Lehman Needs a Miracle

The company that pioneered the US cotton trade and bankrolled railroad constructions that built a nation could soon face extinction.  After Lehman Brothers’ chief executive Richard Fuld tried to assuage fears at Wall Street about the company’s recovery plan by shrinking it, he is now in a precarious negotiation with prospective buyers that could dismember the investment bank through piecemeal sale.

Lehman Could Cease to Exist on Monday

Anthony Sabino, a professor of Law and Business at St. John University said it is most likely Lehman will cease to exist by Monday.  Sabino also added that Lehman Brothers will certainly need a miracle if it wants to survive.

On Friday, the Federal Reserve of New York met with Washington financial authorities and leading financial institution in an emergency conference to discuss the fate of Lehman Brothers.

Treasury Secretary Henry Paulson, SEC Chairman Christopher Cox, and Fed New York Chair Timothy Geithner were among the top policy makers that attended the emergency meeting.

The Fed refused to give details on what financial institutions took part in the discussions or whether the emergency meeting came up with concrete solutions.  The website of Wall Street reported that Morgan Stanley CEO and Merrill Lynch CEO were among the attendees.  John Mack is the CEO of Morgan Stanley while John Thain is the chief of Merrill Lynch.

Sold for Pennies?

Analysts are predicting that other financial companies may gobble up Lehman’s investment banking or its bonds trading venture.  Risky assets such as Lehman’s mortgage and real estate portfolios could be sold for pennies on the dollar, given Lehman’s severe financial troubles.

Firms that could buy out Lehman include big names such as Bank of America, Britain’s Barclay’s Plc, Nomura Securities of Japan, Deutsche Bank AG, and the French BNP Paribas.  All refused to give comment about their participation in the Lehman sale.

Even Lehman Brothers’ spokesman Randy Whitestone refused to give details about his firm’s position on Friday.  

Friday also saw Lehman stock plunge deeply at an all time low of $3.65 down by almost 95 percent from the previous high of $67.73.  Investors are getting convinced that Lehman Brothers could indeed be sold for a pittance.

A Big Embarrassment for the Vintage Company

The nose diving stock prices is a big embarrassment for the more-than-century old investment bank and the oldest at Wall Street.  The beating at the stock market is also humiliating for Fuld, who at 62 steered the company through internal corporate troubles, the technology bubble, and 9/11 attack which demolished its headquarters.

Lehman started as dry goods store founded by a German immigrant Henry Lehman in 1844.  It soon ventured into commodities brokerage and then to underwriting where it helped investors during the surge of railroad construction of the 18th century.