Something is going to happen to Lehman Bros., and given the way this low-compression engine is leaking massive amounts of oil, two of the three “something” possibilities will likely happen this weekend, assuming it makes it through the rest of the day today.
No. 1 would be a takeover by another private-sector company. But, given a Korean bank’s pullout earlier this week, and Lehman’s 42-percent drop yesterday (with further after-hours losses), Bank of America or other suitors will pay only pennies on the dollar.
No. 1A would be a government-brokered private-sector takeover, as with Bear Stearns. Catch? The buying company, as in the Bear case, would insist on some federal guarantees. Coming the weekend after the Fannie Mae/Freddie Mac takeover, this would be economically explosive in the presidential election.
No. 2 possibility, of course, would be a direct government intervention. But, see No. 1A.
No. 3 is the one that wouldn’t happen until next week and that, of course, is a bankruptcy filing. Of course, nobody on the Street wants that to happen.
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