Saturday, September 13, 2008

The LTCM Meeting Versus The Lehman Meeting

When Long Term Capital Management was collapsing the New York Fed held an emergency meeting similar to the meeting held yesterday evening regarding Lehman Bros.

The LTCM meeting was held on September 22, 1998. It is instructive to review who was at that meeting, almost 10 years to the day of the emergency Lehman meeting:

Bankers Trust, Barclays, Bear Stearns, Chase, Credit Suisse First Boston, Deutsche Bank, Lehman Brothers, Morgan Stanley, Credit Agricole, Banque Paribas, Salomon Smith Barney, Societe Generale, Merrill Lynch, Goldman Sachs, UBS and JPMorgan
Of this group, Bear Stearns is gone, Lehman will be buried on Sunday and Merrill Lynch is on the edge. The only other independent investment banks still standing are Goldman Sacks and Morgan Stanley.

This needs to be re-stated. If Merrill goes down, the only remaining significant(that the NY Fed calls to emergency meetings) independent investment banks will be Goldman Sachs and Morgan Stanley.

Maybe its time to re-read my Does Goldman Sachs Run The World? column.

-Robert Wenzel

1 comment:

  1. Wow; this sure reminds Sparky of the Long Term Capital Management (LTCM) collapse about ten years back.

    It’s also interesting to note that some of the same slippery players are present at this meeting!

    Also interesting is this: The main reason LTCM management got into so much trouble with greed-drive leverage is because the “industry,” eager for LTCM’s growing business, fronted them far too much cash, and at far too low a cost.

    This time around, the same thing happened; but this time it was the Federal Reserve under Greenspan that cranked out way too much overly cheap money; and this time isn't wasn't LTCM that got greedy, it was the entire industry!!

    We’re in very, very deep trouble folks; just watch!

    Lehman is but the tip of the proverbial iceberg; Wachovia Bank (WB) is close behind; Merrill Lynch’s balance sheet is obviously cooked; Citigroup’s clearly bordering on insolvency, and once its Level III crap is eventually marked to market it will be bankrupt; and the infamous SEC-evading John J Mack will also see Morgan Stanley continue to crumble like an over-cooked cookie.

    Stay tuned folks; and unless you want to play the US-based financials Put Option game, stay safely sidelined.