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Did The US Government Sanction The Liquidation Of Lehman Brothers?

Tyler Durden's picture




 

Yesterday we described in extensive detail just how on September 10, 2008, by way of a glaringly erroneous margin call, either purposefully or by accident JP Morgan managed to extract over $250 million in variation margin cash from Lehman, which may well have been the catalyst for the end of Dick Fuld's megabank as it precipitated several other multi-billion margin calls from both JPM and other banks, ultimate;y leading to Lehman's liquidation filing five days later.

JPM naturally pleaded innocence and attributed everything to an error committed by an unnamed back-office margin clerk: after all, a mandated hit on a competitor would be not only illegal, but also would involve conspiracy reaching to the highest echelons of government, as Hank Paulson (and to a lesser extent Bernanke) would have had to bless the launch of a raid as brazen as one taking down one of America's largest investment banks from within the US.

Needless to say, anyone who accused the US government of engaging in this level of criminal activity would be immediately branded a conspiracy theorist and ostracized from polite social circles in perpetuity.

But what if said "speculation" emerged not from the depths of some fringe tin-foil operation, but from the sovereign wealth fund of the United Arab Emirates, the Abu Dhabi Investment Council, one of the world's largest sovereign wealth investors and petrodollar recyclers. Surely they can't be branded tin foil? After all they are "very serious people" who manage hundreds of billions.

We ask for the simple reason that this is precisely what happened, as we learn courtesy of Wikileaks-leaked cable 08ABUDHABI1287, UAE VIEWS ON GLOBAL FINANCIAL TURMOIL, describing the meeting of then Treasury Deputy Secretary Kimmitt and Ambassador Olson with officials from the highest branches of Abu Dhabi's top financial organizations.

S E C R E T ABU DHABI 001287
TREASURY FOR D/S KIMMITT, U/S LEVEY, U/S MCCORMICK
NSC FOR DPRICE
STATE FOR EB
 
E.O. 12958: DNG: CO 11/10/2032
TAGS: AE ECON IR
SUBJECT: UAE VIEWS ON GLOBAL FINANCIAL TURMOIL
 
Classified By: Ambassador Olson for reasons 1.4 b and d.
 
¶1. (C) Summary. On 27 and 28 October 2008, Treasury Deputy Secretary Kimmitt and Ambassador Olson met with officials from the UAE Central Bank, UAE Ministry of Finance and Abu Dhabi sovereign wealth funds. Kimmitt discussed the USG response to the global financial turmoil and prospects for the U.S. economy, solicited input on the regional implications, stressed U.S. commitment to open investment principles, encouraged continued vigilence with respect to Iran, and assured that transition planning was underway at the Treasury Department to ensure a smooth handoff to the next administration. End Summary.
 
Lehman Collapse Rattles Abu Dhabi
---------------------------------
 
¶2. (C) D/S KIMMITT DESCRIBED U.S. STEPS TO PRESERVE STABILITY IN THE FINANCIAL SECTOR. ABU DHABI INVESTMENT COUNCIL (ADIC) OFFICIALS QUESTIONED KIMMITT ABOUT THE USG DECISION TO ALLOW THE FAILURE OF U.S. INVESTMENT BANK LEHMAN BROTHERS. ADIC MANAGING DIRECTOR KHALIFA AL KINDI REPEATED SPECULATION THAT LEHMAN'S COLLAPSE WAS PART OF A DEAL WITH THE U.S. CONGRESS, PAVING THE WAY FOR THE $770 BILLION EESA PACKAGE. KIMMITT EXPLAINED THAT THERE WAS NO BUYER FOR LEHMAN AS THERE WAS FOR BEAR STEARNS, AND THAT AT THE TIME TREASURY LACKED THE AUTHORITY TO INJECT CAPITAL OR TAKE OTHER STEPS. (COMMENT: ADIC'S DIRECT AND SUSTAINED QUESTIONING ON THE LEHMAN BROTHER'S COLLAPSE SUGGESTS THAT THE SWF LIKELY SUSTAINED LOSSES FROM HOLDING LEHMAN DEBT INSTRUMENTS. END NOTE.)

Curiously, both "explanations" are wrong, as by now everyone knows that Barclays was an interested buyer in Lehman and would have engaged in a wholesale transaction had it gotten the guaranteed blessings of either the US government or the crown (instead of simply buying just the North American brokerage out of bankruptcy a few short days after the Chapter 7 filing), and furthermore we know that the US Treasury had every authority to inject capital and take "other steps" as confirmed by the subsequent bailouts of AIG and, to a lesser extent, Citigroup.

After all: the US was just getting warmed up.

