Tuesday, September 30, 2008

House of Reps Email Swamped

While trying to send a piece of my mind (a resource in short supply, I assure you) to the House of Representatives, I found that their servers are in meltdown mode today.

The message is clear: Congress can't even be counted on to maintain email for itself. Why on earth would we trust it to bail out Wall Street?

Dude! Where's my meltdown?

I was promised a historic meltdown. Buffett himself promised me one. Where is my historic friggin meltdown?!

With congress rejecting the Paulson bailout plan, the dow dropped by 777 points. We were treated to headlines about "Biggest Point Drop Ever!" Naturally, anybody who has more than a dollar in the market knows that percentage drops are all that matter. A drop 777 points does not make even the top 10 list of all-time point drops; it barely makes the top 20 list at number 18.

Hey congress! Don't you have elections coming up? If I were you, I'd go home and try to get reelected before this legislative fiasco does any more damage to your careers. And stop the fear mongering game. That hasn't been fashionable since Saddam was in power.

Lest I leave you with the wrong idea, I do think that Federal intervention will be necessary to clean up the mess that investment banks have left us with over the past decade. However, the Paulson plan was probably the worst way to approach the problem. Fundamentally, the crisis of confidence stems from the insolvency of the financials. Their balance sheets would have negative net worth if the tsunami of foreclosures were properly discounted, so the Paulson plan did everything it could to prop up the banks with money as well as hide the securities tied to mortgages.

As an investor, why on earth would I return to the market and buy shares in a company that I know was insolvent yesterday, but is solvent today because congress changed the definition of solvency? Furthermore, the companies got themselves into major trouble because of colossal mismanagement of their investments. Having proved themselves to be terrible investors of their own money, why would the Treasury reward them with a $700B investment and think that they have suddenly become great investors?

There is a very straightforward way to deal with these insolvencies. The prescription? The companies should be forced into receivership (the alphabet soup of aid from the Fed is keeping them alive at the moment), then wipe out the shareholders, haircut the bonds, fire the board and CEO, recapitalize, and reboot.

Naturally, the process is painful, but the sooner we get started, the sooner we get back to health.

Finally, I don't agree with everything Ron Paul says, but he delivers a good description of the problem from his testimony yesterday:

Monday, September 29, 2008

Clear, Concise, and a Laugh

Denniger seems to have captured the essence of what folks are trying to communicate to congress here (pdf warning.)

And you might as well watch this video, because you need a laugh while the empire is being destroyed in DC.

Good luck today.

Saturday, September 27, 2008

Politics and the Bailout

The Rasmussen Survey tells us that politicians have not quite made their case to the American public:
Only 30% of U.S. voters think the federal government should step in to rescue the country’s troubled financial markets, according to a new Rasmussen Reports national telephone survey.

A sizable majority (63%), in fact, are worried that the federal government will do too much to respond to the current woes. The survey was taken Wednesday night, even as President Bush was making a nationally televised address urging Congress to pass the $700-billion taxpayer-backed bailout plan proposed by his administration.
This result is similar to anecdotal reports of phone calls and emails into the congressional offices:
Asked about the types of responses he's hearing, Rep. Rush Holt, D-Hopewell Township, said Thursday: "I would say they are 50-50 - between 'no' and 'hell no.'"
So with public sentiment running against Wall Street and an election in 6 weeks, what politician is going to vote for a $700B giveaway to Wall Street?

I think the answer is: Only those no chance of being either reelected or unelected. Currently, only 25 House Republicans (of 199) look set to vote with the Democrats, and I can't get solid figures as to how many House Democrats will vote against.

As near as I can tell, there is a dilemma in front of the folks up for reelection. They would love to vote against the bailout, because that is the clear election-vote winner. On the other hand, if Hank's doomsday scenario unfolds, they don't want to be blamed. They also have advisors telling them that a stock-market crash may happen even if the $700B check is written, which would be the worst result possible for their reelection.

Of those up for reelection, the House Republicans have found their out: They say the current incarnations of the bill simply do not adhere to any principles of the Republican platform, and since the Democrats control the House and Senate, they can vote to stop Armageddon if that is truly what is at stake.

Currently, the best out for the House Democrats is: We will not push through legislation of this size without consensus. It is a weak argument, but seems to be the best one available.

The leadership (Bush, Pelosi, Dodd, Frank) seems hellbent on spending $700B on the way out the door. They have stuck their neck out and decreed, It will pass. Should it fail and the market crashes, they will point fingers at Congress (from the executive branch) or at Republicans (from the Congressional Democrats.)

