Tuesday, July 6, 2010

JP Morgan put Lehman deal at risk

By James Quinn, US Business Editor 654PM GMT thirteen Mar 2010

The Wall Street promissory note conglomerate, according to the justice examiner"s inform in to Lehman"s demise, "threatened to derail" the $1.75bn (�1bn) squeeze in a row over a $15.8bn tri-party "repo" agreement in in in between the dual banks and Lehman.

So critical did the corner turn that by Sep twenty-one just one week after Lehman fell and 4 days after Barclays had voiced the goal to buy the US resources from the liquidators that negotiations in in in between the American and the British bank "reached violation point".

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The situation, that could have risked the jobs of 10,000 of Lehman"s US employees and thrown the tellurian monetary complement in to serve meltdown, is minute in the inform of Anton Valukas, the court-appointed investigator in to Lehman"s last days.

The inform covers Lehman"s unfortunate competition for collateral in the last months, when bank management team contacted billionaire Warren Buffet 3 times to find monetary assistance. Mr Valukas, who interviewed some-more than 250 people and pored by some-more than 20m inner Lehman emails, sum the assertive stairs taken by JP Morgan opposite Barclays to safeguard the US bank was not left holding billions of dollars of Lehman"s neglected assets.

The corner arose since Barclays, on Sep 18, 2008, chose not to replenish the $15.8bn tri-party repo a formidable agreement involving bonds - with Lehman, angering JP Morgan who felt that the British bank had concluded to buy all of Lehman"s securities. Two days later, on Sep 20, JP Morgan, that had a close attribute with Lehman, in jeopardy to seize the Lehman supports it hold and set them off opposite Lehman"s obligations. At the same time, and but the believe of the British bank, JP Morgan used $7bn it had modernized for Barclays" good opposite Lehman"s box of loans.

The make a difference was in the future resolved by a fortitude assembly led by the Federal Reserve Bank of New York and Lehman"s creditors committee, that ran from 3pm and "on and off by majority of the night". A understanding was struck in in in between the dual sides in the early hours of Sep 22.

In the 2,200-page report, Barclays is privileged of any indiscretion in the Lehman takeover by Mr Valukas, who records that nonetheless Barclays perceived a little resources it shouldn"t have finished in the Lehman deal, those resources were value less than $10m.

Barclays is still set to go to hearing with Lehman"s curators over allegations it perceived an bootleg "windfall" of $8.5bn as piece of the transaction.

Other sections of the inform indicate JP Morgan could face authorised claims from creditors since the last for collateral from Lehman in the last days.

The inform reveals initial hit with Mr Buffett came in Mar 2008 from Dick Fuld, Lehman"s chairman. The span discussed a collateral injection from the billionaire"s Berkshire Hathaway firm of $2bn. But Mr Fuld, who the inform found to be "at slightest grossly negligent" in propinquity to his actions, refused to await Mr Buffett"s idea that Lehman directors would buy additional shares to one side Berkshire. This rankled the investor, who, notwithstanding a call from Hank Paulson, afterwards Treasury secretary, done at Mr Fuld"s behest, was additionally not happy with tools of Lehman"s change piece or the terms.

By late August, with the bank"s try to tempt Korea Development Bank to speak up as most as $6bn in capital, Lehman boss Hugh "Skip" McGee briefed one of Mr Buffett"s lieutenants MidAmerican Energy boss David Sokol on the last-ditch plan to separate Lehman in to dual halves, one "good" and one "bad". Mr Sokol briefed Mr Bufett on the idea, but he was not assured by the plan.

In the last week prior to Lehman"s failure filing in the early hours of Sep 15, 2008, Mr McGee again reached Mr Sokol who was bear sport in Alaska to see if he had "any ideas to save us?" Mr Sokol pronounced he did not. Berkshire Hathaway was in the future contacted a fourth time to assistance save Lehman despite in a roundabout way by Bob Diamond, Barclays president, asking either he competence assistance financial an merger of the total of Lehman.

Mr Diamond left a voice message. But Mr Buffett last year certified he usually listened the summary months after since he didn"t know how to entrance his voice mail.

Spokesmen for Barclays and JP Morgan Chase chose not to criticism yesterday on the report"s findings.


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