$$$ Greenspan Says Lehman Failure Unleashed `Most Virulent‘ Crisis in History [Bloomberg]
$$$ Congress wants review of market plunge [AP]
$$$ Finra’s Ketchum: ‘Shock absorbers’ are a must [Investment News]
$$$ Blankfein On The SEC [CNBC]
Article courtesy of Dealbreaker
A bunch of MBA candidates were stopped on campus for their esteemed opinions on the Goldman sitch. The consensus is they “don’t want to work at a firm like Lehman Brothers” and “what you can respect about Goldman is that they’re greedy but they’re long-term greedy.”
Article courtesy of Dealbreaker
$$$ How Much Did Lehman CEO Dick Fuld Really Make? Oliver Budde, former Lehman Brothers associate general counsel, says Fuld failed to disclose hundreds of millions in compensation. [BW]
$$$ ACA became Wall St’s trash can, now haunts Goldman [Reuters]
$$$ The Power of Lucky Charms [WSJ]
$$$ Tiger Woods’ Tally: 121 kills [HF]
$$$ Blankfein Says He Was ‘Humbled‘ By Senate Hearing [NPR]
Article courtesy of Dealbreaker
Former Lehman Brothers chief Dick Fuld was just spotted walking by himself in Times Square near 42nd Street. Is he looking for office space or just paying a visit to his old firm?
Article courtesy of Dealbreaker
Lawyers from Jones Day, who are overseeing the estate of Lehman Brothers, will begin arguments today in a closely-watched case that seeks more than $11 billion from Barclays, which lawyers for the estate said the British bank received after purchasing Lehman’s assets shortly after it filed the largest bankruptcy in U.S. history.
The Lehman estate plans to argue that executives at Barclays, with the blessing of Lehman’s negotiating team, arranged for a $5 billion discount on the purchase price of Lehman’s brokerage unit while failing to inform the bankruptcy court and Lehman’s board about last-minute changes to the deal. That and other alleged changes to the deal resulted in Barclays picking up Lehman on the cheap, according to the suit.
Bankruptcy Judge James Peck, who approved the original sale transaction to Barclays, is expected to decide whether the Lehman estate’s claims allow it to redraft the deal.
The details are complex, especially because of the mad scramble to close the deal before the markets opened again on September 20, 2008, a week after Lehman filed for bankruptcy. But, the estate alleges that executives on both sides deliberately placed the deal at $5 billion below Lehman’s true book value.
In pre-trial opening arguments earlier this month, Jones Day’s Robert Gaffey claims several executive at Barclays and Lehman admitted in depositions that they knew about the discount and other changes, but never told the bankruptcy court. They include: Martin Kelly, Lehman’s global financial controller, Lehman’s CFO Ian Lowitt, Barclays’ chief negotiators Rich Ricci and John Varley among others.
The discount hinges on a revaluation of assets in a repo deal that Lehman had made with the New York Fed. “Barclays extended to Lehman $45 billion, which was used to cancel the Fed repo. And in return, Barclays got approximately $50 billion of collateral to support the repurchase advance,” Gaffey said in pre-trial arguments.
Barclays president, Bob Diamond, has said the suit had no merit and Lehman’s lawyers are trying to re-write history.
“The deal we did Monday morning was the deal that the judge approved Friday. If we got too good a deal, why did no one else bid? No one else made an inquiry. We announced the bid on Tuesday and it didn’t close until Monday morning, so there was ample time for others. I find it difficult to accept they would play this game in public now,” Diamond told the Sunday Telegraph in December.
But, former Lehman COO Bart McDade, who is expected to take the stand on Monday, said in a deposition that the deal had changed materially from the one presented to the court before the closing. “But nobody told the judge it was a different deal,” according to the deposition.
The Lehman estate is also planning to file suit against a number of Wall Street firms who held Lehman assets before that had pressured Lehman for additional assets in the months before the bankruptcy, according to a person close to the case.
