This page has been archived and commenting is disabled.

Analyst Who Said "Buy Lehman" 20 Days Before Its Collapse Is Now On The Financial Stability Oversight Council

Tyler Durden's picture




 

Seven years ago today, Lehman Brothers failed. But it is what took place just over two weeks prior that is of interest for the scope of this article.

On August 27, less than 20 days before the failure of Lehman, Morgan Stanley analyst Patrick Pinschmidt revised his forecast on Lehman's Q3 earnings from an 8 cent profit to a Q3 loss of $2.80 a share.

Patrick cautioned: "For the franchise and shares to turn the corner, we think management needs to announce a significant bulk asset sale or framework for investors to evaluate the structure or pricing of likely asset disposals."

Also he wasn't very far off when he said that "we believe a key question for investors is not the size of the writedown, but how remaining illiquid asset exposure squares with capital cushion."

And yet, despite his clear concerns about the longevity of Lehman, did the then-Morgan Stanley analyst cut his rating on Lehman? As Reuters reminds us, the answer was a resounding no:

"The analyst maintained his "overweight" rating on shares of Lehman and Goldman."

One month later Lehman did not exist, and Goldman would have followed into the abyss had it not been bailed out first by Buffett and then by the FDIC and the Fed.

Why is this episode relevant? After all virtually everyone was saying Lehman is fine and that there is no risk for the longevity of the bank, at least until the very end, when it was revealed that Goldman's alumnus at the US Treasury had decided to sacrifice Lehman (in the process eliminating Goldman's biggest fixed income trading competitor).

The answer can be found in Mr. Pinschmidt's bio:

Patrick Pinschmidt serves as the Deputy Assistant Secretary for the Financial Stability Oversight Council at the U.S. Department of Treasury. Pinschmidt also serves as the Executive Director of the Council. Prior to joining Treasury, he served as a Financial Markets Policy Advisor to the Congressional Oversight Panel on the Troubled Asset Relief Program (TARP). Previously, Pinschmidt was a sell-side equity research analyst for ten years covering financial institutions, most recently as the Senior Broker and Exchange Analyst at Morgan Stanley. Prior to joining Morgan Stanley, Pinschmidt was the Senior Online Broker and Market Structure Analyst at Merrill Lynch. Pinschmidt holds an MBA from Columbia University’s Graduate School of Business and a bachelor's degree in U.S. History and Diplomacy from Georgetown University’s School of Foreign Service.

In other words, Patrick is now one of the top-placed people in charge of the US Treasury's FSOC. Yes, the same person who 2 weeks before Lehman failed, had an "overweight" rating on the Lehman stock, is not in charge of financial stability.

Is there any doubt why nobody has any faith that without the perpetual backing of the central money printer, US capital markets can no longer exist?

h/t @ReutersJaime

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Tue, 09/15/2015 - 13:41 | 6551473 redd_green
redd_green's picture

The sham continues. 

Tue, 09/15/2015 - 13:44 | 6551495 Plunge Protection
Plunge Protection's picture

Revolving door of failure... they should hire Gartman too while they are at it.

Tue, 09/15/2015 - 14:05 | 6551618 nope-1004
nope-1004's picture

Did I say buy Lehman in 2008?  I meant to say Sell.

 

Tue, 09/15/2015 - 14:12 | 6551664 Pladizow
Pladizow's picture

So this puppet has a different hand up his ass!

Tue, 09/15/2015 - 14:13 | 6551667 SoilMyselfRotten
SoilMyselfRotten's picture

He got it cuz Gartman turned the job down

Tue, 09/15/2015 - 14:23 | 6551712 Fish Gone Bad
Fish Gone Bad's picture

I too have to vote for TEAM GARTMAN.

Tue, 09/15/2015 - 15:00 | 6551912 Squid Viscous
Squid Viscous's picture

yawn... and Cramer is still on the joob toob after his Bear Stearns is fine call, not to mention "Winners of the New World, 2000"

Tue, 09/15/2015 - 14:13 | 6551670 TruxtonSpangler
TruxtonSpangler's picture

He knew exactly what he was doing. He knew Lehman was about to fail and the stock price had to go higher. That is what a stability manager should do. It just didnt work.

Tue, 09/15/2015 - 14:38 | 6551778 azusgm
azusgm's picture

Almost everybody who believed in capitalism knew LEH was about to fail. Too bad the whole house of corruption wasn't allowed to disappear so that there could be an honest reset.

Tue, 09/15/2015 - 14:23 | 6551710 firstdivision
firstdivision's picture

By 'overweight' I meant how much larger the expense side was to the revenue.

