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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 - 21:36 | 3299597 Seasmoke
Seasmoke's picture

Let's just ask Kashkari.

Mon, 03/04/2013 - 21:45 | 3299614 Miss Expectations
Miss Expectations's picture

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.

Just wondering, did someone make Abu Dhabi whole again? 

 

Mon, 03/04/2013 - 21:47 | 3299619 logicalman
logicalman's picture

This is why I'm an anarchist

Mon, 03/04/2013 - 22:13 | 3299666 agrotera
agrotera's picture

Tyler, this must not be you writing this because the last sentence is completely inconsistent with what we who have been bitching on this site since your first days in 2009 witnessed in the fall of 2008.... Bernake and Paulson tag teamed the whole Lehman collapse with the apparent motivation that "never" would they nationalize the banks "as if" that would have been a bad thing for the short run ( the few years it would have taken to unwind the major players that were indeed in the same shape as Lehman had it not been for the blood letting win on the Lehman bet, the immediate payout of collateral free from the US Treasury via the strawman AIG backdoor drop off, bank holding status a few days later for Morgan and Lehman and the beginning of the multi year  acronym fest lobbied for TARP, in lieu of honesty, and our country run by the privately owned Federal Reserve and their colluding agents, the toosacrosancttofail) Instead, we have cohesive transitions from administration to administration all working for the benefit of the Federal Reserve owners who run the country and all legislators except a few non-purchased representatives and a few hold out governors.

Instead of ending with "we will never know" rather, it might be said, we may never see justice for this, the most obvious coordinated plundering of a society in modern times.

Mon, 03/04/2013 - 22:27 | 3299696 Catullus
Catullus's picture

It looks like some ambassador just blew hot air up their ass.

Mon, 03/04/2013 - 22:27 | 3299701 q99x2
q99x2's picture

Of course the treasonous traitors in Washington helped to take down the United States of America. They just cut a friend's SS, who has stage 4 cancer in PA, by $200 so he can pay for ObamaCare. What the hell do you think those thousands of new DHS lightweight tanks are for; enemies of the US. Hell no they are so the banksters and traitors in Washington can take over the country. From the move Aliens 2: We're on an elevator hell; going down. Oh you want some of this sucker. Here take some this.

Probably not a good idea to turn in your guns at this point.

It is likely ok or nearly technically ok at this point for a military coup in D.C. to restore the U.S. Constitution.

Tue, 03/05/2013 - 08:07 | 3300289 putaipan
putaipan's picture

would that be the constitution for the united states of america or OF THE UNITED STATES OF AMERICA ?

Mon, 03/04/2013 - 22:37 | 3299731 bondman1
bondman1's picture

Hanlon's Razor! "Never attribute to malice (conspiracy) that which can be adequately explained by stupidity". The public outcry over Bear Sterns made Lehman easy to sacrifice. Unfortunately that froze worldwide credit. MS & GS were granted bank charters which saved a few of the politicly connected their life savings. The Fed forgot to take out the liquidity iv. It's tough to kick that habit now!

Tue, 03/05/2013 - 00:39 | 3299975 GMadScientist
GMadScientist's picture

Watch out...that IV is full of bubbles.

Tue, 03/05/2013 - 08:15 | 3300236 Sandmann
Sandmann's picture

Lehman Collapse was a London phenomenon because they swept the accounts of Cash on a Friday in London to file in NYC on Saturday leaving London without Cash on Monday and INSOLVENT under English Law with open positions.....so Lehman was closed down in London. Funnily enough AIG in London which had a nice business in Insurance Products was saved by Paulson because Christine Lagarde of  France wanted to save French banks

Mon, 03/04/2013 - 22:37 | 3299732 SpeakerFTD
SpeakerFTD's picture

Here's my first person account.

I was (mostly prop) trading energy commodities for a major fund.    Loving the Wall Street life.  

It was a couple of weeks after Bear Stearns blew up, and the guy trading next to me hangs up his phone and grabs me.  One of his buddies at a bank had just called him.  He said (I quote): "He said they took down Bear and then they're gonna take down Lehman then they're done."    

My response was incredulous.  Lehman?  No way!   I thought it was ludicrous.  In my (naive) eyes, Lehman was  an untouchable.  Bear was gritty, and their demise understandable, but Lehman was in another class.    I couldn't have been more wrong.   And then to witness the Twister-esque machinations used to save  AIG, Citi, etc.   I knew then that the call had been absolutely and precisely correct.

The realization, later, that this had essentially been pre-planned was completely disheartening.  It took a long time for the cold reality of that to filter down through me.  It was one of those bitter tastes of reality that slowly eroded my belief in finance.   Which eroded my faith in our version of capitalism, our rule of law, in fact, our whole American system as it exists.   It was one of my first steps down the path that has led me ZH, Ron Paul, tin-foil hats, firearms and dehydrated food.   