I have no idea how the current lockup is fixed. Monday will be interesting.

Friday, September 26, 2008

Washington Mutual Reeducates Investors On Failure

There are now all sorts of articles on Washington Mutual's failure. Something that is missing from the discussion is: Why the stock was trading for more than pennies before today. Most folks will point to the SEC regulations that forbid shorting. In a normal market, people who think the bank is insolvent would have shorted WM. So all those folks that bought yesterday would have been saved from the opportunity to lose $1.99/share, because the stock would have already been trading at pennies.

However, I think those regulations are only part of the story. The real question is: Who was still holding the stock?

I can only conclude is that it was mostly held by folks who do not understand the basic capital structure of businesses. The arguments for holding the stock seem to run along the lines of "$1.99 per share?! The furniture is worth more than that!" Now would be a good time to relearn about capital structure, because the common shareholders don't see any of the money from the sale of furniture.

When a company wants to raise money, it has several options. For simplicity, we will look at only bonds, preferred stock, and common stock.

Common stock: An investor puts up money, and will see the promise of share appreciation and/or dividends as the business grows.

Preferred stock: Perhaps the company has already issued common stock and sees a clear business opportunity that requires capital to pursue. They make an offer to investors that they will take money in exchange for preferred stock, which carries a specified dividend, and they guarantee that the investors will get their money before common stockholders if the company fails.

Bonds: The company has some asset (like a building and furniture), and it borrows from a bond investor by offering the asset as collateral. If the company fails, the bond investor sells the asset to recover the debt.

So what happened in the Washington Mutual failure? The banking part of the company was taken over by the FDIC. Since the FDIC is going to take a loss on the banking part of the biz, it sold off the deposits to JPM for $2B. There are other items that need selling.

The remaining part of WaMu (the holding company) will sell off everything that remains, which is not much. The bondholders might see a few pennies, but there are back salaries (for example) to need to be paid first.

After the few pennies go to the bond holders, there is no money left for the preferred stockholders. The common stockholders might as well go out for a beer, because they have no hope of seeing any money from the carcass.

So now the question is: Why are stocks of the remaining troubled banks not at pennies? Will the shareholders learn the lesson from WaMu?

Sunday, September 21, 2008

Goldman, Morgan Convert

From Yahoo -- Last major investment banks change status :
"Investors feared that the last remaining independent investment banks would not be able to survive in their current form. There had been speculation that both institutions would be acquired by commercial banks, whose ability to take deposits would give them a stable source of funding."
What a great idea! Now you too can do your daily banking with the company that lost so much of their investors capital that they BROUGHT DOWN THE BANKING SYSTEM AND NEEDED A TRILLION DOLLAR BAILOUT!

Great idea, people will just run to deposit money in this bank.

Saturday, September 20, 2008

We are rewarding failure

Bloomberg informs us that:
The Treasury is stepping up as the buyer of last resort for mortgage-linked assets that few other financial institutions in the world want to buy.
This statement is absolute rubbish. The problem is that the banks do not want to sell at the current market prices. Some of those prices are, in fact, zero.

The correct response is to sell them out of bankruptcy. Instead, we give them a subsidy by having taxpayers' money buy the toxic waste. We are rewarding failure.

There is only one sensible response from the public: Unelect them all. Vote anti-incumbent this year.

Friday, September 19, 2008

Cox and the Law of Unintended Consequences

So Chris Cox, chair of the SEC, is doing his best to prop up financials. That gives me a warm and fuzzy feeling in my gut.

The only problem: He is freezing out the options market. From Bloomberg.com: Worldwide:
SEC staff will recommend commissioners approve a rule to grant a permanent exemption [to the no-shorting rule], the agency said in statement today. Options market makers would have been prohibited from making short sales starting next week under the ban adopted today to keep speculators from driving down stock prices.

Without the change, the $1.6 trillion U.S. options market may be ``dead in the water,'' said Henry Schwartz, president of Trade Alert LLC. William Brodsky, chief executive officer at the Chicago Board Options Exchange, the largest U.S. options marketplace, called the SEC ban ``draconian.'' The Options Clearing Corp., which processes all trades of exchange-listed contracts in the U.S., said the limit on market makers may prove ``potentially disastrous'' for options, which give investors the right to buy or sell stocks at fixed prices in the future.
As you may have noticed, there was substantially smaller volume in financial stocks today, which is telling us that liquidity is drying up.

