Entries Tagged 'Lehman Brothers' ↓

Citigroup and The Bank of New York are trustees to about $138 billion of Lehman Brothers debt.  The two companies are at the top of the failed brokerage’s list of unsecured creditors, according to the petition filed New York bankruptcy court yesterday.

Citi, which is also having trouble of its own with exposure to mortgage-backed securities and rising loan losses, released a statement on Monday saying that the firm had strong liquidity and capital positions.

Stocks took a nose dive today, having their largest financial crisis in years after venerable brokerage house Lehman Brothers filed for the biggest bankruptcy ever.  In addition to the Lehman losses, Bank of America said it would purchase Merrill Lynch, and mega-insurer AIG plummeted on fears that it won’t be able to raise cash to continue operation.

On the flip side, Treasury prices rallied as many investors looked for the safe haven of government debt, sending  yields lower. Oil prices also tumbled well below $100 a barrel on declining global economic growth.

The Dow Jones lost 504 points, or 4.4%. It was the biggest one-day drop for the Dow since Sept. 17, 2001, when the market reopened for trading after having been closed in the aftermath of the terrorist attacks.

The S&P 500 index lost 4.7%, also its worst day since Sept. 17, 2001, when it plunged 4.9%.

The nation’s largest insurer, AIG, exacerbated an already alarmed market in the afternoon with news of an impending restructuring.

After the close of trading on Monday, S&P said it will be slashing its debt rating on mortgage lender Washington Mutual [[WM]] to junk status, reflecting the turmoil of the ongoing credit market meltdown and WaMu’s overexposure to the troubled housing market. WaMu shares dove nearly 27% during the trading session, falling another 11% in after-hours trading.

Wall Street kept its hopes up Sunday night for a buyout of troubled Lehman Brothers, but potential suitors are walking away, and banking executives and federal regulators are scrambling to prevent a broader financial crisis.

The Federal Reserve stepped in late on Sunday to try to bring calm to the markets by saying it will expand lending to the banking industry.

The prognosis for Lehman Bros., however, doesn’t look good.  Especially now that Bank of America [[BAC]] and British bank Barclays [[BCS]] have pulled out of negotiations.  Bank of America instead purchased Merrill Lynch for $44 billion earlier on Sunday evening.

Top Wall Street officials and federal regulators have been meeting together throughout the weekend, but hopes are fading that any sort of deal will come together.

Monday will not be a good day for U.S. financial markets if a deal doesn’t go through.

While waiting for a deal to come through on Lehman, the Federal Reserve also announced a series of steps to help assist the financial markets. The Fed said it would expand short-term lending to banks by starting to take all investment-grade debt as collateral - not just Treasurys and other high-grade securities like it had been.

A consortium of domestic and foreign banks were also in talks to create a fund of nearly $50 billion to lend to troubled financial firms.

All of this preparation, however, has done little to calm financial markets around the globe. As of Sunday evening, U.S. markets were headed for a huge selloff at the start of the session on Monday.

Dow Jones futures, as well as the broader Nasdaq and the Standard & Poor’s 500 were as much as 3% lower, before pulling back on some of their losses.