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Lehman Brothers Failure

Sun, 15 Sep 2008 07:36:39 GMT

posted by snehatpr

Posted by liveyou 12 hours ago (http://ratevin.com)
Category: Business | Tags: lehman brothers failure lehman brothers

The ruptured U.S. financial system faces an unprecedented shakeup with Lehman Brothers set to file for bankruptcy, Bank of America buying Merrill Lynch, and the Federal Reserve saying for the first time it will accept stocks in exchange for cash loans.

On a black Sunday for Wall Street, 10 of the world's biggest banks also agreed to establish a $70 billion emergency fund, with any one of them able to tap up to a third of that.

And separately, troubled insurer American International Group asked the Fed for a lifeline, according to news reports.

The events, which followed three days of talks between bank CEOs and regulators at the Fed's fortress-like Manhattan building, indicate that Wall Street and Washington were accepting that massive triage is needed in the face of the credit crisis and U.S. housing bust.

"The U.S. financial system is finding the tectonic plates underneath its foundation are shifting like they have never shifted before," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey. "It's a new financial world on the verge of a complete reorganization."

Lehman will become Wall Street's most high profile bankruptcy since junk bond specialist Drexel Burnham Lambert succumbed in 1990.

S&P500; share futures were down 3.6 percent after Lehman announced it would file for Chapter 11 bankruptcy protection, indicating the stock market will open sharply lower on Monday, and the dollar tumbled.

The euro jumped to 1.4416 to the dollar by 12:30 a.m. EDT from 1.4225 in late U.S. trade on Friday while U.S. Treasury yields dropped on concern about the stability of the U.S. financial system and as investors increased bets the Fed will cut rates.
Related : lehman brothers, lehman brothers employees, lehman bro, lehman brothers news, lehman brothers bankruptcy
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GENERAL F.A.Q - INTRADE

Sat, 19 Oct 2008 03:18:00 GMT

posted by blcool

For More Information: Click Here

What is the role of Intrade

Intrade is an exchange that facilitates the matching of orders from its customers. Intrade ensures that trading profits and losses are transferred between customers in a timely manner and allows customers to close out positions by trading with any other customer. Intrade does not enter into trades on the exchange.

What is exchange trading

Exchange trading allows members to trade on contracts against other members.

How does Intrade make money?

By taking a small commission on matched trades. There is no charge for entering an order; there is only a charge when you get a matched trade.

How are the fees calculated?

Intrade trading exchange has been modeled around an exchange and clearing house together. To calculate your fees for any trade, multiply the number of lots you traded by $0.05.I keep getting "Page Cannot Be Displayed" errors when using Internet Explorer version 5 or above.

Click Here

I keep getting "Page Cannot Be Displayed" errors when using Internet Explorer version 5 or above

This is a known problem with Internet Explorer. To resolve this you should change your browser settings as follows: Click on Tools, Internet Options.... from the main menu at the top of your browser. Click On the Advanced Tab. Find the check box next to "Show friendly HTTP error messages" uncheck this box.

I get a security alert message when I try to log on to my account.
This happens when you are using the url http://intrade.com as opposed to http://www.intrade.com. It is OK to click Yes and continue. If you wish to avoid the alert in future, just use www.intrade.com when logging into your account.

Is it Legal for me to use Intrade where I live?

The simple answer is that we cant be sure and this is why we require you to confirm to us that your activities are permissible from your own location. If you are in any doubt if your activities are legal from your location then you should not use our service until you take suitable professional advise.

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Are Intrade Predictions better than Polls?

Whether prediction markets like Intrade can predict more accurately than opinion polls has been studied. Based on past performance prediction markets seem to be more accurate. Does that mean prediction markets like Intrade will be in every instance? No. But we believe that the market mechanism is superior to a polling mechanism. Also, the Intrade prediction market will aggregate information from the polls (and perhaps poll participants will also be influenced by the predictions from the markets).

How can Intrade's Predictions be So Wrong?

