Chapter 206： The fall of Lehman Brothers
When this happened, in the eyes of the U.S. Treasury Secretary and Federal Reserve Chairman, although it was a pity that Bank of America gave up on Lehman Brothers, at least Merrill Lynch was rescued.
The most important thing is that this process does not require the American government to pay, which also allows them to avoid the situation of being criticized by lawmakers and the public again.
Moreover, at this time, for Lehman Brothers, there is another option, which can be said to be their last straw - Barclays Bank of the United Kingdom.
The bank, which has no investment banking business, bought it after Lehman Brothers proposed a plan to break up the company in order to enter the American market.
The split plan was proposed by the CEO of Lehman Brothers, who was going to spin off Lehman Brothers' problematic assets and mortgage-related assets from the company to form a "bad bank"; combine high-quality assets and profitable businesses into one "Good Bank".
Then the "good bank" was sold to Barclays Bank in exchange for funds, which were injected into the "bad bank" to complete the rescue of the bad business.
To this end, Barclays Bank is willing to invest 10 billion US dollars to acquire the "good bank" business they spun off.
So on the third day of the meeting, the chairman of the New York Fed announced the good news to everyone, although everyone here has already known about it through their own channels-Barclays Bank in the United Kingdom has drawn up a complete set of acquisitions of Lehman. Brother's plan, and is ready to execute.
The only hurdle now is that the plan, which would require enough money from other banks to finance Lehman Brothers' distressed assets, would require a total of about $33 billion. The chairman of the Federal Reserve Bank of New York hopes that the consortium present here can give a figure and work together to solve this fund.
This incident greatly encouraged the consortium present. Except for Merrill Lynch and Citibank, two banks that had just completed their self-rescue, they were unable to contribute, and other bigwigs participated enthusiastically and quickly completed the fundraising.
Just when they thought everything was right, the chairman of the New York Fed got a call from the head of the UK Financial Services Authority, who told him that the UK would still assess whether Barclays had the right capital structure to take on the risk of taking over Lehman Brothers.
The president of the New York Fed who received the call rushed into the office of the US Treasury Secretary Paulson in a huff and told him about this. Paulson was shocked and immediately asked his subordinates to call the director of the British Financial Services Authority again. After hearing the same reply, he personally called Darling, the Chancellor of the Exchequer.
The other party also said that they were anxious about the potential risks brought about by this transaction, and that Barclays’ acquisition of Lehman would pose a threat to the UK’s financial security.
After hanging up the phone, US Treasury Secretary Paulson said sternly:
"We've been tricked by the British, they don't want to import our 'cancer'."
However, Paulson even wanted to go to the American commander and put pressure on the British Prime Minister, but he had realized from the tone of the British Chancellor of the Exchequer that the other party's attitude was very firm, so he finally gave up this idea.
Because on the phone, the British Chancellor of the Exchequer once asked him:
"We need to determine what will be undertaken and what the American government is willing to do."
To this, Paulson's answer was: "Then we have nothing to do."
Therefore, if they themselves are unwilling to contribute to the rescue of Lehman Brothers, then the British side is naturally even more reluctant to take the risk of introducing danger into the domestic financial system, after all, they have a lot of trouble to solve.
Now that things have developed, the American side immediately realized that the bankruptcy of Lehman Brothers was inevitable.
As a result, the U.S. Treasury Secretary and the Chairman of the Federal Reserve, who were originally the rescuers of Lehman Brothers, immediately turned into "extractors".
They urgently urged the board of Lehman Brothers to file for bankruptcy as soon as possible, to prevent the spread of bad market expectations.
So today, Monday, March 1, Lehman Brothers officially declared bankruptcy.
The collapse of the $650 billion-debt company, in addition to the loss of more than 20,000 employees, triggered a chain reaction in financial markets.
As soon as the market opened in the morning, the U.S. stock market suffered a "Black Monday". The Dow Jones Index recorded its largest single-day drop in points and losses since the "9.11" incident, and the global stock market also plummeted.
Under the influence of such a situation, the stock markets in Europe and Asia are also destined to not be spared, and it is believed that there will be a sharp decline after the opening in the evening.
Today, at the same time as Lehman Brothers announced its bankruptcy filing, Bank of America announced that it would acquire Merrill Lynch, the third largest investment bank in the United States, for a total price of $45 billion.
