The shares of Lehman Brothers have fallen deeper since Friday, 12 September as compared to September 8. It’s doubtful whether the federal government will cater any help to Lehman and thus the position of Wall Street is dwindling. The 158 year old firm is still in hope that it will find another bank to buy it and be its savior in this sinking time of its.
It looks likely from the news on Wall Street that Bank of America, Barclays, and a consortium of private equity firms are the most interested contenders.
Treasury Secretary Hank Paulson has said the federal government is unwilling provide any additional help to Lehman beyond allowing it to continue borrowing short-term money from the Federal Reserve—sources confirmed as per the financial wire service reports.
It is undoubtedly very risky for any bank to include Lehmans real estate assets to its balance sheet. “There’s very little chance anyone will do a deal for Lehman without the government stepping in,” said Janet Tavakoli, a derivatives and structured finance consultant in Chicago.
There are rumours and whispers within the wall street that Lehman might file a bankrupcy case. This step would definitely shake the Wall Street very hard, considering the tens of billions in short-term loans other banks have extended to Lehman, which are backed by collateral. Moreover, there are other transactions Lehman has done with prominent trade partners like hedge funds that are also backed by collateral.
Andrew Rahl, a bankruptcy lawyer with Reed Smith speaks considering the filing of Lehman bankruptcy, “”Clearly this would be a filing without any real precedent. There could be unintended consequences; there could even be some favorable consequences.” By favourable consequences he means that the assets of Lehmans ailing real estate wouldn’t enter the market soon as the bankruptcy court might freeze it. Another alternative for Lehman is to bet broken into pieces and let the acquirers buy whatever benefits them the most.
