Lehman Brothers, which is the nation's No. 4 investment bank, may need a miracle to survive, the institution was racing to find a buyer two days after it laid out a restructuring plan it said would raise badly needed cash it lost on bad bets in real estate holdings.
The Federal Reserve Bank of New York (the Fed) just held an emergency meeting with major financial institutions and top Washington policymakers to discuss the future of Lehman Brothers.
The Friday night meeting that was attended by Treasury Secretary Henry Paulson, was held at the offices of New York Federal Reserve Bank president Timothy Geithner. The meeting was confirmed by Fed spokesperson Michelle Smith.
However, Smith refused to disclose what financial institutions participated in the meeting or whether the group had reached any conclusion over how to resolve the crisis facing Lehman Brothers. She said that in addition to Paulson and Geithner, Christopher Cox, the chairperson of the Securities and Exchange Commission, was in attendance for the discussions. Moreover, the private sector participants that were described by Smith, only as "senior representatives of major financial institutions."
Meanwhile, the Wall Street Journal reported on its Web site that this group included Merrill Lynch chief executive John Thain and Morgan Stanley chief executive John Mack among others. For information, earlier in the day a person familiar with Paulson's thinking said that the treasury secretary was opposed to the use of any government cash to bail Lehman Brothers out of its financial difficulties.
Paulson believes the Lehman condition is different in two critical aspects from the government-assisted rescue of Bear Stearns back in March. In addition, Paulson believed that financial markets have been aware for some time of the difficulties facing Lehman and have had time to prepare and the Fed is now allowing investment banks in need of emergency loans to borrow directly from the Fed just as commercial banks can do.
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