So why use lies as justification for the inaction that did indeed "pave way" for Hank Paulson's theatrical demand for a blank check in Congress justified by a three page term sheet? Could it be that it is precisely because the US government did indeed sanction the "hit" on Lehman, and JPM's escalating rounds of margin calls was the "weapon" used to take out the offending bank?

Alas, with such "in-depth investigative journalism" as Andrew Sorkin's very much retroactively pseudo-fictional "TBTF" narrative of events, one will never know what really happened in those days before Lehman's collapse unleashed the biggest bank profit bonanza and money printing, wealth transfer orgy in history.

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Mon, 03/04/2013 - 20:32 | 3299432 swissaustrian
swissaustrian's picture

How many DDoS attacks have been launched on ZH lately?

Mon, 03/04/2013 - 20:36 | 3299446 Lost Wages
Lost Wages's picture

BREAKING: Goldman Sachs, Citibank and JP Morgan warn of possibility of intense cyberattacks against anti-authoritarian financial blogs, obviously coming from Chinese military sources and not financed or condoned by the banks themselves. However, said cyberattacks may bleed over to banking system and erase your account balance, purely by accident of course, and not planned by anyone including the banks. Any money losses will be handled with same efficiency as MF Global scandal and are backed by the full faith and credit of the FDIC.

Mon, 03/04/2013 - 20:49 | 3299479 Tijuana Donkey Show
Tijuana Donkey Show's picture

BREAKING: In addition, these cyberattacks may impact boat motors and boat stability, if guns or gold is on the boat at the time of the attack. In addition, the attacks may render GPS worthless, causing exact locations of said accidents to remain unidentified. 

Mon, 03/04/2013 - 21:26 | 3299572 Pinto Currency
Pinto Currency's picture

 

Perhaps the US Gov is captive of a few major banks. 

In that case the US Gov would not approve the hit but simply acuiesced.

Mon, 03/04/2013 - 22:14 | 3299667 Antifaschistische
Antifaschistische's picture

"an error so profound one wonders if this was not a premeditated "hit" on one bank by another bank."

Seriously, "one wonders"....seriously?  "wonders"   seriously?   I want to meet the person that really "wonders" if the vipers of Wall Street routinely conspire to bring an organization, or a government, or a world leader, or a lowly congressman from Texas, etc. down.  I have no "wonder" at all.

Mon, 03/04/2013 - 22:31 | 3299712 francis_sawyer
francis_sawyer's picture

When the 'evil episcopalians' decide that the time is right, THEY will sanction the liquidation of the US government...

Mon, 03/04/2013 - 22:51 | 3299771 James_Cole
James_Cole's picture

In related news, prosecutors in the Bradley Manning case today decided to pursue the longest possible sentence against him for "aiding the enemy" - life.

Manning, for those not aware, was the one who leaked the cables + other stuff.

Let this be a lesson - if you ever come across information that would encourage folks to question the integrity of their gov, bury it quickly!

Tue, 03/05/2013 - 00:40 | 3299977 NotApplicable
NotApplicable's picture

Add to this the fact that one of Bernanke's defenses after bailing out Bear in response to question "who are you going to bail out next?" was "We aren't afraid to let anyone fail."

Tue, 03/05/2013 - 01:24 | 3300043 YBNguy
YBNguy's picture

RIP Ken Lay

Tue, 03/05/2013 - 07:56 | 3300275 overmedicatedun...
overmedicatedundersexed's picture

one wonders if chris cox was some how forced to testify on his in action in the fall of 2008, while the markets crashed..head of SEC, yet never shown in the public spot light...what tales he might tell..he holds the keys to this mystery..has anyone seen chris cox, most likely living in corzine's guest house.

Mon, 03/04/2013 - 20:56 | 3299501 Bingfa
Bingfa's picture

Seriously, there will be a huge cyber push in the coming months

The more the EU breaks down. That's why they're creating the illusion everything's fine here.

                               If you think the illusion was hysterical before.....wait, full court press.

Mon, 03/04/2013 - 22:22 | 3299687 fudge
fudge's picture

from 2012

http://www.weeklystandard.com/blogs/un-seek-control-internet_664018.html

http://www.huffingtonpost.ca/2012/12/03/un-control-internet_n_2229623.html

The denials were every where , but I can't see any other way to keep the sheep in fold.

Bloggers and smart phones are every where.

 

Mon, 03/04/2013 - 22:51 | 3299773 Bingfa
Bingfa's picture

They will never keep the Matrix intact without censoring the internet. Never

I think your right, Guns and Internet will both be dealt with by the UN...in time.

