Independent UK: Banking giants in the spotlight as confidence drains from Wall Street

[marmar]

Banking giants in the spotlight as confidence drains from Wall Street
By Stephen Foley in New York
Monday, 17 March 2008


The bosses of four of Wall Street's biggest investment banks are preparing to report dismal financial results this week, and the short-term stability of the US financial system may well turn on their tone of voice and turn of phrase when they face investors.

After the crisis of confidence that overwhelmed Bear Stearns in a matter of days, investors will tune into the quarterly conference call with executives at its close peer Lehman Brothers with particular concern tomorrow.

But sources at Lehman Brothers have already begun to sketch the reassuring picture that Dick Fuld, chief executive, will pass to investors, saying that it learnt lessons from the last credit crunch in 1998 and has sufficient reserves in cash and easily sellable assets to cover even a large-scale withdrawal of lending by its creditors and trading partners.

Lehman is seen as closest in size and structure to Bear, since both are leaders in fixed-income trading, particularly in mortgage-related derivatives. Its shares plunged 15 per cent on Friday when Bear Stearns had to accept a bail-out by the Federal Reserve and JPMorgan Chase.

When Alan Schwartz, Bear Stearns chief executive, appeared on television last week to say that rumours of a liquidity crisis were false, his performance failed to reassure investors and, some say, may have contributed to the exodus of clients and counter-parties.

"We are in a tenuous market environment and experiencing a true crisis of confidence," warned Meredith Whitney, analyst at Oppenheimer & Co. "A company is only as solvent as the perception of its solvency." ......(more)

The complete piece is at: http://www.independent.co.uk/news/business/news/banking-giants-in-the-spotlight-as-confidence-drains-from-wall-street-796867.html

[Gman]

1. "A company is only as solvent as the perception of its solvency"

Very true words that apply to any company big or small. If a company is perceived insolvent, even if they are solvent, they cannot borrow money. Cash flow, the life blood of a business dries up. The company collapses.

[DemocratInSoCal]

2. TRANSLATION

But sources at Lehman Brothers have already begun to sketch the reassuring picture that Dick Fuld, chief executive, will pass to investors, saying that it learnt lessons from the last credit crunch in 1998 and has sufficient reserves in cash and easily sellable assets to cover even a large-scale withdrawal of lending by its creditors and trading partners.

TRANSLATION: Lehman Brothers is about to run out of money, and will suffer the same fate as Bear Sterns, within the next few weeks, if not sooner.

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