Tue, 03/05/2013 - 00:56 | 3300011 MiltonFriedmans...
MiltonFriedmansNightmare's picture

1+ Speaker, and a golf clap to boot.

Tue, 03/05/2013 - 08:41 | 3300348 ITrustMyGut
ITrustMyGut's picture

thanks for the post.. and the sharing of experience... 

Mon, 03/04/2013 - 22:47 | 3299764 bugs_
bugs_'s picture

The Lehman Sanction - starring PeeWee Herman as Dr. Hemlock

Mon, 03/04/2013 - 23:15 | 3299817 Bingfa
Bingfa's picture

Many people don't realize it right now but we are in the midst of the biggest history ever.

The transformation of America. He who lives will tell quite a story. Epic times.....

Tue, 03/05/2013 - 01:02 | 3300018 MiltonFriedmans...
MiltonFriedmansNightmare's picture

4th turnings are a bitch, and the game is now on.  The plebes best hope in this Sampson vs Goliath battle is that the military, the real US military takes down DC, DHS and the bankster overlords.  In the absence of said intervention, I don't see much hope, rather Hunger Games bitchez.

Mon, 03/04/2013 - 23:17 | 3299827 Yes_Questions
Yes_Questions's picture

 

 

Uh, didn't the movie kinda go there already?

http://www.rottentomatoes.com/m/margin_call/

 

Mon, 03/04/2013 - 23:26 | 3299852 beentheredonethat
beentheredonethat's picture

as someone who knows the people involved in this correspondence, I would not get too much out of the content. Not a lot of insight there, and what is told by the us gov to ADIC is unlikely to be too close to the actual players. 

Mon, 03/04/2013 - 23:34 | 3299869 rosiescenario
rosiescenario's picture
Did The US Government Sanction The Liquidation Of Lehman Brothers?

 

Did Goldman benefit from this?

 

Was this pay back for Lehman not helping when LTC's shit hit the fan?

Mon, 03/04/2013 - 23:48 | 3299893 Aaron Burr
Aaron Burr's picture

Thats why I'm richer than you, mother fucker.

Tue, 03/05/2013 - 00:58 | 3300014 MikeMcGspot
MikeMcGspot's picture

I'ts like having fun whilst tossing little munchkins in the air singing "Follow the yellow brick road"

It is almost real!

Tue, 03/05/2013 - 01:13 | 3300031 observer007
observer007's picture
Brave New Chip Cash World - CeBIT 2013: Withdrawing cash with the new German ID card

 

"Very soon German bank customers will no longer need their bank cards to get their hands on cash. All they will need is the new German ID card with the online ID function activated and the six-digit ID-card PIN."

 

http://homment.com/Withdrawing-cash-id-card

Tue, 03/05/2013 - 01:36 | 3300055 Decimus Lunius ...
Decimus Lunius Luvenalis's picture

Sanction denotes authority which is an absurd proposition. 

Tue, 03/05/2013 - 01:56 | 3300070 Excursionist
Excursionist's picture

Not-so-minor quibble re:  "...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."

Don't know about the 'other steps', but prior to legislation passed only after Sept. 15, 2008, Treasury didn't have authority to accept unsecured paper.  Plain English:  couldn't inject cash in exchange for equity or equity-like securities.

 

Tue, 03/05/2013 - 03:36 | 3300144 Joseph Jones
Joseph Jones's picture

Barack personally sent a laser guided missle to incinerate American citizen 16 year old son of Anwar Al-Awlaki without criminal charge, wigthout arrest, without trial, and without consequence.  A one man police, DA, defense attorney, judge, jury, and executioner.  At least he saved us the cost of trial. 

He controls life and death.  He is god of this world.  For what act does this Satan lack "authority?"

Tue, 03/05/2013 - 06:52 | 3300232 Sandmann
Sandmann's picture

and the NY Fed couldn't ?

Tue, 03/05/2013 - 02:03 | 3300075 GOLD AND SILVER...
GOLD AND SILVER NATZI's picture

Whatever, none of this is important to me or impacts my life.  I'm just trying to get through these depressing months without football.  NASCAR is OK to watch, but I just dream about MNF lighting up my huge LG screen again while me and my drinking buddies sit around it and talk about how great our lives were in high school.  Speaking of drinking, I've noticed the brewskies are getting more expensive and they're lowering the alcohol content.  Even more messed up is I couldn't find any Jimmy Dean's breakfast on a stick, nor pork rinds at Wal Mart this past week.  They were all out.  Anyone know why this stuff is happening now?

