Even those who were smart enough to recognize that the independent investment bank model was no longer viable thought that Goldman would get acquired.
There were whispers that the ~ GBP 103 Billion HSBC (the only mega cap bank stock to actually give investors a positive return year to date), would be the one to pick up the franchise. I for one, was one of the people who liked this story – it made sense right? There really didn’t seem to be anybody else who had the firepower at least liquidity-wise to pull off that kind of trade.
I was naive. I forgot about Goldman.
Firepower clearly has nothing to do with liquidity. The kind of lobby that Goldman commands is undeniable. How else do you explain the fact that Bear, Merrill, and Lehman were allowed to fail Read the rest of this entry »
Many are loudly criticizing Paulson’s mega bailout fund. $700bn is not a small amount considering the fact that the global GDP as of 2007 is estimated at around $55 trn (1% of global GDP), and the size of the US economy is around $14 trn (therefore around 5% of US GDP).
People are saying that the US taxpayer is getting squeezed from every which angle to make up for the irresponsibility of mega ‘sophisticated’ financial institutions. Not only is he having to deal with a fall in the prices of his real estate assets, costlier credit, job insecurity and business uncertainty, he’s now having to subsidize something that he doesn’t even understand. This is not entirely true however Read the rest of this entry »
I did a stint at AIG about a year back, helping them with restructuring their UK business into a consolidated entity. They were speaking to Standard & Poors to get a credit rating for the consolidated entity. They got the rating that they were looking for. I wasn’t surprised, the amount I heard about AIG’s gold standard risk management infrastructure and the highly risk averse investment mandate.
Of course this didn’t help much when the $440bn worth of Credit Default Swaps (CDS) that they issued to everybody and their uncle Read the rest of this entry »
If you’ve been watching the market, even if not very closely, you’ll agree with me that it’s been – at the risk of sounding facetious – surreal.
Monday felt like a train wreck – Paulson’s refusal to bailout Lehman over the weekend and its subsequent bankruptcy announcement, and Merrill’s overnight sale to Bank of America (BoA) had my head spinning. If the Monday wasn’t black enough with news of Lehman and Merrill, we quickly learned that AIG was going around with a begging bowl trying to raise capital in the tens of billions to escape bankruptcy. Monday closed with the Dow 500 points down – that’s almost 5% - in contrast to the less that 1% movements that we’re used to seeing for that index.
In a discussion with a friend we realised that two global and highly esteemed (although Lehman had a more patchy 160 year history than Merrill Lynch) had within days just *poof!* ceased to exist. While BoA will probably retain the Merrill brand, its unlikely that my kids will ever hear the word ‘Lehman’. Indeed Lehman Brothers will probably be relegated to a notch in Barclay’s timeline on their website’s ‘About Us’ page.
One week ago, this wasn’t likely. 
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