Banking, finance, and taxes
Lehman (LEH) Chapter 11 Could Occur Today, Financial Stocks Could Open Off 20%
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Several media reports say that large financial firms are trying to reduce their risk to deals that they have with Lehman (LEH) in the event that the firm begins a liquidation later today.
According to Bloomberg, "Banks and brokers today held a session for netting derivatives transactions with Lehman, or canceling trades that offset each other, in case the New York-based firm files for bankruptcy before midnight New York time."
If Lehman’s commercial real estate and mortgage-paper securities are sold rapidly as the firm is dissolved by a court, it would almost certainly drive down the value of similar assets help by virtually every other large brokerage firm and bank.
If trading patterns from last week hold, shares of companies like Merrill Lynch (MER) and Morgan Stanley (MS) could easily open down 20% tomorrow.
Douglas A McIntyre
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