So like housing: You can keep the price high, but the number of transactions will drop. In addition, the volatility will also get large and spread in time.

I really hope nobody needs to unwind a large position in this market. The results could be disasterous with these volumes.

Thursday, September 18, 2008

Ban on Shorting Brokerages?

Apparently Chris Cox is considering a ban on shorting, modeled after his market heroes in China where shorting is also not allowed (and has since dropped over 60%). The initial reports from CNBC indicated he was going to ban all shorts, but a Bloomberg article indicates that he's since limited it to just brokerages:
The commission is considering banning short-sales of the shares of Wall Street brokerages after Morgan Stanley fell 39 percent this week, said a person familiar with the matter.
If you've been following this story, CNBC announced originally that it was going to be a ban on ALL shorts. My guess is that Paulson and Bernanke, both well-versed in how markets function, got to Cox and gave him an earful. He now needs a way to save face.

Since shorting adds liquidity to the markets, and liquidity is inversely related to volatility, this ban would be a huge gift to those who bought volatility. It would almost certain crash the stocks involved, since no-bid situations would result during trading hours.

The real question should be: What horrible event is about to unfold that is about to drive stocks through the floor? Is there some new nationalization of companies that is going to kill stocks? We are witnessing history as it is being made, so sit back, relax and pull up a beer. The wild ride continues.

Update: Blog comments are reporting that FDIC folks are in CA to shut someone down tomorrow. Don't know whether they are big or small... Please leave any info here.

Schumer: Inject Money for Equity

Something that seems to have been lost on the market late this afternoon: The comprehensive solution that Chuck Schumer is presenting is going to dilute shareholders of banks. From Bloomberg:
``The Federal Reserve and the Treasury are realizing that we need a more comprehensive solution,'' said Schumer, who today proposed an agency to pump capital into troubled banks. ``I've been talking to them about it,'' Schumer, a Democrat who chairs the congressional Joint Economic Committee, told reporters in Washington today.

Schumer urged forming an agency to inject funds into financial companies in exchange for equity stakes and pledges to rewrite mortgages and make them more affordable.

Schumer advocated a Great Depression-era Reconstruction Finance Corp. model, different from the Resolution Trust Corp.- type plan others have floated.
The last time the gov't took equity stakes? Fannie, Freddie and AIG. This is NOT good for shareholders, they will be similarly wiped out.

Missing the Point

Some folks think they can take two insolvent institutions, combine them, and have a solvent institution. I don't understand why this myth persists; it is easily disprovable with simple arithmetic.

Nevertheless, Wall Street seems to think that mergers will restore confidence. For example, from Bloomberg:
``If we could get some deals done, that will add some confidence to the market,'' said Jack Ablin, who helps manage about $55 billion as chief investment officer of Harris Private Bank in Chicago. `` Banks are as cheap as they've been ever, relative to the rest of the market.''
Lots of folks STILL do not understand the problem. It is not whether things are cheap or expensive, it is whether they have a negative or positive net worth! Until confidence is restored in the balance sheets, there will be no confidence in the banks.

NB bankers: No confidence will be possible with as many Level 3 assets as currently exist. All other efforts will only result in temporary stock pops, because investors will ultimately return to wondering when the Level 3 time bomb explodes.

Tuesday, September 16, 2008

Bailout Nation

CNN has noticed that money is beginning to flow to private enterprise. The lead story as I write this:
"Fed rescues AIG with $85 billion loan:
In an unprecedented move, the Federal Reserve Board is lending as much as $85 billion to rescue crumbling insurance giant AIG, officials said Tuesday evening. In return, the federal government will receive a 79.9 percent stake in the company, CNNMoney.com reports. Officials decided they had to act lest the nation's largest insurer file bankruptcy."
While it doesn't contain a discussion about moral hazard and the like, it will certainly get the notice of nonfinancial folks.

Random Observation in the wake of the Bailout: I've noticed that several blogs are now calculating how much money the Fed has left, and when it will need its own bailout. Seeing these comments on public blogs is not good for confidence.

Fed Close to Deal to Give A.I.G. $85 Billion Loan

Fed Close to Deal to Give A.I.G. $85 Billion Loan - NYTimes.com:
In an extraordinary turn, the Federal Reserve was close to a deal Tuesday night to take a nearly 80 percent stake in the troubled giant insurance company, the American International Group, in exchange for an $85 billion loan, according to people briefed on the negotiations.