The predictions or prices on intrade are predictions, they are not guarantees or certainties. A market that is trading at 90, means that there is a 90% chance of the event happening. 90% means the event it is highly likely to occur, but not guaranteed. Intrade's predictions have been wrong in the past, and will be again in the future. However, the Intrade market mechanism of aggregating opinions to give the an estimate of likelihood of an uncertain future event occurring is the best one we know.
Click Here For More Information

Intrade is the World's Leading Trading Exchange for Prediction Markets. Trade Event Futures on Political, Current, Financial, Weather & Unique Events.

News for 15 October 2008

Tue, 15 Oct 2008 14:00:59 GMT

posted by agustingonz

Carlyle objects to Lehman's Neuberger deal [NY Times]
Carlyle Group, and Jeffrey Lane, the former chief executive of Neuberger Berman, filed objection to Lehman Brothers sale of Neuberger

Carlyle sees great opportunity to invest in banks [Yahoo Finance]
Carlyle Group co-founder David Rubenstein said on Wednesday that he saw great opportunity to invest in financial assets affected by the credit crunch

Profit falls at JPMorgan as loan losses increase [NY Times]
JPMorgan Chase, the investment bank, reported third-quarter profit of $527 million on Wednesday, suffering a steep decline amid the turbulent markets

Lehman's hedge fund clients face margin calls on frozen assets [Bloomberg]
Lehman Brothers hedge-fund clikents may have to pay more collateral on $65 billion of assets frozen when the investment bank went bankrupt a month ago

Morgan, Goldman avoid capital punishment [The Street]
The federal government's $10 billion equity investments in both Morgan Stanley and Goldman Sachs seem to have eased nagging doubts about the firms liquidity positions

The Dummies Guide to InTrade and Prediction Market Margins

Sat, 11 May 2008 06:45:00 GMT

posted by beckychr007

I've decided on a Mother's Day present—all my InTrade shares on Hillary Clinton. And because I'm such a good daughter, I'll throw in Ron Paul too.

InTrade is the online prediction market . They have even surpassed Vegas in the types of things which can be wagered—whether OJ Simpson will be acquitted, first Hurricane of the season, whether Britney will go back to rehab this year, etc.

Actually, in many cases the forecasting has been astonishingly accurate. This is due to the law of mob wisdom. If large groups of people, from diverse backgrounds, with various abilities and information, are actually putting something of value behind their opinion, the consensus line is a pretty good soothsayer. Economists, who did not get their degree from the University of Moscow, have always known this.

But, just like the commodity futures market does not necessarily reflect the actual value of pork bellies, the role of the laws of Stupidity, Enthusiasm, Greed and Texas Hold em, must be considered.

For example, at one point InTrade investors gave Ron Paul a 10% chance of being elected president. The only place such a probability ever really existed, was in the minds of some of his more deluded supporters, and in the land of wistful, wishful thinking which many of us inhabited in the heady days before the first primary.

Most of the money on Ron Paul, came from saps like myself who got caught up in the heady possibility that America just might, maybe, hopefully be ready for the truth, and a return to the principles and ideas that initially made the American Experiment so attractive and promising.

But, there were also those who coldly watched and purchased Ron Paul shares, as throngs of people threw off apathy and opened their pocketbooks in pursuit of a dream made possible only by the human capacity for faith—just as many tithe ten percent of their income to a particular church, with unshakable conviction that their brand of religion alone has a monopoly on universal truth and personal salvation.

And all those objective investors , if they did not cash out before Iowa, certainly did so before the New Hampshire primary. These individuals were simply taking advantage of a corollary of the Laws of Greed and Stupidity—a fool and his money are soon parted.

At this point no one should place a bet on Obama. He is overvalued because a large portion of the country is drunk on an exhilarating elixir of Obamarma. There is a feeling, except in the mind of Barack, who is a shrewd politician, that a wave of change has overtaken America, and all the voting patterns that have elected American presidents for the past sixty years are out the window.

Hillary Clinton is vilified for pointing out that Obama can't get the support of the “bitter people”—white blue collar workers. Well, that is the essential swing vote in presidential elections—and it is ignorantly lame to call it the old politics of race and class, and pretend it no longer exists. Almost all of us wish that was the case—but it is not, and it will not be any different in November. However, if you are convinced that the golden tongue of Barack can sway the bubbas of the not-so-deep southern states—place your bets.

