Lehman headed to bankruptcy ?

11:34 pm Sunday September 14th, 2008

Lehman brothers is headed to bankruptcy after failing to find a buyer. They failed to do so because the US Federal Government refused to extend the same sort of financial help that it extended to Bear Stearns.Lehman had been in operation for 158 years and employed 25,000 people and had revenues of close to 36 billion dollars. Through its extensive range of derivative products it was heavily involved in global finance. Its failure will lead most likely to a massive sell-off tomorrow on Wall street.For a while the British bank Barclays had shown some interest in buying Lehman but it backed away when it realised that the government would not provide any help and that it required the approval of its shareholders before acquiring the stricken investment bank.
The end of Lehman came after a long day of intense negotiations which also saw Bank of America acquire Merrill Lynch for $50 billion or $29 a share. The Government and Fed hoped to minimize the fallout by permitting an extraordinary show and tell operation today during which investment banks could assess the extent of their exposure in the case of the Lehman failure and unwind their swaps before the opening of the market on Monday. We will know tomorrow if the Government has been successful or if their unwillingness to intervene further will lead to another great crash. In an effort to calm the markets the Fed has announced its broadening its loan program for investment banks who wish to use lower grade securities as loan collateral.