After Lehman Brothers revealed it liquidated three investment funds last quarter as their assets declined in value amid the larger credit crisis, Deutsche Bank rushed out to maintained its “buy” rating and a price target of $52 on the company’s stock. When the pain from laughing so hard subsides, continue on:
Lehman moved the funds’ assets — worth about $1 billion — onto its balance sheet. The bank purchased another $800 million in “deteriorated” assets from other funds
For it’s part, Deutsche Bank said it expects Lehman Brothers to write down $2.3 billion in the second quarter, adding that the investment bank does not face a major liquidity risk in the short-term.
But what need has Lehman Brothers for cash any way? The ailing broker/banker can now do the ”in thing” thanks to a very accommodating Fed:
Wall Street firms may be bundling high-yield, high-risk corporate loans into securities to use as collateral to borrow from the U.S. government, according to a report by Morgan Stanley analysts. Securities firms can borrow against collateralized loan obligations at the Federal Reserve’s Primary Dealer Credit Facility, the analysts said. The Fed set up the facility last month, its first extension of credit to non-banks since the Great Depression.
They’re also “an easy way for banks to reduce balance sheet risk, which indirectly helps reduce capital requirements, by funding the AAA through the Fed and selling the equity, which provides high yield to investors”
Can I bundle my Visa, Mastercard and American Express bills and give them to The Fed as collateral for a prime loan?