UN small arms treaty vote in late March, read all the rhetoric about how they plan to work around the 2nd amendment

Obama got a plan. I say he crushes the US then hands sovereignty to the UN. NWO- agenda 21

Mon, 03/04/2013 - 23:22 | 3299844 Totentänzerlied
Totentänzerlied's picture

No. There is no need to censor those who censor themselves, much less those who speak but don't act.

Mon, 03/04/2013 - 23:27 | 3299854 Bingfa
Bingfa's picture

Internet is already underway

Guns.... might get a little messy

Wed, 03/06/2013 - 00:54 | 3303796 Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

Shut the net and it all goes down, gov't, banks, corps, supply chains, whatever else you can think of.  

 

Find a doctor, you're not thinking straight.

Mon, 03/04/2013 - 22:07 | 3299653 monkeyboy
monkeyboy's picture

We ARE so fucked!

Mon, 03/04/2013 - 21:10 | 3299541 sgt_doom
sgt_doom's picture

Oh, come on already!!!!!

Everyone knows by this time that a bear run on Lehman's by JPMorgan Chase, Goldman Sachs and Deutsche Bank took place.

Why is this really news????

Mon, 03/04/2013 - 20:31 | 3299433 Careless Whisper
Careless Whisper's picture

US gov = JP Morgan   Are you starting to get it?

Mon, 03/04/2013 - 20:51 | 3299442 Xibalba
Xibalba's picture

BLYTHE MASTERS: 'We have no short position in silver, just hold one on behalf of our client'

http://www.zerohedge.com/news/blythe-masters-blogosphere-silver-manipula...

 

Mon, 03/04/2013 - 21:06 | 3299533 tom a taxpayer
tom a taxpayer's picture

Hank Paulson, Sec Treasury at time of Lehman's demise, has an alibi…he was bird watching in Central Park.

http://www.newyorker.com/talk/2011/12/12/111212ta_talk_widdicombe

Mon, 03/04/2013 - 21:48 | 3299592 Pinto Currency
Pinto Currency's picture

 

Where does Blythe explain how they sell 300 million oz. of silver futures in 4 nanoseconds as a hedge to ensure their client gets lower silver prices.

 

Mon, 03/04/2013 - 22:20 | 3299681 fourchan
fourchan's picture

hank paulson won best actor that year right?

the fickle finger of fate, in his case, is indeed crooked.

 

we the people paid him 400 million for the perfomance.

Mon, 03/04/2013 - 22:43 | 3299751 H E D G E H O G
H E D G E H O G's picture

hopefully, that "fickle finger of fate" winds up on a trigger somewhere, sometime, just dreamin'..........................

Mon, 03/04/2013 - 21:06 | 3299510 prains
prains's picture

Now you start to see the hand of Cheney has been buried so far the American ass he's been combing their hair for years.

 

Where is the guy today????

 

Cheney; "serving wench !! bring forth the libations ! we must now sacrifice another virgin ! bwaaaaa haaaaaaa haaa"

 

 

Mon, 03/04/2013 - 22:53 | 3299777 GtownSLV
GtownSLV's picture

If Cheney were in banking he'd have destroyed the world a dozen times over, fortunately for us all, he's only in oil and politcis.

Tue, 03/05/2013 - 12:31 | 3301021 prains
prains's picture

You need to readjust your jock strap he's in ALL of it. it's all the SAME THING (politics/oil/banking) run and controlled by the same oligarchs and cheney wants so desperately to be one of them it hurts.

 

"IT puts the lotion on ITS skin" 

 

hurts

Mon, 03/04/2013 - 21:08 | 3299535 johngaltfla
johngaltfla's picture

and by extension....

 

JP Morgan is the Fed which IS the US Government.

 

Of course, payback for LTCM played a HUGE role in this action.

Mon, 03/04/2013 - 21:18 | 3299555 Bingfa
Bingfa's picture

It's all a huge interconnected farcical chess game

One where they didn't use their pawns efficiently.

 

Mon, 03/04/2013 - 22:27 | 3299702 centerline
centerline's picture

We are pawns.

Mon, 03/04/2013 - 22:35 | 3299726 Bingfa
Bingfa's picture

That's what I meant, they have no use for us now. They pushed Globalization and it killed the pawns.

Ever played computer chess and both sides have a queen and a pawn?  They got no moves left.

Mon, 03/04/2013 - 22:55 | 3299781 chubbyjjfong
chubbyjjfong's picture

The power of the pawn lies within its weakness.

Tue, 03/05/2013 - 00:23 | 3299947 GMadScientist
GMadScientist's picture

I thought it was the potential to transition into being the most powerful piece on the board.