Affected by the bankruptcy of Lehman Brothers, the two remaining independent investment banks in the United States, Goldman Sachs and Morgan Stanley, also encountered a lot of trouble.
But at this time, the emergency is American International Group, the largest industrial and commercial insurance institution in the United States, which is a deep participant in subprime mortgage bonds.
At that time, in order to earn $200 million to $300 million in premiums a year, this company guaranteed a large number of CDS bonds, which is the company with the largest amount of CDS bond guarantees in the United States. Now, the repayment of CDS bond premiums alone is enough to drag this company into the abyss. .
At that time, the CDS bonds purchased by William Chen's Meta Investment Company had more than US$2 billion to be paid by the company. Fortunately, they acted fast and did not turn these premiums into AIG's debt.
Now that Lehman Brothers has filed for bankruptcy, a large number of financial institutions and counterparties that have purchased such insurance have filed claims against American International Group. Without financial aid, the company may not survive for days, if not hours.
After introducing these situations to William Chen, John Drey said:
"This afternoon, the commander-in-chief convened Treasurer Paulson, the chairman of the Federal Reserve, members of advisers, and representatives of other financial regulators for a high-level meeting in the Roosevelt Room of the White House to discuss these recent events."
"I heard that at the beginning of the meeting, the commander changed his relaxed and humorous style, looked gloomy, and bluntly asked, how did we get to where we are today? The Treasurer and the Fed chairman were speechless for a while. "
Hearing John Drey say so much to himself, he will even understand that he must not only just tell him the news he got.
From these news, William Chen can clearly see that the American government's response to the subprime mortgage crisis has changed its attitude before, from the initial financial assistance to companies, to the avoidance of government investment after being criticized, mainly by Consortiums figure it out on their own.
In the face of the government's seemingly letting go attitude, those consortiums responded negatively, which eventually led to the bankruptcy of Lehman Brothers. Now this influence and destructive power have been fully manifested, and just now John Deletti Yes, the urgent meeting of the commander is a signal.
The Treasury Secretary and the Federal Reserve have proposed not to rule out the use of quantitative easing to solve the problem of liquidity depletion in the crisis. Now, after the bankruptcy of Lehman Brothers, it seems that the era of flooding has finally begun.
This also means that the subprime mortgage crisis is about to pass the second stage and begin to shift to the third stage. Therefore, his operational strategy also needs to be adjusted accordingly.
"William, I know you've been shorting all the time, so you must have made a lot of money in this subprime mortgage crisis, as can be seen from the profit we invested in your private equity fund."
Chen William knew that the other party had told him so much, and he would definitely ask about these things. He didn't need to hide it. Now almost everyone knows that he made a lot of money in the subprime mortgage crisis because he chose the right direction. Where does the constant buying and buying and the big investment money come from?
It's just that as for the specific amount of his earnings, unless you talk to the top management of his company, others can only guess. The most common view is that his profit exceeds 20 billion US dollars.
Sure enough, John Del Rey continued to ask: "It is said that your profit exceeds 20 billion US dollars?"
"In fact, if all the funds add up, there will be more."
Hearing what William Chen said, John Drey nodded.
This is similar to what he guessed, except that when William Chen said this he meant the fund he invested in himself, and what John Drey understood was that adding Chen William's private equity fund is profitable, so Chen William's net worth in his mind will be much lower than his actual assets.
"However, William, what you need to pay attention to is that although your profits are obtained through legitimate means, under this situation, some public opinions and public opinions have to be paid attention to, so you still need to do something. ."
When John Drey and William Chen were talking about this, the door of the study was suddenly knocked, so John Drey stopped and saw his assistant Kevin who came in.
"Mr. Del Rey, I just got a call from Capitol Hill. Congress has an urgent meeting tonight and needs you to come over."
John Drey looked at the time, it was almost half past eight in the evening.
"Why so late?"
"Yes, Mr. Del Rey, it is said that the Secretary of the Treasury and the Chairman of the Federal Reserve are going to explain to Congress the proposed bailout of the American International Group. This matter is very urgent and they hope to start it tomorrow."
Sure enough, when William Chen heard this, he understood that after the bankruptcy of Lehman Brothers caused market panic, the American government still decided to bail out the larger American International Group.
He also knew that the back-and-forth conversation between his uncle and his assistant should be deliberately letting him hear, so as to get more information about the current situation.
