Lehman Merrill Lynch AIG Fannie Freddie WaMu Madoff Citibank saga

[Stefan Zota]

Things are moving very quickly. Panic is definitely dominant at this moment.
Everybody looking for next victim. Everybody questioning Alt+A exposure.

Things seem more dire than last year.


I think a big challenge will be the orderly default of Lehman. Even if ISDA organized a special session to close some related contracts, the exposure is huge on derivative's side. Who is taking the other side of these trades? If not Fed, then maybe some insurance companies (if they were insured) however do you think that insurance scenario include the default of a major IB?
Right now, I am worried about a domino effect that will wipe out a significant number of companies. Maybe Merrill and Bofa are considering this as an argument for an emergency merger.

One thing is for sure, if Lehman defaults, it would be a new experience for Wall Street ...

 

[Andy Nguyen]

A lot of people is nervously watching the news over this weekend. For some, the landscape on Monday morning will be different than when they left work Friday night.

When you have Lehman and Merrill possible sale going on at the same weekend, something is really bad. I hope the higher up at my work is right when he said when the show is over, the market will be more efficient, more liquid and the bad ones will be gone.

 

[doug reich]

Just came across this article on a blog (http://quantinvestor.blogspot.com/2008/09/greenspan-versus-buffett-forbes-2003.html)

The Great Derivatives Smackdown - Forbes.com

"In the energy and utility sectors, companies used derivatives and trading activities to report great 'earnings'--until the roof fell in when they actually tried to convert the derivatives-related receivables on their balance sheets into cash. 'Mark-to-market' then turned out to truly be 'mark-to-myth.'"

And, of course

Derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."

 

[Muting]

It is a time to test the power of private sector almost without the backstop from the government. Also, it will test the theory of investors' short memory in a few years.

 

[Andy Nguyen]

Bank of America Corp. has agreed to buy Merrill Lynch & Co. for about $44 billion, or around $29 a share, according to The Wall Street Journal.

 

[Yan He]

So Lehman is about to filing banrupcy, and ML will be part of BoA? Any update for WaMu?
Can't imagine how would it look like when market open tomorrow...

 

[Stefan Zota]

Now all doomsday scenarios are coming into play.
Everybody blaming the derivative OTC market. It is not fair since this market is not invented by IB, it was also based on needs of funds/investors/companies. It is easy to demonize Wall Street companies and side with taxpayer.
However, in perspective, Wall Street was one of the engines that made U.S. the only super-power. Lehman or Bear Stearns produced indirectly more wealth to regular american citizen then a one time $50bn hit ...

 

[Andy Nguyen]

People carried boxes out of the headquarters of Lehman Brothers in New York on Sunday
http://www.nytimes.com/2008/09/15/business/15lehman.html?hp

 

[Naing Lynn]

J.P.Morgan Chase & Co., back in talks to buy WaMu?

Rumor has it that J.P.Morgan Chase & Co., is back in talks to buy WaMu, five months after it made its first offer. Back in April, J.P.Morgan made a bid to buy WaMu for $8 per share and WaMu rejected that deal. Let's see what happen this week. It will be a rocky start tomorrow on the Street.

So Lehman is about to filing banrupcy, and ML will be part of BoA? Any update for WaMu?
Can't imagine how would it look like when market open tomorrow...

 

[kean]

So Quants are helpless and may lose their jobs at Wall St!

 

[Yan He]

So who will have the hope then ? There are always time that things go up and down. I don't think the re-shuffle of Wall Street will wipe out Quant as a profession, nor Structured Finance. Just concentrate at learning new stuff if you are still at school, or work harder/smarter if you are working

"Hopeless" is too much a strong word. There is always hope.

 

[Sanket Patel]

Time to usher in a new era of risk-management

 

[charlesdwright]

Time to usher in a new era of risk-management

Time to usher in a new era of common sense.

 

[Andy Nguyen]

There are only two things relevant on Wall Street: greed and fear.
Fear is now. Just wait when Greed returns and everyone will forget about today.

 

[Uncle Max]

I'm surprised that Dow is only 300 points down. I expected it to plunge much more.

 

[bob]

Time to usher in a new era of common sense.

Time to consider the possibility that 20x leverage on $600 billion in assets is a crime, not a business model.

 

[Sanket Patel]

Time to usher in a new era of common sense.

Touché

 

[Ka Wai]

Time to give risk managers more power within the company...

Unfortunately, risk managers' powers derive from fear. And fear often are short-lived...

 

[charlesdwright]

Time to give risk managers more power within the company...

Unfortunately, risk managers' powers derive from fear. And fear often are short-lived...

I respectfully disagree.

Time to hire traders who understand markets and are accountable for their own risk.

 

[bob]

That sounds good, but how do you make traders running books in the millions "responsible" for the risks they take? Seize their property when they take a loss?

Edit to Add:
Not that I think risk management as currently conceived is necessarily the solution either. You can only hear about "ten-sigma events" so many times before you realize that there are some serious and sophisticated delusions out there in the world.