In return, the Fed will receive warrants, which give it an ownership stake. All of A.I.G.’s assets will be pledged to secure the loan, these people said.
Help me out here: What do the words "Free Market" mean? Why won't every exec of a extremely large company write stupid insurance (I'm looking at you Greenberg) collect the dough, and then let the taxpayers clean it up?

We have truly socialized the losses. Welcome to the ownership society.

Monday, September 15, 2008

AIG Is Tuesday's Headline

So what could be worse after today?

S&P and Moody's have just downgraded AIG. Suddenly they need $75 billion in order to meet collateral calls.

A collateral call is a little like a margin call. When you can potentially owe money on a security, the other party demands that money be held in escrow "just in case". AIG has written several securities that promise to put up collateral in the case of downgrade by major ratings agencies.

I believe the words used on CNBC is a "Financial Atomic Bomb". As CNBC is known for a perpetually sunny outlook on the stock market, things might be rough tomorrow.

If you want to keep track what this does to S&P futures overnight, click here.

Update via CR: NYT is reporting that
But none of those downgrades appeared to lead to events requiring A.I.G. to post billions of dollars of collateral to its swap counterparties. Its swap contracts cite downgrades by Moody’s and Standard & Poor’s of A.I.G.’s long-term senior debt ratings, and such changes had not been announced as of Monday evening.
So the downgrades are not forcing the collateral after all. CNBC says that bankruptcy will happen by tomorrow if not resolved.

This is obviously a developing situation.

Morning Pricing: Merrill and Bank of America

There have been all sorts of bankruptcies, mergers, and fed actions since the last update. Most blogs are All Lehman All The Time, so you will have no problems finding information about last night from them or even from the WSJ.

One observation: Bank of America announced a shotgun marriage with Merrill last night. Both boards approved the all-stock offer, which was 0.8595 BAC shares for each MER share.

As I write this, the implied price of Merrill is supposed to be
0.8595 * 28.62 (current BAC price) = 24.59889

We also note that S&P downgraded Bank of America this morning.

Combining the above factoids tells us that
1. There is considerable doubt in the market that the deal will close.
2. If the deal closes, the net result might be to take down BoA, rather than prop up Merrill.

Update @ 11:35a

Merrill should be 0.8595 * 28.76 = 24.72
and is currently 21.18.

Sunday, September 14, 2008

Insolvency vs Illiquidity

So what is the difference between insolvency and illiquidity? Say you have a credit card, and you owe $1000, all due on the next payment. The payment is overdue. Your car is for sale, and as soon as you sell it you will have the money to pay the $1000 on the credit card.

If the Fed loans you $1000 and puts a lien against your car, they've solved your liquidity crisis. You can take the Fed's money and pay your bill. Once the car sells, the Fed gets its money back.

But now repeat the above exercise and remove the car. That is a solvency crisis. You owe $1000 and have insufficient assets to sell off.

The problem with AIG, Merrill, WaMu, and the former Lehman is not one of liquidity.
It is solvency.

Here's the kicker: You can't loan your way out of a solvency crisis. There is no other means available then to unwind the bad debt. This is exactly what happened with Lehman today. Merrill's day of reckoning was postponed, and will instead happen when Bank of America performs the unwind.

AIG is staring down the barrel this moment. Will they unwind?
Sooner or later, they will.

So in conclusion, we should make the Treasury write 100 times on the blackboard:

Insolvency is not solved by M&A.
Insolvency is not solved by M&A.
Insolvency is not solved by M&A.

Public Service: Click HERE for up-to-the-minute S&P futures overnight.

Just Making Stuff Up

MarketWatch, The Washington Post, and Dealbreaker are reporting various pressures on making a deal happen with Lehman before Asian markets open for Monday trading.

Here's the problem: Major Asian markets are closed on Monday
Japan: Respect-for-the-Aged Day
China: Mid-Autumn Festival
Korea: Harvest Moon Festival
Hong Kong: Mid-Autumn Festival

Just which Asian markets are causing pressure? This tells me that reporters (or their sources) are just making stuff up to sound like they know what is going on.

So maybe a deal happens or maybe it doesn't, but it has very little correlation with the stories that are currently being published in the main stream media.

Subsidizing Barclay's in their Quest for Value

This morning's CNBC is reporting that Barclays is the leading contender to buy Lehman. Apparently, Lehman would sell its good assets to Barclays, and then a consortium of banks would put up $30B to buy the bad part of Lehman.

