Lehman Brothers Too Big To Fail? Don't Count On It

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Lehman Brothers Too Big To Fail? Don't Count On It
Posted March 17, 2008 | 08:42 AM (EST)

Wall Street is in a full meltdown. Bear Stearns (BSC) is gone, so the markets are wondering who's next. The leading contender? Lehman Brothers (LEH).

Lehman's stock dropped 15% on Friday, and it's down by another third in pre-market trading. Some specific concerns:

Like Bear Stearns, Lehman is relatively small and undiversified.

* Like Bear Stearns, Lehman just reiterated that its "liquidity position is strong."

* Like Bear Stearns, at least one of Lehman's trading partners is cutting it off: The WSJ reports that Southeast Asia's biggest bank, DBS Holdings, has asked traders not to enter new transactions with Lehman Brothers. "DBS has sent an internal e-mail saying it would not deal with Lehman Brothers from now on."

The only positive thing I can see coming out of this disaster is the re-regulation of our credit markets with much stricter oversight.

I wonder how many privately-held hedge fund managers are twitching right now, knowing that they are one margin call away from collapse?

:sarcasm:

Down over 50%

Remember the early 1990s, when bank regulators shut down some humungous banks like Security Pacific?

It's a myth that a bank is too big to fail.

Lehman is a candidate.
My money is on Washington Mututal.
And then there's Fannie Mae and Freddie Mac.

We don't even hear about the small banks that have failed over the last 12 months or so.

Seriously, this has the potential to be an enormous disaster, the likes of which we haven't seen since the Great Depression. It really is huge. That's why it's important to get as informed as possible about what is coming, and to disregard much of what we hear on the mainstream cheerleading shows for Wall Street and stocks.