Work on Lehman Brothers’ rescue to continue over weekend

From Wikinews, the free news source you can write!
Jump to navigation Jump to search

Saturday, September 13, 2008

Lehman Brothers’ headquarters in New York City.

Lehman Brothers, a major American investment firm, is spending the weekend trying to find an investor that would save the firm from complete collapse. The company has lost 80 percent of its stock value since Monday, when it announced that it had not secured a deal with the Korea Development Bank, which was widely expected to occur. On Wednesday, Lehman published their biggest loss in the 158 years of their existence.

According to the Financial Times, Bank of America is trying to create a joint takeover bid with JC Flowers and the China Investment Corporation (CIC), which is a Sovereign Wealth Fund. The CIC invested $5 billion in Morgan Stanley when that bank needed a cash infusion in December 2007. It is unclear if the CIC will act as lead investor or act through JC Flowers, with which the CIC has established a fund.

The Federal Reserve and Treasury Department are working with Lehman to find a suitable bidder. Hank Paulson, Treasury secretary, promised that no government money will be given to Lehman, unlike the takeover of Bear Stearns in March of this year.

Paulson has also met with several executives of Wall Street firms to discuss the crisis and try and find possible investors. In a meeting initiated by Timothy Geithner, president of the Federal Reserve Bank of New York, it was pressed upon the banking industry that it needed to handle the crisis. The Wall Street executives included John Mack, the chief executive of Morgan Stanley; John Thain, chief executive of Merrill Lynch; Jamie Dimon, chief executive of J.P. Morgan Chase; Lloyd Blankfein, chief executive of the Goldman Sachs; Vikram Pandit, chief executive of Citigroup; and representatives from the Royal Bank of Scotland (RBS) and the Bank of New York Mellon Corporation. Christopher Cox, Chairman of the Securities and Exchange Commission was also present.

The firm, which has over 25,000 staffers, has suffered bad results due to the subprime mortgage crisis.

Icon of loudspeaker
This audio file was created from the text revision dated 2008-09-14 and may not reflect subsequent text edits to this report. (audio help)