This deal sounds insane. Why would a bunch of competitive investment banks subsidize Barclays?

If the deal closes, it's not because the financials of the bad bank make it a great opportunity for profit. It's because the consortium have so much rot on their own books that a mark-to-market event would take them all down. So it might be worth billions for them to keep their banks open a while longer and collect their salaries and bonuses.

We'll know by 9am tomorrow.

Saturday, September 13, 2008

Lehman Hires Bankruptcy Firm

The game of brinkmanship continues: WSJ.com
Lehman has hired law firm Weil, Gotshal & Manges LLP to prepare a potential bankruptcy filing, according to a person familiar with the situation. The New York-based Weil has a leading bankruptcy practice and advised Drexel Burnham Lambert on its 1990 bankruptcy filing.

In a Lehman bankruptcy, the firm's brokerage units would have to enter a Chapter 7 liquidation, in which a court-appointed trustee would take over, liquidate the firm's assets and get Lehman customers back their money. In general, securities that a customer holds at a brokerage firm are legally the investor's property and aren't exposed to the claims of the firm's creditors.
A bankruptcy filing on or before Monday would bring an enormous amount of selling pressure to the equity markets. As we said before, strap in cuz it's going to be a wild ride.

Update: Catch the posts over at Calculated Risk, and don't miss the golden words in the comments.

Treasury Wants To Unload Lehman's Real Estate

CNBC reports that the feds wants investment banks to pony up cash and split up Lehman's bad real-estate purchases. However, the idea has gone over like a lead balloon:
On Friday night, after the government finished out what one person with knowledge of the discussion described as the Fed's 'LTCM Plan,' an executive in the room pointedly asked, 'What happens when there's another one?'

People with knowledge of the matter say the government provided no real answer other than to point out what they've been saying for the past three days as Lehman began to implode and look for buyers: There will be no government bailout of the firm, and if the street doesnt do something to help in the process, such as buying Lehman's bad assets, a deal to sell the good part of Lehman will be difficult to complete.
Indeed, what happens when the next one hits?

It is not a question to be taken lightly. If the Feds can't get Lehman sold, then it will be unwound next week. And what would that look like?
If Lehman is not sold, most analysts conclude it will likely be forced to file bankruptcy possibly as early as the end of this weekend. A bankruptcy filing could be catastrophic for the markets, given the size of Lehman's balance sheet. Billions of dollars in trades would effectively be frozen, something that would almost certainly cause massive selling of stocks.

Paulson to I-Banks: Do you really want to do this?

The NYT is reporting that Treasury Secretary Paulson and SEC chief Cox have effectively issued an ultimatum to the NY investment banks: Fix Lehman or we will unwind it.
Timothy F. Geithner, the president of the New York Federal Reserve, called a 6 p.m. meeting so that bank officials could review their financial exposures to Lehman Brothers and work out contingency plans over the possibility that the government would need to orchestrate an orderly liquidation of the firm on Monday, according to people briefed on the meeting.

Flanked by Treasury Secretary Henry M. Paulson Jr. and Christopher Cox, the chairman of the Securities and Exchange Commission, he gathered the executives in person to impress on them the need to work together to resolve the current crisis.

Mr. Geithner told the participants that an industry solution was needed, no matter what, and that it was not about any individual bank, according to two people briefed on the meeting but who did not attend. They said he told them that if the industry failed to solve the problem their individual banks might be next.
An unwinding of Lehman would be catastrophic to many balance sheets throughout the financials industry. It would provide a real-time market quote for many hard-to-value securities. (Currently, many companies are using fictional valuations for these securities, claiming that there is no actual market transaction to use as a reference, so we'll just make something up.)

The real problem: The Goldman's and Morgan's of the world are already short of cash to solve problems like these. So even if they save Lehman, AIG and Merrill are right behind. And since John Thain's statements are catching up with him, it will take more than pretty words to fix companies like Merrill.

Strap in, it's going to be a wild ride on Monday.

UPDATE: The WSJ is reporting that a deal could be announced tonight. Presumably, somebody set an artificial deadline of tonight so that everyone could play a game of brinkmanship and wait until Sunday to come back to the table.

They have also confirmed that it is up to the NY iBanks to prevent a default:
At an emergency meeting Friday night called by the Federal Reserve Bank of New York, New York Fed President Timothy Geithner, described two potential scenarios: either a liquidation of Lehman or an industry-driven solution in which Wall Street firms would possibly providing financing to remove some of Lehman's real estate assets, one person briefed on the matter said.

