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Posts Tagged ‘Lehman Bros’

Wall Street Isn’t Capitalism!!

Posted by Larry Doyle on March 22nd, 2010 1:53 PM |

Is our nation trending away from the principles of capitalism which built the foundation upon which we rest? Another healthcare whine? Nope. I am talking about the once proud pillars of capitalism centered on lower Manhattan, otherwise known as Wall Street.

Let me simplify the debate. What is capitalism? Are you willing to accept the definitions provided by my Investing primer, Investopedia?

What Does Capitalism Mean?
An economic system based on a free market, open competition, profit motive and private ownership of the means of production. Capitalism encourages private investment and business, compared to a government-controlled economy. Investors in these private companies (i.e. shareholders) also own the firms and are known as capitalists.

What does the Financial Times have to say about our financial system this morning?   (more…)

Dick Fuld Unaware of Lehman’s ‘Cooking the Books’? STOP IT!!

Posted by Larry Doyle on March 13th, 2010 2:34 PM |

Given the global interest in this story, I am bumping it up from the original posting on 3/12/2010.  LD

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Former Lehman Bros. CEO, Dick Fuld

Reports that Lehman was effectively ‘cooking its books’ prior to its ultimate demise are not a surprise.

Reports that Dick Fuld, then CEO of Lehman, was not aware of the nature of this cooking are both ridiculous and pathetic.

The lifeblood of every financial institution on Wall Street is access to financing for its operations. That financing very often comes in the form of repurchase agreements (repo financing), in which the institution borrows funds while pledging assets. These short term loans, often overnight loans, are unwound at a preset date and preset prices. The rates borrowers have to pay for funds borrowed depend on the credit quality of the borrower itself and the quality of the assets pledged. (more…)

To Wall Street, Washington, and World: “Fool Me Once…

Posted by Larry Doyle on March 11th, 2010 2:08 PM |

…shame on you, fool me twice, shame on me!!!

There are a handful of financial journalists who pull no punches in telling the absolute truth and in providing real transparency. Bloomberg’s Jonathan Weil holds a special spot in the Sense on Cents Hall of Fame for his determination in calling people and institutions on the carpet. From Wall Street to Washington to around the global financial landscape, Weil leaves no stone unturned in promoting integrity. His commentary today is superb. Please share it with friends. Weil writes, Greece Lifts a Page From Citigroup’s Playbook:

Is it too much to ask for the world’s titans of government and finance to speak credibly when they open their mouths? (more…)

FINRA Board to Address Allegations of Schapiro Misconduct

Posted by Larry Doyle on February 4th, 2010 11:40 AM |

Are the wagons circling around Mary Schapiro and her former FINRA colleagues?

Regular readers of Sense on Cents are familiar with the issues and concerns I have raised repeatedly with Wall Street’s self-regulator, FINRA. I continue to believe the issues embedded within this self-regulatory organization lie near the heart of what I deem the Wall Street-Washington nexus.

Perhaps America will learn more about these issues soon. Why? Next week, FINRA’s Board of Directors will address alleged wrongdoings by Ms. Schapiro et al. What are the issues?   (more…)

Lessons from Bear Stearns

Posted by Larry Doyle on March 16th, 2009 10:37 AM |

It was one year ago that the Federal Reserve and Treasury delivered Bear Stearns into the hands of JP Morgan for $2 a share. Bear Stearns stock had traded above $170 a share in 2006. With the passage of time, what are some of the lessons learned and what questions remain unanswered.

1. Although Bear Stearns employees and shareholders may not qualify a price of $2 a share (revised to $10 a few weeks later) as being saved, would the financial system have been better off letting Bear totally fail? Why? If Bear had failed, many people do not believe we would have had the breakdowns in our financial systems that occurred because of Lehman’s failure.

2. Did Dick Fuld, CEO of Lehman, assume that the Fed and Treasury would save Lehman much as they did Bear? Was he less aggressive in pursuing increased capital injections during the Summer 2008 as a result? Many people believe this to be the case. (more…)

Libor Creeping Higher

Posted by Larry Doyle on March 11th, 2009 5:45 AM |

For those involved in the markets, very often the first rate one checks in the morning is Libor (London Interbank Offered Rate). For those not directly involved in the markets, perhaps tomorrow morning or Thursday you may start your day by asking your partner, “where’s Libor?”  In all seriousness, the 1 month and 3 month Libor rates may very well be the most closely watched indicators of market health in the world.

As Libor is the rate at which banks can borrow from each other in the London market, the rate is an indication as to the availability of dollars and the confidence banks have in each other’s credit. Traditionally, Libor tracked the Federal Funds rate (the rate at which banks borrow from the Federal Reserve) very closely.  However, on the heels of the failure of Lehman Bros. last September, the confidence banks and investors had in each other plummeted. The relationship between the Fed Funds rate and 3 month Libor blew out.  The 3 month Libor rate went as high as 4.7% from just outside 1%. Recall that at that period there was concern about money market funds “breaking the buck” amongst a whole set of other issues. (more…)

FROM THE ARCHIVES: The Wall Street Model Is Broken…and Won’t Soon Be Fixed!!

Posted by Larry Doyle on March 5th, 2009 6:37 PM |

Some of my favorite movies are The Sting, Rocky, and Papillon.  I could watch those films a few times a year and appreciate the plot, character development, and climax.

In that same vein, for newer readers here at Sense on Cents, I want to highlight a piece I wrote on November 12, 2008.  I believe this piece is as clear cut an historical explanation as I have seen to highlight the background of the debacle on Wall Street which precipitated this economic disaster. I also find it interesting as to my comments about potential market reaction to an aggressive tax/spend program under President Obama and a Democratic Congress. 

I hope you find this article informative and enlightening: (more…)

The Wall St. Model is Broken . . . and Won’t Soon be Fixed!!

Posted by Larry Doyle on November 12th, 2008 12:15 PM |

Despite billions and now trillions of dollars in capital injections and equity investments made by our government, private equity, and sovereign wealth funds, our economic turmoil is a long way from being over. I do find it interesting that despite numerous Wall Street titans having indicated to us at different points over the last year that we were in the 7th inning of this fiasco, now a recurring theme is that we should not expect any real economic recovery until 2010. Actually, maybe we were in the 7th inning but it was the 7th inning of the first game of a 4 game series.

Well, if we want to figure out where and when we are moving forward, I think it would be beneficial to know from where and when we came.

For those over 50 years of age, perhaps you remember when mortgage money dried up. Perhaps you also recall the days of putting down 20% before you even thought of buying a home. In any event, the growth of the secondary mortgage market in the mid 1980s was a result of some very sharp financial minds on Wall St. who engineered a product called a Collateralized Mortgage Obligation (CMO). (more…)






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