But, with all the mob intoxication over Obama, it would be an excellent time to purchase some shares of John McCain , who was going at 38 this morning. And I would hold on to them, until some good polls were indicating that Honest John was headed for a defeat in either Ohio or Pennsylvania—or if you are super cautious, best unload them the day after the Republican convention.

You can see how some of us, who were well trained in the art of bookmaking by our fathers, will play the margins. And we will also be a factor in artificially inflating the odds of something happening, and bail out when it looks like safe or optimal profits have been acheived.

That is what is happening with oil right now. All the people who ruined the economy playing the securitized mortgage game are now investing in oil. Only an idiot, or a paid libertarian lobbyist, thinks that supply and demand has caused a 30% increase in the value of oil since Christmas.

This time, rather than Residential Housing Ponzi, a game of poker is going on. There are a lot of devalued dollars fleeing Wall Street and running after barrels of oil. The players are trying to determine that opportune moment right before the other guy winks, and they should fold and take their chips to the cash out window.

The oil companies know this. In a recent survey the majority of oil execs predicted a barrel of oil would be going for $100 by the end of the year. So in the end , after this most recent bubble of greed pops, the market will reflect the true value of oil, which has increased due to demand, but just not to the extent that we are all now suffering through.

Overall, markets are accurate—just like the InTrade wagering will be. They are just not good predictors at any particular moment.

In making InTrade investments the effect of Vegas, and the organizations your local bookie represents, must be taken into account.

Prediction markets, especially sports, but increasingly everything under the sun, are invariably bound by the large sums of money that are thrown at bookies . If the Vegas line is trading at an InTrade equivalent price spread , then anytime the InTrade price goes outside of that range there is an arbitrage profit-- gamblers will go long with the bookies and short on InTrade.

In sports, the bookies set the line, and InTrade follows. However, all that may change as the paradigm of gambling and prognostication investment morphs with the growth and popularity of InTrade and similar markets—especially if the market is ever unleashed by eliminating federal wire fraud prohibitions which dampen participation.

Yes, you should be aware, unless you are placing your bets directly in Vegas, the stock exchanges, or commodity markets, all of this is illegal in a country that would greatly benefit if the water supply was spiked with Zyprexa. In America, it is preferred that you throw your money away on state lotteries or senselessly drive up the price of household staples.

I am sure that somewhere along the line some zealous officials from the Justice Department will start busting InTrade investors and civilly forfeiting profits.

I'm so sure, I think I'll go online and put my money where my mouth is.

Lehman Brothers to Declare Bankruptcy, B of A to merge with Merrill Lynch

Sun, 15 Sep 2008 12:23:00 GMT

posted by gblass

NEW YORK (CNNMoney.com) -- After enduring one of the most dramatic days in its history, Wall Street received a climactic jolt on Monday when Lehman Brothers, a 158-year-old investment bank undermined by bad bets on real estate, said it will file for bankruptcy.

The fall of Lehman followed a wild, three-day scramble by top Wall Street executives and federal regulators who worked around the clock to come up with a solution to a still-unfolding financial crisis.

By the end of the weekend, the Federal Reserve had stepped in to try to calm the markets by announcing plans to loosen its lending restrictions to the banking industry. A consortium of 10 leading domestic and foreign banks had agreed to create a $70 billion fund to lend to troubled financial firms. And two major financial companies - Bank of America (BAC, Fortune 500) and Merrill Lynch (MER, Fortune 500) - were finalizing a merger while another - American International Group - was reportedly struggling to secure billions of dollars in capital.

But it was the fate of Lehman (LEH, Fortune 500) that gripped Wall Street. After weeks of speculation about its health, Lehman's fate took a turn for the worse Sunday when Bank of America and British bank Barclays, both viewed as potential "white knights," pulled out of deal talks, according to sources.

"This looks like the end," a Lehman executive, who declined to be identified, told Fortune on Sunday afternoon.

So Bank of America turned to merger talks with Merrill. By early Monday, the two had announced that BofA had bought Merrill for $50 billion in stock.