Tue, 03/05/2013 - 02:20 | 3300088 Sandmann
Sandmann's picture

I thought it was all to do with LTCM in 1998 when Goldman looked at the books then starting destructive trading against LTCM forcing the Fed into a rescue. The two main clearing houses for LTCM were Bear and Lehman. I thouht it was self-evident that Paulson worked for Goldman when in government and pulled the plug on both banks.

Tue, 03/05/2013 - 02:32 | 3300102 resurger
resurger's picture

The cock sucker Hank Paulson bought some for 9cents on the dollar, the plan was to bankrupt LEhman Brothers (since AD had so much money invested in it) , the same goes for Citi Bank, and unleash the massive free banana republic free money print fest so that the crony corrupt wall street bozos enrich them selves on behalf of main street. 

how many Shadow SWF's are now invested with the US? ADIA, SAFE, and many others will have the same fate...

so it all boils down to avarice control and whoever blinks out first... but will they learn? We have learned, i will love to watch those fucking cannibals liquidating their holdings, it would be a nice watch on a 3D ZH TV.

Again, what possibly can go wrong? Keep buying

Tue, 03/05/2013 - 03:11 | 3300126 Freewheelin Franklin
Freewheelin Franklin's picture

I was watching an interview with Marc Faber and he was asked why the government didn't  bail out Lehman. He just kind of smiled and said something like, well, i guess some people in the government didn't like Lehman and some people may have been jealous (wink, wink)

Tue, 03/05/2013 - 03:12 | 3300129 Freewheelin Franklin
Tue, 03/05/2013 - 03:41 | 3300146 slackrabbit
slackrabbit's picture

I wonder how much ADIA now has in US banks? Given the lies and manipulation I would suspect many governements have been slowly moving to other markets and assets. Particulary that yellow metal...

Tue, 03/05/2013 - 05:48 | 3300198 smacker
smacker's picture

 

For speculation to stand up that USG conspired with JPM to bring down Lehmans, there needs to be a motive identified. If it was a quasi-false flag operation, what was the purpose?

Was it that Lehmans was seen as a cancer in the over-leveraged banking system and a decision was taken to cut it out before it spread and engulfed the whole system?

Tue, 03/05/2013 - 06:05 | 3300205 smacker
smacker's picture

Tyler, a small point of clarification:

The Abu Dhabi Sovereign Wealth Fund is the wealth fund of the Abu Dhabi Emirate, not of the United Arab Emirates as you say here:

"...from the sovereign wealth fund of the United Arab Emirates, the Abu Dhabi Investment Council"

Abu Dhabi is the largest and most senior Emirate, and almost certainly has the largest wealth fund (because it has by far the most oil) but other Emirates (eg Dubai) also have their own wealth funds under their own control. There is no collective UAE Wealth Fund, as far as I know...the individual Emirati Royals are very protective of their independence.

Tue, 03/05/2013 - 07:01 | 3300238 falak pema
falak pema's picture

As head of Euro group at that time Sarkozy had a meeting with Geithner; then head of NY FED, along with Lady Lagarde then Finance minister of France.

According to that meeting GWB gave Paulson the green light to pull the plug on Lehman two months earlier.  WE are in Dec 2008 and not only the Abu Dhabi lot knew they had got creamed!... The Euro banks as well; in the ripple effect. Euro zone was at panic stations bigtime. Sarko had to get the lowdown...

Lagarde was very adamant that GBW and Paulson/Geithner STATED had not seen the systemic risk to the world when they made that decision. What Lagarde/Sarkozy do not state is whether GWB/Geithner/Paulson/Ben had a plan to rip-off wealth from public to private as part of the market knee jerk resulting. In the great scheme of Oligarchy evolution of world markets...

"That we will never know"...is correct in THAT context. But as TD implies, its for us to fill in the dots knowing since then what has transpired.

My take is that every government Oligarch was in on the deal as this is a plan they all knew could come about, ever since they went deep into derivatives culture and CDO/CDS mayhem of subprimes became the basket case; visible since  March/May 2007 to the world! 

Can you imagine that upper echelon USA government were not montoring that awesome risky play via Freddy/Fanny/Aig??

You bet they were, and trying to see how they could make it work their way and cause the demise of "welfare state" USA; the main agenda since Reaganomics began. 

1% vs 99%; its been on the agenda since RR days; and consequence of Nixonian plays! The Oligarchs knew in 1979 when Volcker went hard on inflation that they would have to decouple the mega state from their own profit making enterprises (MIC/big oil, big pharma business and their new blue print of financialised WS; later the outsourcing phase in NWO hubris).

Somebody had to burn, as to have winner you need losers. It would be the first world sheeple as the debt gravy train and Oil wealth transfer pain made it impossible to save ALL of first world. That was the basis of the RR/Maggie blue print.