Barclays, which is represented by super-lawyer David Boies, is expected to argue that Lehman knew about the specifics of the deal and Barclays simply made a gain on the assets that it purchased, which rose in value after the deal closed. Boise is also expected to argue that the deal was never presented to Judge Peck as “a wash,” with no net gain to either side and it was far more beneficial to the Lehman estate than a full liquidation, which would have occurred had Barclays walked away from the transaction.
Article courtesy of Dealbreaker
Lehman Used ‘Alter Ego’ To Transfer Risks (NYT)
In the years before its collapse, Lehman used a small company — its “alter ego,” in the words of a former Lehman trader — to shift investments off its books. The firm, called Hudson Castle, played a crucial, behind-the-scenes role at Lehman, according to an internal Lehman document and interviews with former employees. The relationship raises new questions about the extent to which Lehman obscured its financial condition before it plunged into bankruptcy.
AIG ‘Strongly Objects’ To Pay Restrictions (FT)
In Monday’s filing, AIG said it “strongly objected” to Mr Feinberg’s decision in November to reduce the salaries of David Herzog, chief financial officer, from $675,000 to $350,000, and Kris Moor, the head of the property and casualty unit, from $1m to $450,000. AIG’s board also expressed concern that Mr Feinberg’s move to cap the cash salary of the top 100 staff to $500,000, unless there were exceptional circumstances, put the insurer at a “competitive disadvantage”.
Trump and Bondholders Gain Control of Casinos (NYT)
Mr. Trump joined with bondholders in a successful $225 million bid that beat out a rival offer by Carl C. Icahn.Much of the money for the bid was put up by Avenue Capital Management. Mr. Trump will control 10 percent of the company and will have the option to increase his stake in the future. Rather than cash, Mr. Trump offered the bondholders the use of his name on the three casinos. “The Trump brand is worth millions of dollars to the debtors,” the bankruptcy judge, Judith Wizmur, said in her ruling. “The debtors’ identification with the Trump Organization raises its profile in the gaming industry.”
Nine Year-Old Fossil Hunter Finds New Species Of Human Ancestor (Bloomberg)
Matthew Berger was about 15 meters (49 feet) from his dad, Lee, a paleontologist working at the archeological dig in South Africa known as the Cradle of Humankind, when he called out, his father said during a briefing yesterday with reporters. “Dad, I found a fossil,” the youngster said.
Former Northern Rock Executives Fined, Banned (AP)
The Financial Services Authority said Tuesday it wanted its sanctions against Northern Rock’s former deputy chief executive David Baker and former managing credit director Richard Barclay to be a ”loud and clear message that we are serious about taking action against senior directors where they step over the line.”
Birds Aren’t In It For Love, Research Says (Reuters)
“The main discovery is that so many birds do divorce for what humans would describe as selfish reasons,” Stutchbury said, noting that females may seek out males that are more colorful and better singers, or look to “step up in the world” and move to areas that are safer and have more food.
Imagine The Bailouts Are Working (NYT)
Close your eyes and imagine it with Andrew Ross Sorkin.
FDIC’s Bair Says Banker Pay Can Pose Systemic Risk (Reuters)
Bair said the agency is not seeking to set specific pay levels but believes that banks with risky compensation plans should have to pay more for deposit insurance.
Hedge Fund Managers Invest On Capitol Hill (Politico)
Your shocking news of the morning.
Details Scarce on WaMu Failure (WSJ)
Waiting for someone to come forward and admit this was karma for bankrupting Lenny Dykstra.