Tue, 09/15/2015 - 13:49 | 6551525 TeamDepends
TeamDepends's picture

Must be tough for Columbia U to keep topping itself. Add my man Pinschmidt to Cloward and Piven, Obama, the Weather Underground, and countless radical marxist douches.

Tue, 09/15/2015 - 17:21 | 6552640 HardAssets
HardAssets's picture

" Is there any doubt why nobody has any faith that without the perpetual backing of the central money printer, US capital markets can no longer exist? "

Capital markets no longer exist. No more so than they did in the ole' USSR.

There . . . fixed it for them.

Tue, 09/15/2015 - 13:42 | 6551476 redd_green
redd_green's picture

Corzine considers launching hedge fund after the stellar success at MF Global.

http://www.wsj.com/articles/jon-corzine-considers-launching-hedge-fund-1...

Tue, 09/15/2015 - 13:54 | 6551547 Chuck Knoblauch
Chuck Knoblauch's picture

The cost for staying out of prison was a son and an undisclosed amount of money.

He still has another son to give as collateral on the next venture.

Tue, 09/15/2015 - 15:27 | 6552085 LawsofPhysics
LawsofPhysics's picture

Bullshit, off with his own head!

Wed, 09/16/2015 - 06:29 | 6554341 redd_green
redd_green's picture

Im with you, Laws. If this was the old days, the pre fluoride in the water days, angry lynch mobs with torches and pitch forks would be roasing this pig and feeding him to the farm animals.

Tue, 09/15/2015 - 13:45 | 6551498 SgtMilstar
SgtMilstar's picture

Buy US treasurys.

Tue, 09/15/2015 - 13:46 | 6551504 LawsofPhysics
LawsofPhysics's picture

LOL, expected, much akin to Krugman and his Nobel prize...
Truth is treason in an empire of lies.

Tue, 09/15/2015 - 13:48 | 6551516 A is A
A is A's picture

Statist planning is the new orange...

Tue, 09/15/2015 - 14:20 | 6551694 City_Of_Champyinz
City_Of_Champyinz's picture

Hey! there is only room for one of us on ZH!  LOL

Statism: Ideas so good they have to be mandatory.

Tue, 09/15/2015 - 15:16 | 6552021 e_goldstein
e_goldstein's picture

Fight it out.

Tue, 09/15/2015 - 13:50 | 6551535 MASTER OF UNIVERSE
MASTER OF UNIVERSE's picture

Everyone was awestruck when Lehman went down. The analyst in question was as optimistic as Fuld was. Clearly, hindsight is 20/20 all around with the exception of Dr. Rajan, and Brooksley Born IMO. I, for one, was amazed when Lehman actually filed Chapter 11.

Tue, 09/15/2015 - 13:51 | 6551536 Caveman93
Caveman93's picture

Financial Stability Oversight Council? You have got to be joking. Whose stability are they looking over because it sure as fuck ain't mine!

Tue, 09/15/2015 - 13:53 | 6551553 SmedleyButlersGhost
SmedleyButlersGhost's picture

Maybe he meant "bye Lehman"?

Tue, 09/15/2015 - 13:55 | 6551565 Seer
Seer's picture

Can't make this shit up!

Wed, 09/16/2015 - 06:30 | 6554343 redd_green
redd_green's picture

"Its a crazy world"

"Somebody oughta sell tickets"

"Id buy one"

Tue, 09/15/2015 - 13:57 | 6551574 Bill of Rights
Bill of Rights's picture

Just proves us all right, we're dealing with lower IQ individuals who have to cheat, steal and lie to make it to the top.

Tue, 09/15/2015 - 14:32 | 6551749 Fish Gone Bad
Fish Gone Bad's picture

That describes serial killers as well.

Tue, 09/15/2015 - 15:48 | 6552186 bamawatson
bamawatson's picture

Ted Bundy? 

Tue, 09/15/2015 - 17:32 | 6552716 HardAssets
HardAssets's picture

Lower IQ ? No

Zero conscience. Yes

They'll say and do Anything to get what they want.

Tue, 09/15/2015 - 13:57 | 6551575 Son of Captain Nemo
Son of Captain Nemo's picture

Why ask "why"?...  And at this point?  Why not?!!!

Perhaps we should get Prince Alwaleed and Pat together for the same activity with Pat providing the line of credit to Americans "on the street"?...

Tue, 09/15/2015 - 13:57 | 6551576 Chuck Knoblauch
Chuck Knoblauch's picture

At a certain age, you should retire and go away.

Tue, 09/15/2015 - 13:57 | 6551577 astoriajoe
astoriajoe's picture

School of foreign service? Lot of spooks do that, no? 