The rest is the dynamics of the planned Oligarchy construct; a little later, a little faster; but inevitable. 

Tue, 03/05/2013 - 07:21 | 3300252 negative rates
negative rates's picture

I detect some poison in your coffee this morning, a little dizzy perhaps, light headed when you stand? I have some spare wheelchairs for that knee problem of yours if needed, cheap too.

Tue, 03/05/2013 - 08:29 | 3300327 falak pema
falak pema's picture

...I hate when that happens...

poison is bitter like truth; or even whiffs of it....now I wonder what I said that "whiffs" of it...

Tue, 03/05/2013 - 07:30 | 3300258 falak pema
falak pema's picture

And to see the next step down this Oligarchy construct here is their spiel today :

GOLDMAN: The Economic Crisis Ends In 2013 - Business Insider

THE KEY PUNCH LINE IN THIS REASONING :

...The essence of the model is essentially this chart, which recognizes that private sector surpluses (rising corporate and household savings) is the mirror image of public sector deficits....

LOL, forget household savings; the rest says it all!

Your debt our profit equals out. But...our profits are everywhere and invested anywhere; whereas your debts will continue to grow as the USD stays debased and your salaries/pensions stay under the austerity gun.

Oligarchy Profits worldwide will continue to explode in this model, not first world sheeple wealth.  

Tue, 03/05/2013 - 07:01 | 3300241 torak
torak's picture

OK.  Let's just say they did sanction the liquidation of Lehmans?

Prove it. 

Or take it one step further...You can prove it!

Who is going to do anything about it?  What regulatory agency, judicial entity, government body:  Who's going to do anything?  You?  Write a book -- of course.

Welcome to American 2.0.c build 2013

Or let's say you have the evidence, but suddenly you come down this this overwhelming desire to kill your two teenage kid's and your dog with a 9mm Glock.  You preform the coup-de-grace with a shot to the left side of your own head, although you are right handed.  No one in your neighborhood hears a thing, altought you neighbors comment that they could ofter here you singing in you home and yard.

Ya, we live in interesting times. 

"RUUUUUNNNNNNNNNNNNNNNNNNNNNNNNNNNNNN!" <screaming>
Agatha -- Minority Report  (so much for fiction)

By the way, let me end the story for you.  Nothing happens! 

 

Tue, 03/05/2013 - 07:15 | 3300248 negative rates
negative rates's picture

I hate when that happens.

Tue, 03/05/2013 - 07:12 | 3300245 More_sellers_th...
More_sellers_than_buyers's picture

All these guys leave wall street and the mega bucks they earned and took cushy government jobs. Why??? Well it is obvious now, they didnt have to get us government approval for the hit, they had their own guys on the inside

 

Tue, 03/05/2013 - 11:12 | 3300762 IamtheREALmario
IamtheREALmario's picture

So the Arabs (and I use the term loosely) did not figure they would get burnt from licking satan's balls?

Tue, 03/05/2013 - 13:34 | 3301253 batterycharged
batterycharged's picture

I think Goldman's Hank Paulson's actions were totally non-partisan as head of Treasury in his decision to screw Lehman.

Wasn't it obvious?

And the fact that JPM's Jamie Dimon is on the Fed board, I also think his actions are totally non-partisan.

And there was no partisan play in allowing JPM to acquire all the good and none of the bad assets of not only Bear Sterns but also WAMU.

Yeah, no conspiracies here. Everything was above board.

No TBTF here. Move along.

Tue, 03/05/2013 - 15:10 | 3301630 Mo Bius
Mo Bius's picture

   I had always wondered who held the CDO's on Lehman. Confidential, of course. Hell, national fuckin' security. The Nazi G.H.W. Bush? Carlysle? Bet Fuld got kickback on the deal.

   All these derivatives ARE illegal uncer the '33 & '34 securities laws.

   Tom Heneghan is reporting that the Joint Chiefs are considering arresting the punk B.S. Bernanke for his continued commingling of Wanta - Reagan Protocol funds: http://www.myspace.com/tom_heneghan_intel/blog/546748980. He's trying to shore up BofA's derivatives position on the Japanese yen. He further reports that Terry Duffy, head of CME, is in possession of a $10 billion margin call on BofA, issued some days ago.Now $30 billion. Duffy flew off to Germany, Heneghan reported, to arrange a derivatives fix, perhaps in concert with Skull&Bones Duetsch Bank.

   He also reports that the new TreasSec, Jack Lew, will use constitutional authority to SEIZE the FedRes.

   HOPE sells at a premium in HELL.

Wed, 03/06/2013 - 02:00 | 3303877 Nu Yawks hottes...
Nu Yawks hottest club is's picture

But Sorkin said that didn't happen .. <rolls eyes>

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