http://bankimplode.com/blog/2008/06/02/morgan-merrill-and-lehman-get-cut-down/ Mon, 11 Jul 2011 17:39:06 +0000 hourly 1 http://wordpress.org/?v=3.3.1 http://bankimplode.com/blog/2008/06/02/morgan-merrill-and-lehman-get-cut-down/comment-page-1/#comment-1069 Vic Vysotsky Sun, 08 Jun 2008 16:49:32 +0000 http://bankimplode.com/blog/?p=189#comment-1069 The situations of the banks mentioned in the story are different from one another. However, they all share a basic constraint. As losses are recognized, each of these banks must either inject fresh capital, which these days can be very expensive, or shrink their loan books to keep their capital ratios adequate. Bank of America is well situated to handle this, because of their huge retail base; their biggest problem at the moment is that if Countrywide were to go bankrupt, the resulting chaos would seriously harm BOA, which is why BOA is still grimly keeping Countrywide afloat. Merrill Lynch's investment banking arm has been playing high-risk games for at least three years, and I have less than full confidence that even Merrill Lynch senior management is fully aware of all the risks Merrill is exposed to. JP Morgan should be OK; their risk management strategy is quite well integrated, and should protect them. Of course, their acquisition of Bear Stearns will cause them big headaches, but the Fed will largely insulate Morgan from the downside consequences of those. As for Lehman, the rumors keep circulating that Lehman's situation is weak, but I'm somehat skeptical about those rumors. Lehman has been through many ups and downs in the financial markets, and has shown great resiliency in the past; I bet they ill again. The situations of the banks mentioned in the story are different from one another. However, they all share a basic constraint. As losses are recognized, each of these banks must either inject fresh capital, which these days can be very expensive, or shrink their loan books to keep their capital ratios adequate. Bank of America is well situated to handle this, because of their huge retail base; their biggest problem at the moment is that if Countrywide were to go bankrupt, the resulting chaos would seriously harm BOA, which is why BOA is still grimly keeping Countrywide afloat. Merrill Lynch’s investment banking arm has been playing high-risk games for at least three years, and I have less than full confidence that even Merrill Lynch senior management is fully aware of all the risks Merrill is exposed to. JP Morgan should be OK; their risk management strategy is quite well integrated, and should protect them. Of course, their acquisition of Bear Stearns will cause them big headaches, but the Fed will largely insulate Morgan from the downside consequences of those. As for Lehman, the rumors keep circulating that Lehman’s situation is weak, but I’m somehat skeptical about those rumors. Lehman has been through many ups and downs in the financial markets, and has shown great resiliency in the past; I bet they ill again.

]]> http://bankimplode.com/blog/2008/06/02/morgan-merrill-and-lehman-get-cut-down/comment-page-1/#comment-1031 Bank-Implode! » Merrill Lynch - $32.2B Tue, 03 Jun 2008 00:27:41 +0000 http://bankimplode.com/blog/?p=189#comment-1031 [...] Morgan Merrill and Lehman get Cut Down [...] [...] Morgan Merrill and Lehman get Cut Down [...]

]]> http://bankimplode.com/blog/2008/06/02/morgan-merrill-and-lehman-get-cut-down/comment-page-1/#comment-1030 Bank-Implode! » Lehman Brothers - $7.2B Tue, 03 Jun 2008 00:26:18 +0000 http://bankimplode.com/blog/?p=189#comment-1030 [...] Morgan Merrill and Lehman get Cut Down [...] [...] Morgan Merrill and Lehman get Cut Down [...]

]]> http://bankimplode.com/blog/2008/06/02/morgan-merrill-and-lehman-get-cut-down/comment-page-1/#comment-1029 Bank-Implode! » Morgan Stanley - $16.1B Tue, 03 Jun 2008 00:25:33 +0000 http://bankimplode.com/blog/?p=189#comment-1029 [...] Morgan Merrill and Lehman get Cut Down [...] [...] Morgan Merrill and Lehman get Cut Down [...]

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