Friday, September 26, 2008

Lehman and WaMu failures

When they let Lehman fail they thought it would be contained.  It wasn't.  

Brad DeLong pointed out that when they let Lehman go the funding market went haywire.  

There is something like 30 billion in "other liabilities" (mostly debt) at WaMu.  They let it fail too.

The credit market sieze up is just going to get a lot worse.

Its funny - the government with one hand passes out 700 billion to "free up the credit market" and at the other hand throws petrol on the flames.

I am surprised.  It cost me money.  But it was always a wild-ass-speculative bet.  

I only wish I had done the arb of going long the preferred and short the common rigged so I made money on all outcomes.  

But I did not.  My bad.

J

2 comments:

John Haskell said...

the government passed out $700 billion? When did that happen?

Despite Paulson's best efforts it looks like some kind of responsible plan will be put together which involves taking over bad banks and not giving Christmas presents to the ones that can survive. Alas GS may find itself in the former group.

Anonymous said...

hey man, don't feel bad. a lot of people lost out on the WaMu trade. Of course, the Lehman trade is one that worked in a more orderly fashion. Most people were playing the takeover where they went long the Bank's debt and short the holding co thinking that the bad assets would push recoveries down on the holding co and the thrift business would keep the recoveries high on the Bank's debt - and just the opposite happened. I mean, who the fuck is able to buy just the assets while fucking all of the bondholders in the ass? The equity holders knew what they were getting into so I can't feel bad for them (hope your losses weren't in equities!). But to screw the bondholders like that is insane!

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