Wednesday, September 10, 2008

Goldman and Lehman

After Lehman's meltdown yesterday, we get this inspiring quote from Goldman:
"'Goldman is a willing counterparty to Lehman across all our businesses,' spokesman Michael DuVally told Reuters."
What Goldman did not say: We are of course hedging any deal done with Lehman.

I found the statement to be in the category of "Damning with faint praise."

Tuesday, September 9, 2008

Conservatorship Alternative

FHFA is explicit:
Conservatorship does not preclude receivership.

So when the CBO says that "the federal budget is on an unsustainable path", it would be prudent to question whether future administrations will follow through on Hank's bailout vision.

Odds are high that the bondholders will STILL take a haircut in the future.

Monday, September 8, 2008

Hank's Bazooka Is A Boomerang

FRE/FNM bonds are now backed by the Treasury, so the yields of FNM/FRE should converge to those of comparable treasuries. Does anyone really believe that a future McCain or Obama administration are going to see things the way that Hank sees them?

Let's face it: House prices aren't even close to stabilizing. The taxpayer payout on FRE/FNM bonds is going to be substantial.

In future years, when taxpayers are still paying for the nationalization of FRE/FNM, it is going to look VERY attractive to demand that bond holders take, say, a 10% haircut. This move will be a politically expedient method to save an enormous amount of money: On $5 trillion dollars, $500 billion dollars will be generated without raising taxes or cutting spending.

Therefore, the best bet for current investors in FRE/FNM bonds is to sell them and buy treasuries now, while the yields are close. Naturally, since many bond holders will recognize this strategy, the correct tactic is to sell first and not buy any more bonds until the interest rate reflects the risk that future payments are likely to be cut. This will drive the bond rates up, mortgage rates up, and will negate the very thing that Hank is trying to accomplish.

It will be a horrific mess once the markets realize this fact. Fasten your seatbelts.

Friday, September 5, 2008

A Day of Financial Infamy

The NYT is reporting that Fannie and Freddie are going into "Conservatorship", which sounds a lot like temporary nationalization, except that no one in the current administration can own up to nationalizing $5 trillion dollar institutions:
Under a conservatorship, the common and preferred shares of Fannie and Freddie would be reduced to little or nothing, and any losses on mortgages they own or guarantee could be paid by taxpayers.

A conservatorship would operate much like a pre-packaged bankruptcy, similar to what smaller companies use to clean up their books and then emerge with stronger balance sheets.
The Bush administration has officially socialized the losses with this announcement.

We note that the Washington Post claims that the Bush administration is going to protect the preferred shareholders. This will be remembered for a generation or more.

Hank Paulson is Bill Gross' Dog

Let me get this straight:
1. Bill gross threatens to screw the US Treasury unless FNM/FRE are bailed
2. so Hank rolls over
3. The markets go wild, because bailouts are bullish.

Welcome to bizarro world.

Monday, September 1, 2008

KDB to get killer price?

The rumor grows... Is KDB really this stupid?!
UPDATE 1-KDB confirms talks with Lehman on possible deal: "Britain's Sunday Telegraph reported that Lehman had intensified talks with KDB to raise as much as $6 billion in a share sale that could be concluded this week, without specifying sources.

The paper said KDB could buy up to 25 percent of the beleaguered U.S. investment house."
Why on earth would KDB buy 25% for $6B, when the current LEH market cap is $12B? Hell, they can just wait a couple of months and buy it out of bankruptcy with the blessing (and backstop) of the Fed.

Fool Me Twice

A Korean newspaper has been fed information (again!) that KDB is negotiating a Lehman stake:
Bloomberg.com: Worldwide: "Korea Development Bank may team with a domestic lender, probably Woori Finance Holdings or Hana Financial Group Inc., to buy a stake in Lehman, Dong-a Ilbo reported today, citing financial officials that it didn't identify.

The state-run bank is in talks with Lehman to buy a stake including management control in the fourth-biggest securities firm in the U.S., the Korean-language newspaper reported, citing the officials at KDB and South Korea's Financial Services Commission. The bank may make a decision by Sept. 10, Dong-a said."
So the old saying goes: Fool me once, shame on you. Fool me twice, shame on me.
How many fools are left to believe this rumor?

Update: Surprise! KDB has no comment on report of Lehman talks

Can somebody tell me why KDB would leak this info and drive the price UP when they are trying to purchase shares? Gimme the proverbial break.