Hours before Bank of America pulled out, Barclays had abandoned talks to buy Lehman, a source close to the situation told CNNMoney.com.

All the while, top Wall Street officials and federal regulators, who began meeting Friday, spent much of their Sunday at the Federal Reserve Bank of New York in the hopes of devising a plan to save Lehman and allay fears that threatened to roil U.S. financial markets Monday.

The accounting firm of PricewaterhouseCoopers said Monday that three of its partners have been appointed administrators to Lehman's British operations.

Meanwhile, broader efforts to tackle problems plaguing the industry are underway.

The Federal Reserve announced a series of steps to support the financial markets. The Fed said it would expand its short-term lending to banks by starting to take all investment-grade debt as collateral - instead of just Treasurys and other high-grade securities.

"The steps we are announcing today, along with significant commitments from the private sector, are intended to mitigate the potential risks and disruptions to markets," said Fed Chairman Ben Bernanke.

Similarly, a group of 10 commercial and investment banks including, among others, Goldman Sachs (GS, Fortune 500), Citigroup, Barclays and Morgan Stanley, agreed to pony up $7 billion each to create a $70 billion lending pool to help troubled institutions.

The measure would also help resolve exposure between Lehman Brothers and its counterparties, the companies said.

Treasury Secretary Henry Paulson, who has led efforts to help get the U.S. housing market and the broader economy back on track, applauded the plan and steps taken by regulators.

"These initiatives will be critical to facilitating liquid, smooth functioning markets, and addressing potential concerns in the credit markets," Paulson said in a statement.

Yet the last-minute efforts provided little comfort to financial markets around the globe. As of Sunday evening, U.S. markets were headed for a steep selloff at the start of Monday's session.

Futures in the Dow Jones industrial average, as well as the broader Nasdaq composite and the Standard & Poor's 500 were as much as 3% lower, before paring some of their losses.

Investors already started piling into safe-haven Treasuries as the yield on the benchmark 10-year note dipped to 3.565% from 3.72% late Friday.

That nervousness also spread to the currency markets as the dollar eased against both the euro and the yen.

Adding to those concerns was news that insurance giant AIG (AIG, Fortune 500) planned to unveil a restructuring plan that will include the sale of part of its business to raise cash and boost investors' confidence, according to a published report.

Investors are also likely to await more data about troubled savings and loan Washington Mutual (WM, Fortune 500), which sought to provide assurance about capital levels on Thursday.

What could help temper a market selloff is the Bank of America-Merrill deal, said one expert.

"This sort of offsets the Lehman thing," said Dan Alpert, managing director of the boutique New York City-based investment bank Westwood Capital. "But the reality is that it is just a short-term impact."

Lehman dark and light

Still, much of the market's focus ahead of Monday was on the endgame for Lehman. The hope was that some solution could be found by early Monday morning in the U.S. - before financial markets open in Europe. Most Asian markets are closed for a holiday Monday.

But the abandonment of Barclays and Bank of America left Lehman Brothers teetering.

During the afternoon, and adding to the dark cloud hanging over Lehman, the International Swaps and Derivatives Association staged a special trading session so that big brokers could limit their Lehman Brothers risks.

The session was called "to reduce risk associated with a potential Lehman Brothers Holding Inc. bankruptcy," according to a statement on the ISDA's Web site.

Lehman - one of the nation's largest and oldest investment banks - has suffered a dramatic and rapid descent. Its shares, which sold for as much as $67 in the past 12 months, have plummeted 94% this year and now trade at $3.65.

In the past six months, the company reported $6.7 billion in losses due largely to bad bets on real estate.

In its bankruptcy announcement Monday, Lehman said that its board had OK'd the filing "to protect ... assets and maximize value." None of Lehman's broker-dealer subsidiaries will be included in the Chapter 11 petition, the firm's announcement said. Lehman said it is trying to sell its broker-dealer business and is in "advanced discussions" to unload its investment management division.

Race against the clock

A source with knowledge of this weekend's meetings told CNN that representatives of several major financial institutions met with Paulson, Securities and Exchange Commission Chairman Christopher Cox and New York Federal Reserve Bank President Timothy Geithner to discuss Lehman and the volatile state of the financial markets.