Tue, 03/05/2013 - 00:40 | 3299978 Quit Your Bitchin
Quit Your Bitchin's picture

Mongo was a pawn.

Tue, 03/05/2013 - 01:20 | 3300038 DaveyJones
DaveyJones's picture

we're prawns      and were food for other sea creatures

Mon, 03/04/2013 - 21:23 | 3299566 logicalman
logicalman's picture

If you receive a gift of White House Cufflinks, you know who's got your back.

Mon, 03/04/2013 - 20:35 | 3299434 Xibalba
Xibalba's picture

 

MF GLOBAL? 

 

Mon, 03/04/2013 - 22:12 | 3299663 LeisureSmith
LeisureSmith's picture

Speaking of MF Global. Just for fun i smacked John Corzine's face on John Gotti's body.... and it turned out like i'd imagine Ben Bernake would look if he had been juicing since high school and had a more "hands on" job in the syndicate. Strange. http://www.flickr.com/photos/79201873@N08/8516177015/in/photostream

Mon, 03/04/2013 - 20:32 | 3299435 Lost Wages
Lost Wages's picture

Let's hope the truth doesn't take too long to come out. Usually the truth about this kind of thing isn't revealed for another 50 years.

Mon, 03/04/2013 - 21:33 | 3299579 Omen IV
Omen IV's picture

"Could it be that it is precisely because the US government did indeed sanction the "hit" on Lehman, and JPM's escalating rounds of margin calls was the "weapon" used to take out the offending bank?"

for those interested in an exact parallel - read the last third of the book - The AIG Story by Hank Greenberg former CEO

he was taken out forcibly from the managment after building the company from scratch from the 60's to the largest Insurance carrier in the world - with rigid controls on Risk managment which all went away on his termination

the rest you  know - a Lone Gunman - Cassano managed the entire CDS desk in London (former Drexel) and took on ONE WAY risk that cannot be justified by anyone  - never would have happened or allowed on Greenberg watch

and Paulson nukes AIG for GS.... and for cover the rest of the banks on fraudulent CDO's put to AIG that cant stand the light of day and the Fed intervenes in stopping the california and federal lawsuit filed against the banks  on behalf of stockholders of which Greenberg was one of the largest

these "hits" were preplanned and executed from high level - follow the breadcrumbs

the similiarity in circumstances is breathtaking !

 

 

 

Tue, 03/05/2013 - 00:51 | 3299994 McMolotov
McMolotov's picture

Let's hope the truth doesn't take too long to come out. Usually the truth about this kind of thing isn't revealed for another 50 years.

Yeah, I'm glad this is the year we'll finally know with certainty what really went down with Kennedy 50 years ago. Wait a minute...

Mon, 03/04/2013 - 20:33 | 3299436 Bear
Bear's picture

Does anything 'happen' without saction? What?

Tue, 03/05/2013 - 00:23 | 3299949 GMadScientist
GMadScientist's picture

Weather.

Tue, 03/05/2013 - 00:52 | 3299997 McMolotov
McMolotov's picture

HAAAAAAAAAAAAAAAAARP!!!!!!!!!!!!

Mon, 03/04/2013 - 20:33 | 3299437 kito
kito's picture

they shouldve sanctioned not only the liquidation of lehman, but also aig, citi, goldman, and every other leech institution that is draining this country and europe of its lifeblood...............

Mon, 03/04/2013 - 20:40 | 3299454 Kirk2NCC1701
Kirk2NCC1701's picture

Yes.  And if they'd left only JPM standing, it would have prevented the circular finger-pointing, as we'd only have one 'king-ape', the 90,000 lb JPM gorilla to deal with.   And we've all seen the ending to that king-ape movie before.  ;-)

Mon, 03/04/2013 - 21:01 | 3299522 booboo
booboo's picture

There will only be one "Gorilla" on Wall Street and his name is Dick Fuld and.....whats that? Bankrupt? Ribs got cold? nevermind.

Mon, 03/04/2013 - 21:08 | 3299536 disabledvet
disabledvet's picture

amen to that. "they're all a bunch of criminals." at least one died. "it appears the cause of death was murder, sir." "oh. well, 'parting is such sweet sorrow.'" http://www.youtube.com/watch?v=grMo5-2Y5oc

Mon, 03/04/2013 - 20:34 | 3299440 Bay of Pigs
Bay of Pigs's picture

Yes, the US Govt (US Treasury) most certainly did have a role in flushing Lehman along with JPM and the FED itself.

All the pieces of the puzzle are coming together just as ZH has maintained all along. Well done Tyler(s).

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