"Okay William, I have to go to Capitol Hill first. It looks like it will be very late tonight. You can stay here for a while, I have other things I want to tell you specifically, but now I don't have time, Just let Kevin talk to you."
The most important thing is that this process does not require the American government to pay, which also allows them to avoid the situation of being criticized by lawmakers and the public again.
Moreover, at this time, for Lehman Brothers, there is another option, which can be said to be their last straw - Barclays Bank of the United Kingdom.
The bank, which has no investment banking business, bought it after Lehman Brothers proposed a plan to break up the company in order to enter the American market.
The split plan was proposed by the CEO of Lehman Brothers, who was going to spin off Lehman Brothers' problematic assets and mortgage-related assets from the company to form a "bad bank"; combine high-quality assets and profitable businesses into one "Good Bank".
Then the "good bank" was sold to Barclays Bank in exchange for funds, which were injected into the "bad bank" to complete the rescue of the bad business.
To this end, Barclays Bank is willing to invest 10 billion US dollars to acquire the "good bank" business they spun off.
So on the third day of the meeting, the chairman of the New York Fed announced the good news to everyone, although everyone here has already known about it through their own channels-Barclays Bank in the United Kingdom has drawn up a complete set of acquisitions of Lehman. Brother's plan, and is ready to execute.
The only hurdle now is that the plan, which would require enough money from other banks to finance Lehman Brothers' distressed assets, would require a total of about $33 billion. The chairman of the Federal Reserve Bank of New York hopes that the consortium present here can give a figure and work together to solve this fund.
This incident greatly encouraged the consortium present. Except for Merrill Lynch and Citibank, two banks that had just completed their self-rescue, they were unable to contribute, and other bigwigs participated enthusiastically and quickly completed the fundraising.
Just when they thought everything was right, the chairman of the New York Fed got a call from the head of the UK Financial Services Authority, who told him that the UK would still assess whether Barclays had the right capital structure to take on the risk of taking over Lehman Brothers.
The president of the New York Fed who received the call rushed into the office of the US Treasury Secretary Paulson in a huff and told him about this. Paulson was shocked and immediately asked his subordinates to call the director of the British Financial Services Authority again. After hearing the same reply, he personally called Darling, the Chancellor of the Exchequer.
The other party also said that they were anxious about the potential risks brought about by this transaction, and that Barclays’ acquisition of Lehman would pose a threat to the UK’s financial security.
After hanging up the phone, US Treasury Secretary Paulson said sternly:
"We've been tricked by the British, they don't want to import our 'cancer'."
However, Paulson even wanted to go to the American commander and put pressure on the British Prime Minister, but he had realized from the tone of the British Chancellor of the Exchequer that the other party's attitude was very firm, so he finally gave up this idea.
Because on the phone, the British Chancellor of the Exchequer once asked him:
"We need to determine what will be undertaken and what the American government is willing to do."
To this, Paulson's answer was: "Then we have nothing to do."
Therefore, if they themselves are unwilling to contribute to the rescue of Lehman Brothers, then the British side is naturally even more reluctant to take the risk of introducing danger into the domestic financial system, after all, they have a lot of trouble to solve.
Now that things have developed, the American side immediately realized that the bankruptcy of Lehman Brothers was inevitable.
As a result, the U.S. Treasury Secretary and the Chairman of the Federal Reserve, who were originally the rescuers of Lehman Brothers, immediately turned into "extractors".
They urgently urged the board of Lehman Brothers to file for bankruptcy as soon as possible, to prevent the spread of bad market expectations.
So today, Monday, March 1, Lehman Brothers officially declared bankruptcy.
The collapse of the $650 billion-debt company, in addition to the loss of more than 20,000 employees, triggered a chain reaction in financial markets.
As soon as the market opened in the morning, the U.S. stock market suffered a "Black Monday". The Dow Jones Index recorded its largest single-day drop in points and losses since the "9.11" incident, and the global stock market also plummeted.
Under the influence of such a situation, the stock markets in Europe and Asia are also destined to not be spared, and it is believed that there will be a sharp decline after the opening in the evening.
Today, at the same time as Lehman Brothers announced its bankruptcy filing, Bank of America announced that it would acquire Merrill Lynch, the third largest investment bank in the United States, for a total price of $45 billion.
Affected by the bankruptcy of Lehman Brothers, the two remaining independent investment banks in the United States, Goldman Sachs and Morgan Stanley, also encountered a lot of trouble.
