Professor Elam

The big poker game this weekend is not in Las Vegas, it is at the Federal Reserve Building in NYC.
Lehman must be sold to allay fears that the markets will melt down this week.  Lehman as I described in class this week does not have enough capital to get through its Sept 30 examination. Now the FED has called in Morgan, MER, et al and asked them to buy it. As one player put it, and what about the next one.  for that the FEDS have no answer. This needs to get done before teh Asian markets open on Monday, which is to say Sunday night here.

If there are no buyers for mortgages Lehman holds, the thinking is that buyers will balk at buying anything.  That would not be good. Even the foreign central banks are urging something must be done.

I would say, take the $40 B in troubled LEH mortgages, fold them into Fannie, then sell the brokerage offices to the other brokers.  But then I not get hired as a consultant.

Stay tuned.