Article courtesy of Dealbreaker
As it’s been previously mentioned, Dick Fuld has been sleeping like a baby since the examiner’s report on Lehman came out. Though some would suggest the report’s findings indicate Fuld is a criminal, the ex-CEO believes it painted him in a phenomenal light. Reading the final draft also put Dick in a great mood because it took a huge weight off his shoulders. This is going to seem crazy, but apparently he was actually a bit nervous about what the thing would say about him! To the extent he could barely enjoy himself! Not even picking out the perfect outfit soothed him; my god, he could barely match shirt and tie without collapsing on the closet floor. Basically, The Gorilla was an absolute ball of nerves and you if you want Charlie Gasparino’s opinion? Kind of acted like a big puss during the ordeal. Sayeth Chaz:
According to people who know how the former Lehman CEO behaved during the inquiry, he often appeared “hyper” and “highly agitated,” and “barely stood still” during the questioning. One person with knowledge of Fuld’s behavior said that at times “he broke down” when asked about Lehman’s demise, and at others exhibited a tremendous amount of “nervous energy.”
It’s honestly a good thing CG wasn’t around to witness this display first hand, as it would’ve sickened him. Ridiculous. Gaspo didn’t say this in his report, because he works for a family network, but it would not surprise him to hear that Fuld pissed his shorts in fear on a daily basis and furthermore, that those shorts were “frilly lace panties” (Chaz’s words, not mine). But if he had been there? You can bet he’d be having none of this, and would’ve had no problem telling Dick as much, while sharing a little piece of advice. Little something like this.
Article courtesy of Dealbreaker
Fuld privately believes that the report by examiner Anton Valukas provides proof that he did nothing illegal as he steered Lehman through a financial mess that ultimately led the firm to file the largest bankruptcy in US history, according to sources familiar with the matter [...] But while Valukas in the report said that the Lehman estate has “colorable” claims against Fuld, former CFO Erin Callan, and other members of the financial team for not disclosing its use of the Repo 105 transactions, people in Fuld’s camp think differently. They say that if after poring over reams of documents and sifting through millions of e-mails, Repo 105 is the strongest example of Lehman’s supposed shenanigans, Fuld & Co. are in good shape.
In related news, Joe Gregory is looking for a job, if anyone knows of any opportunities.
Article courtesy of Dealbreaker
Under the Chapter 11 reorganization plan proposed by the company, Lehman sought authority to create an asset manager business called LAMCO that would specialize in management of Lehman’s commercial real estate, mortgages, principal investments, private equity, corporate debt and derivatives assets.
Lehman said LAMCO would provide management services to Lehman, administer its assets and offer long-term employment opportunities for the hundreds of Lehman employees working to liquidate the former investment bank’s estate.
Lehman plans to end bankruptcy, create new company [Reuters]
Article courtesy of Dealbreaker
According to the examiner’s report, a little bit of both. (Since Anton Valukas apparently has no interest in telling both sides of the story, it falls on us to remind you that Dick has his own theory for why LEH went under: the adoption of Casual Friday).
Fuld was warned months before the bankruptcy by Treasury Secretary Henry Paulson that Lehman might fail if it continued to report losses without finding a buyer or putting in place a survival plan, according to the report.
Lehman’s chief was “at least grossly negligent in causing Lehman to file misleading periodic reports” while its risks were rising because of long-term assets financed with short-term debt, Valukas said in the report.
Lehman’s executives engaged in conduct ranging from “non- culpable errors of business judgment” to “actionable balance sheet manipulation,” as they used “accounting gimmicks” to move assets off the balance sheet without disclosing that to the government, rating agencies, investors or Lehman’s board.
Also supposedly not helping matters was Pandit. That damn Pandit. And Jamie Dimon but he gets a pass because he can do whatever he wants.
“The demands for collateral by Lehman’s lenders had direct impact on Lehman’s liquidity pool,” said Anton Valukas, the U.S. Trustee-appointed examiner, in a 2,200-page report filed in Manhattan federal court. “Lehman’s available liquidity is central to the question of why Lehman failed.”
JPMorgan, Citigroup Helped Cause Lehman’s Collapse [Bloomberg]
Lehman Report [Jenner And Block]
Article courtesy of Dealbreaker