparino: talking to bond traders…fed moves around issue…real issue is bad stuff on balance sheets and people aren’t selling those things
Another break. Roger Altman coming up.
Back…widespread purchase of homes has come home to roost…recap of financial news from past week.
Roger Altman of Evercore Partners on phone.
Dylan Ratigan: How do you solve this problem?
RA: Before that, these events are historic and tragic and very disturbing. A little bit hard in the midst of these to figure out solution for housing biz…agree with Alan Greenspan that financial market will not stabilise until market sees home prices stabilise…heard conversation about putting floor under housing…very unlikely…taking possession of unsold homes is more than government can afford
What should government do? More oversight of banks?
RA: clear fed reserve can’t stand behind institutions it does not regulate…so banks it does not regulate will have to come under regulation and supervision…expect that legislation to pass next year
DR: What is your view of stability of financial system
RA: Think highly of Morgan Stanley and Goldman Sachs so expect them to ride this out…when you have Lehman and Merrill in one weekend…Merrill forced to sell self to BofA…we’re in a very rare and dangerous financial environment…Altman started at Lehman Brothers and this is the worst he’s seen in his career.
DR: How will these events affect broader economy?
RA: There will be a negative effect because people will be taking credit out of markets…
Back. Recap. Ken Lewis now arguably the most powerful man on Wall Street
CNBC stunned [So is everybody else.]
David Faber: stunned by what’s happened over week…week ago was Fannie, Freddie takeover…recaps major news tonight…[AIG down at bottom of list in terms of major stories]…nothing will happen on AIG tonight…13 months into credit crisis because people didn’t pay back sub-prime mortgages.
DR: Would you say leveraged banks and easy loans combined created problem?
David Faber: No…when i-banks stepped in to fill Fannie and Freddie gap in 2003, real problem
How confident there will be orderly market tomorrow
SL: Depends on how they saw weekend…no other financial outcome for Lehman…if no one else was going to takeover, then what were they going to do…
Charlie Gasparino notes that he called that Merrill needs to be sold to a bank. Thanks.
CG: Fed believed Merrill was the firewall…if Lehman goes, Merrill will be next.
David Faber: Remembers same conversation the night of Bear Stearns bailout…six months ago
Michelle Caruso: Breaking news…NYT says JC Flowers, KKR and TPG have withdrawn private equity bids for AIG…paper also confirms CNBC’s report of AIG looking for bridge loan…
SL: wants to talk about rule from Fed getting rid of wall between commercial and investment banks…backdoor way of throwing liquidity out there
Gasparino: MS and Goldman at a competitive disadvantage against BofA and Merrill conglomerate.
Dylan Ratigan pauses to note historic nature of tonight.
Tony Crescenzi, chief bond strategist at Miller Tabak on the phone: Worried about Fed’s balance sheet getting stretched.
DR: How much money does the Fed have and how much have they put at risk and how much do they have left?
TC: $475 billion in securitized treasuries…approx $100 billion put at risk with events over weekend…
Commercials…Another Citi never sleeps ad…only major bank ad seen during program.
Back. Bertha Coombs back at Lehman hdqtrs…amazed people are taking with grace and good humour…boss told him if stock is at $1 they need to come in
Lehman employee: Things happen in life and you have to deal with it…September 11 was far worse…he was at downtown headquarters.
Bringing in John Harwood for political manifestations on phone…both Obama and McCain will address tomorrow…BO in Colorado, McCain in Florida…both resistant to additional taxpayer backstops…Obama will use as call for change…JMC will use as ex. of need for reform
Gasparino: Debate at JPM because worried they would take out Bear, Lehman and Merrill…that’s what happened
SL: Is it enough? Has Fed done enough to keep systemic risk from ballooning in market?
David Faber: personal side of this…e-mails coming in to LB employees from clients…saying it’s been a great relationship
Bill Seidman: A lot of lessons learned…have to look at financial statements before you deal with people financially.
DR: A day that will be remembered forever.
Business Insider Emails & Alerts
Site highlights each day to your inbox.