On Saturday, several heads of big Wall Street banks, including Merrill Lynch CEO John Thain, were seen entering and leaving the offices of The Federal Reserve Bank of New York.

According to several reports, other financial firms were said to be reluctant to contribute their own funds to help keep Lehman's more toxic assets afloat without the assurance that the government would backstop Lehman's bad loans.

However, a source close to the situation told CNN Friday that the Treasury Department was adamantly against using any government money to help finance a takeover, restructuring or bailout of Lehman.

Top banking regulators, including the Federal Reserve, faced heavy criticism from lawmakers following the bailout of Bear Stearns in mid-March.

The Fed helped engineer a fire sale of the firm to JPMorgan Chase (JPM, Fortune 500), agreeing to put taxpayer funds at risk by guaranteeing $29 billion's worth of potential losses on Bear Stearns' portfolio.

A chaotic week for Lehman and Wall Street

The talks followed what has been one of the most tumultuous weeks ever on Wall Street.

Things first started to unravel at Lehman Tuesday following reports that talks between the state-run Korea Development Bank, who was rumored to be interested in buying a stake in Lehman, had ended.

That, combined with the threat of a downgrade by some of the credit ratings agencies, led to a bloody sell-off in the firm's stock.

Hoping to finally put all the rumors to rest, the company released its third-quarter results more than a week in advance on Wednesday, booking a nearly $4 billion loss and announcing a drastic restructuring plan. Investors were unconvinced though and the sell-off in Lehman shares continued, with the stock plunging 42% on Wednesday.

By Thursday evening, it was widely reported that Lehman was actively seeking a buyer for the entire firm. The company reportedly reached out to a number of suitors, including Bank of America and Barclays.

Speculation also surfaced Friday that J.C. Flowers & Co. and other private equity firms may bid for all or parts of Lehman. Current regulatory restrictions prevent buyout firms from owning a bank outright, although the Federal Reserve has eyed loosening those restrictions as bank failures pile up.

But as Friday wore on without any news of a deal, Lehman's stock wound up falling another 13.5%. Shares plunged 77% over the course of the week, setting the stage for regulators to call upon banking executives to get together Friday night and begin talking about ways to hash out an end to the Lehman crisis.

End of an era for Wall Street icon

Lehman's bankruptcy marks a bitter coda for one of Wall Street's oldest and most well-known firms. Getting its start as a modest cotton-trading firm in Montgomery, Ala., in 1850 by German immigrant brothers Henry, Emanuel and Mayer Lehman, the firm saw its fortunes rose and fell along with the rest of Wall Street.

After World War II, Lehman's profile grew as it advised such household American companies as Ford, Campbell Soup and Philip Morris on deals, before expanding overseas into Europe and Asia in the 1960s and 1970s.

The firm also became a breeding ground for high-profile dealmakers. Both Steve Schwarzman and Pete Peterson, co-founders of the private equity giant Blackstone Group, worked for Lehman in the early 1980s.

But Lehman's rise was cut short in April 1984, when the company agreed to be purchased by Shearson/American Express for $360 million. The company emerged independent just seven years later, albeit in much weaker shape than it was before.

It was around that time, however, that CEO Richard Fuld Jr., assumed the helm at Lehman and the firm went public after splitting off from American Express.

Known for his direct approach and staunch loyalty to the firm, Fuld transformed Lehman in the decade that followed from a lowly bond trading house into a worthy adversary of larger investment banks Goldman Sachs and Morgan Stanley.

Still there were bumps along the way for the long-time Lehman chief, including the Russian credit crisis and the painful collapse of the hedge fund Long-Term Capital Management in the late 1990s.

Fuld was quick to remind investors of those painful days and subsequent comeback during a conference call Wednesday, just after the company revealed its nearly $4 billion third-quarter loss.

"This firm has a history based on adversity and delivering," said Fuld. "We have a long track record of pulling together when times are tough."

But the obstacles Lehman faced this time around proved too tough for Fuld to overcome.