Rohatyn's Lehman Brothers Now Leading the Banks `Dance of Death'
PARIS, June 10, 2008 (Nouvelle Solidarité)As LaRouche said, the next big one after Bear Stearns will not get a financial funeral. Why? There's not enough money! While all the financial media try to convince themselves that Lehman Brothers was saved, everybody realizes that Wall Street's fourth largest bank is hopelessly bankrupt. Both the French financial daily Les Echos and Le Figaro run major scare stories. Les Echos front page: "New Major Shock in American Finance" and "Lehman Brothers plays its survival by raising $6 billion." Le Figaro shows the picture of CEO Richard Fuld with a caption saying, "Engaged in a race against time. What is at stake is the survival of the bank." The bank, besides reporting its first loss since 1994 ($2.8 billion) in the second quarter, announced that it had to write off $3.7 billion of assets linked to commercial and residential real estate.
While the bank raised $5.9 billion in February and April, it is again "searching for another 6 billion on the market." The bank has its back against the wall: "shares dropped by 50% since the beginning of the year, by 12% last week and by an extra 10% on Monday alone," writes Le Figaro. Nobody is really convinced the bank will raise the required liquidity. Les Echos reports that "Lehman Brothers has not revealed the name of the investors that have subscribed to the refinancing operation, but supposedly famous investors. These are supposed to be the pension fund of the State of New Jersey and CV Starr, a capital fund created by the former boss of AIG, Maurice Greenberg." Lehman Brothers had extra losses through bad bets by its hedge fund, Peloton. The hedging had so far covered the subprime losses. The bank got rid of $130 billion of assets in the last three months and had to write off over $17 billion of subprime losses, using the $7.4 billion it got from the hedge fund to do so. But, bets went wrong, and it is 'game over.'
Jean-Marc Vittori, a lead editorialist of Les Echos, says this goes far beyond Lehman Bros. "Because financial players finished believing the story they told for weeks: the story that said that by saving Bear Stearns, the Fed and JP Morgan had finally ended the [July 2007 subprime] crisis in March ." For Vittori, if Lehman is in trouble, it is also because "over the last days, major banks have decided to cut all liquidity." Vittori concludes: bankers have raised over $300 billion to heal the wounds of the crisis but are now in trouble, and, "A world where banks lack money is a world which goes wrong."