Tue, 09/15/2015 - 13:58 | 6551583 yogibear
yogibear's picture

Reward the criminals for their crimes.

Tue, 09/15/2015 - 13:59 | 6551589 10mm
10mm's picture

Perfect,he's a fit/sarc

Tue, 09/15/2015 - 14:00 | 6551594 Clowns on Acid
Clowns on Acid's picture

This guy should be working with Cramer... in the feckin' license plate shop at Riker's Island.

Tue, 09/15/2015 - 14:23 | 6551713 Seer
Seer's picture

AND, we'd froce them to pay for their room and board!

Tue, 09/15/2015 - 14:05 | 6551604 philosophers bone
philosophers bone's picture

The bank bail-in laws are coming and they are putting all of the right pieces and players in place.  "Cash" has never been riskier.

Tue, 09/15/2015 - 14:19 | 6551688 SHsparx
SHsparx's picture

In government and wallstreet, you fail upwards.

Tue, 09/15/2015 - 14:22 | 6551704 mendigo
mendigo's picture

I hope they would say: "It is what has happened since that is truly tragic."

Tue, 09/15/2015 - 14:36 | 6551762 Seasmoke
Seasmoke's picture

Just BTFD on Lehman at Zero.

Tue, 09/15/2015 - 14:39 | 6551783 Tyrone Shoelaces
Tyrone Shoelaces's picture

'

Financial Stability Oversight Council

Sounds like something out of Atlas Shrugged.

Tue, 09/15/2015 - 14:46 | 6551821 paint it red ca...
paint it red call it hell's picture

Up is down, black is white, yes is no, truth is lies, facts are fiction, conspiracy is theory, perversion is wholesome, corruption is preferable, justice is undesirable, etc. etc.

Welcome to the politically manipulated correctedness............................... the new normal

Tue, 09/15/2015 - 15:59 | 6551915 crashguru
crashguru's picture

(in the process eliminating Goldman's biggest fixed income trading competitor)!!!!

Speaking on the fifth anniversary of Lehman's collapse, joint administrator and PWC insolvency partner Tony Lomas said the 3,400 creditors of the investment bank's UK and European operations should be repaid in full early in the New Year.

He also added that if a legal dispute with a small group of bondholders over £1.3 billion is decided in PWC's favour, creditors could get more than they are owed.

Which suggests that there were certainly much more bankrupt companies than Lehman.

It all makes perfect sense if one assumes that THEY wanted to cause as much damage as possible and that also explains why this guy got promoted.

Tue, 09/15/2015 - 15:01 | 6551920 Element
Element's picture

As long as the SEC porn servers are up, we're all green here.

Tue, 09/15/2015 - 15:02 | 6551931 chinaboy
chinaboy's picture

Financial Stability Oversight Council === Buy Lehman!!!

Tue, 09/15/2015 - 15:15 | 6552009 Atomizer
Atomizer's picture

Desperate Mission: Jeb Bush Asked Mexican Billionaire Carlos Slim ...

 

Can you spare me a peso during Lehman burning to the ground? I'll promise to transform the telecommunications answering service to press 1 for Español or press 2 for English. 

Tue, 09/15/2015 - 15:40 | 6552129 bentaxle
bentaxle's picture

Epitaph on his tombstone (after being bumped off in a self-inflicted nail gun accident,) "Didn't see that one coming neither."

Tue, 09/15/2015 - 16:04 | 6552241 SmedleyButlersGhost
SmedleyButlersGhost's picture

Ahemmmm...."either"

Either or... neither nor.  My Mom was a tough woman

Tue, 09/15/2015 - 15:40 | 6552141 Secret Weapon
Secret Weapon's picture

This dickweed is part of the problem.  Why is he pretending to be part of the solution? 

Tue, 09/15/2015 - 15:42 | 6552154 jacship
jacship's picture

Tyler

show the zh's

the list

of all bank's

derivative's

and how oil hedging

can make the market

Dance

Tue, 09/15/2015 - 15:55 | 6552213 Tegrat
Tegrat's picture

I will never forget in 2008 when Lehman stock was around $34.oo I wanted to short it, but I was worried that I could not manage the trade and still do my day job.

 

 

Tue, 09/15/2015 - 16:12 | 6552290 Greed is King
Greed is King's picture

Compared to Western banksters Mugabe is a virtuous financial genius and a paragon of prudence.

Tue, 09/15/2015 - 16:31 | 6552376 Grandad Grumps
Grandad Grumps's picture

Whether he is a moron or criminal or criminal moron, he seems to be in the right business.

Do NOT follow this link or you will be banned from the site!