But at this time, the emergency is American International Group, the largest industrial and commercial insurance institution in the United States, which is a deep participant in subprime mortgage bonds.
At that time, in order to earn $200 million to $300 million in premiums a year, this company guaranteed a large number of CDS bonds, which is the company with the largest amount of CDS bond guarantees in the United States. Now, the repayment of CDS bond premiums alone is enough to drag this company into the abyss. .
At that time, the CDS bonds purchased by William Chen's Meta Investment Company had more than US$2 billion to be paid by the company. Fortunately, they acted fast and did not turn these premiums into AIG's debt.
Now that Lehman Brothers has filed for bankruptcy, a large number of financial institutions and counterparties that have purchased such insurance have filed claims against American International Group. Without financial aid, the company may not survive for days, if not hours.
After introducing these situations to William Chen, John Drey said:
"This afternoon, the commander-in-chief convened Treasurer Paulson, the chairman of the Federal Reserve, members of advisers, and representatives of other financial regulators for a high-level meeting in the Roosevelt Room of the White House to discuss these recent events."
"I heard that at the beginning of the meeting, the commander changed his relaxed and humorous style, looked gloomy, and bluntly asked, how did we get to where we are today? The Treasurer and the Fed chairman were speechless for a while. "
Hearing John Drey say so much to himself, he will even understand that he must not only just tell him the news he got.
From these news, William Chen can clearly see that the American government's response to the subprime mortgage crisis has changed its attitude before, from the initial financial assistance to companies, to the avoidance of government investment after being criticized, mainly by Consortiums figure it out on their own.
In the face of the government's seemingly letting go attitude, those consortiums responded negatively, which eventually led to the bankruptcy of Lehman Brothers. Now this influence and destructive power have been fully manifested, and just now John Deletti Yes, the urgent meeting of the commander is a signal.
The Treasury Secretary and the Federal Reserve have proposed not to rule out the use of quantitative easing to solve the problem of liquidity depletion in the crisis. Now, after the bankruptcy of Lehman Brothers, it seems that the era of flooding has finally begun.
This also means that the subprime mortgage crisis is about to pass the second stage and begin to shift to the third stage. Therefore, his operational strategy also needs to be adjusted accordingly.
"William, I know you've been shorting all the time, so you must have made a lot of money in this subprime mortgage crisis, as can be seen from the profit we invested in your private equity fund."
Chen William knew that the other party had told him so much, and he would definitely ask about these things. He didn't need to hide it. Now almost everyone knows that he made a lot of money in the subprime mortgage crisis because he chose the right direction. Where does the constant buying and buying and the big investment money come from?
It's just that as for the specific amount of his earnings, unless you talk to the top management of his company, others can only guess. The most common view is that his profit exceeds 20 billion US dollars.
Sure enough, John Del Rey continued to ask: "It is said that your profit exceeds 20 billion US dollars?"
"In fact, if all the funds add up, there will be more."
Hearing what William Chen said, John Drey nodded.
This is similar to what he guessed, except that when William Chen said this he meant the fund he invested in himself, and what John Drey understood was that adding Chen William's private equity fund is profitable, so Chen William's net worth in his mind will be much lower than his actual assets.
"However, William, what you need to pay attention to is that although your profits are obtained through legitimate means, under this situation, some public opinions and public opinions have to be paid attention to, so you still need to do something. ."
When John Drey and William Chen were talking about this, the door of the study was suddenly knocked, so John Drey stopped and saw his assistant Kevin who came in.
"Mr. Del Rey, I just got a call from Capitol Hill. Congress has an urgent meeting tonight and needs you to come over."
John Drey looked at the time, it was almost half past eight in the evening.
"Why so late?"
"Yes, Mr. Del Rey, it is said that the Secretary of the Treasury and the Chairman of the Federal Reserve are going to explain to Congress the proposed bailout of the American International Group. This matter is very urgent and they hope to start it tomorrow."
Sure enough, when William Chen heard this, he understood that after the bankruptcy of Lehman Brothers caused market panic, the American government still decided to bail out the larger American International Group.
He also knew that the back-and-forth conversation between his uncle and his assistant should be deliberately letting him hear, so as to get more information about the current situation.
"Okay William, I have to go to Capitol Hill first. It looks like it will be very late tonight. You can stay here for a while, I have other things I want to tell you specifically, but now I don't have time, Just let Kevin talk to you."
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