After Bear Stearns fell, I asked
Is Lehman Next? Lehman came out with its earnings report last week that soothed Wall Street's worries.
However, in a piece The Debt Shuffle by Jesse Eisinger, Eisinger's concludes:
The picture emerging is that of an investment bank that is dancing as fast as it can
Eisinger points out that:
- Lehman’s balance sheet isn’t shrinking, as we’d expect. - Other financial institutions are taking down their exposure right now amid the market turmoil to be prudent
- Lehman got more leveraged, not less. - The investment banks “gross” leverage hit 31.7 times equity, up from the fourth quarter and way up from last year’s 28.1.
- Lehman includes debt in its calculation of equity. Say what?
- Lehman reaped substantial earnings gains because investors thought it is more likely to go bankrupt.
- Lehman’s write-downs seem tiny. - The bank only wrote these assets down by 3 percent. And its Level III assets —the hardest to value portion of these instruments—were written down by only the same percentage.
If Lehman fails, how much will the FED have to spend
this time and will JP Morgan ride again to the rescue?
Related Posts (on one page):
- Lehman Follow-Up
- Is Lehman Next?
