Lehman

The New York Fed has released this week's Primary Dealer net holdings update. While the data indicates that PD's were aggressive sellers of virtually everything (USTs, Corps, Agency, except MBS) in the prior week, the one category that stood out was Treasury Bills, in which net short exposure reached levels last seen during the Lehman bankruptcy. Last week's net short exposure of ($15) billion compares to the ($26) billion two year low seen on September 17, 2008. The Lehman collapse period was very curious as during it PDs saw both a record selling in Bills followed by a record buying of Bills, all within a month: whereas in the week ended 9/17 $41 billion of Bills were sold/shorted, the week of October 22, saw a covering/buying spree of over $51 billion. We have not seen this kind of amplitude in the past two years. Over the past 5 weeks, PDs have sold a total of $29 billion in Bills, starting with a net long exposure of $13.8 billion in the week ended January 13, and culminating with a net short of ($15) billion on February 17.

The man on a book mission, who just incidentally destroyed America with his failed "bazooka threat" containment policy, is out with some new truly brilliant revelations, like for example that the consequences of Lehman's collapse were exacerbated due to the unanticipated actions of PriceWaterhouse Coopers, Lehman's receiver in the U.K., whose freezing of accounts is considered by Hank as the precipitating factor that nearly destroyed the money market system. Hank tops it off by saying that Lehman's $50 billion in impaired CRE loans posed a more substantial threat to the Federal Reserve than the $300+ billion in currently delinquent mortgages on the GSEs' books, which explains why he bailed out one and not the other.

At this point using the words "Greece" and "record" in the same sentence is starting to get uncool. Alas, today, it has to be said one more time. The country's CDS is now at 387 bps, another all time wide, while the spread to Bunds is just getting plain silly. Of course, the chorus of voices begging for calm is increasing, with Spain's prime minister the latest to claim that "nobody will be leaving the euro." It is unclear at this point if he is referring to Greece or Spain. This is coupled with Papandreou saying that he is "seeing speculation in world financial markets" regarding his country's risk, and the ever ubiquitous " rumors can create problems." Dick Fuld surely can sympathize.

Developing story: It was just a matter of time, as previously expected.

Ironically, on September 18th 2008 Lehman would undergo millennia of Chinese water torture just to get the sale done. How everything changes in one short year.

Reporters at the WSJ have uncovered something very intriguing while they were combing through the billing records of Jenner and Block, whose chairman, Anton Valukas is currently moonlighting as the examiner of the Lehman Bankruptcy Case. In J&B's August fee statement, the firm discloses information that as part of its estate recoupment process, it has been contemplating suing none other than the Federal Reserve.

"The deal was actually structured to give Barclays an immediate and enormous windfall profit. Certain Lehman executives agreed to give Barclays an undisclosed $5 billion discount off the book value of securities transferred to Barclays, and later agreed to give billions more in so-called "additional value" that Barclays demanded, but the Court never approved. This immediate windfall to Barclays (i) was not disclosed to the boards of LBHI and LBI, (ii) was not revealed in the agreement the Court was asked to approve, and (iii) was never disclosed to the Court until now."

Counterparty risk is considerably below its peak levels surrounding the September 2008 systemic crisis anxiety. However, while the CDR Counterparty Risk Index (CRI) is trading back to July 2008 levels (post Bear Stearns), cognitive biases to anchor on the worst case are misleading as the largest 14 OTC derivative counterparties remain 5-10 times more risky than early 2007.

From the reader mailbag:

I have no idea if this is real, but it looks cool for the non-UK views who have been neglected.

If you thought the entire investing world had lost sight of Dick Bove after his Buy recommendation on Lehman stock on August 21, 2008... You were right. Which is why Dick can not contain his excitement at seeing media exposure after someone still apparently cares what the Rochdale analyst has to say.

As Zero Hedge has claimed on numerous occasions in the past, the ultra-expedited sale of Lehman's North American Broker Dealer operations to Barclays Capital a mere 4 days after Lehman filed for bankruptcy, was likely rife with not just impropriety and judicial incompetence, stupidity and hubris (here's looking at you

If this does not blow the lid on the thousands of teaparties held in the U.S., then likely nothing will.

America's armpit claims "misrepresentations by Lehman execs led to the state losing millions." New Jersey's suit names top executives and board members, claiming it lost $100 million on stock investments... Ernst & Young is also a defendant in the lawsuit.

Bankrupt Lehman Brothers posted a monthly operating report for January in which it disclosed a $1.8 billion increase in the cash of the bankrupt estate. At the end of January Lehman held total cash of $6.8 billion. The cash at LBHI alone is worth roughly 5 cents in recoveries to bondholders (assuming $150 billion in unsecured claims).

Bankrupt Lehman Brothers posted a monthly operating report for January in which it disclosed a $1.8 billion increase in the cash of the bankrupt estate. At the end of January Lehman held total cash of $6.8 billion. The cash at LBHI alone is worth roughly 5 cents in recoveries to bondholders (assuming $150 billion in unsecured claims).

Bankrupt Lehman Brothers posted a monthly operating report for January in which it disclosed a $1.8 billion increase in the cash of the bankrupt estate. At the end of January Lehman held total cash of $6.8 billion. The cash at LBHI alone is worth roughly 5 cents in recoveries to bondholders (assuming $150 billion in unsecured claims).