Today, Lehman Brothers Holdings Inc. joins its counterparts at Bear Stearns Cos., Merrill Lynch & Co. and more than 10 banks that couldn't survive this year's credit crunch.
Just when the US economy seems to be leveling out, the collapse of the 4th largest US investment bank will cast chaos upon the market and would be extra heavy on firms and individuals who are relying on Lehman for financing. This however shouldn’t come at a surprise to anyone with the company losing 94% of its market value this year. Moreover everyone except its shareholders and workers have everything to gain and nothing to lose with Lehman’s bankruptcy.
The good news is that as the system has already been through the crisis of Bear Stearns Cos, it is expected that given time the losses will distribute themselves in the market and there will not be any lasting turmoil.
For a more in depth analysis of the difference between Bear Stearns and Lehman Brothers, check out Barry Ritholtz's article "The Terrible Lessons of Bear Stearns".
4 comments:
What does everyone have to gain from Lehman's bankruptcy?
Well Lehman's assets would have to be forced to sell at even lower prices (Bad for related parties, good for others).
why is it good for others...doesn't the low sale prices drive the prices in the market lower?
Of course there are good and bad involved. But the bad conditions of the market does not take away from the great deals Lehman's assets will have now.
But I did underestimate the impact of Lehman's collapse on big players as there are a lot more related parties than I orginally assumed.
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