Wednesday, February 23, 2011

LEHMAN looses yet AGAIN

We heard at the financial crisis started with the fall of Lehman Brothers, and then the whole black hole came around, that sucked trillions in market value and wealth. But Lehman's was a victim of its own system. I still recalled what i saw in BBC's programme Love for Money "The Bank that Bust the world", Then Merrill Lynch's Chairman and CEO John Thains said that it would have had taken 30-40 billion dollars to rescue Lehman, but it would have stopped he catastrophic effects it brought. Anyhow, that changed the world completely


Anyhow, Lehman's news has been coming for sometime regarding their bankruptcy procedures being unfolded and how they are repaying their creditors, if they are lucky enough to get the full they owed. Lehman filled a suit that Barclays had improperly salvaged its North American Investment banking division days after the bank filed for chapter 11, and also that Lehman executives gave a $5bn discount to Barclays.“The sale process may have been imperfect, but it was still adequate under the exceptional circumstances of Lehman Week,” he said.

Barclays bought the brokerage in the 2008 financial crisis after Lehman went bankrupt, as regulators urged approval of the deal to prevent a panic. The sale took a week. Barclays has said it was the sole bidder, taking 10,000 employees and giving 72,000 customers access to $40 billion in assets frozen in the September 2008 bankruptcy. Lehman’s lead bankruptcy lawyer, Harvey Miller of Weil Gotshal & Manges LLP, testified in April that the sale “was of enormous benefit to the nation.”
The U.K. bank has been fighting with the brokerage trustee James Giddens over $2.3 billion of clearance box assets, of which the trustee said $1.5 billion was already “wrongfully” transferred to Barclays. They also disputed $769 million in the brokerage’s reserve accounts for customers, and margin assets.

Lawyers for the Lehman estate claimed that Barclays had improperly reaped an $11 billion windfall from the deal by secretly negotiating a discount for Lehman’s North American operations.But Judge Peck disagreed, writing that the speed of Lehman’s bankruptcy filing and the urgent need to sell the failed firm’s assets overrode what he acknowledged were flaws in the sales process.
“The court was not deceived in a manner that should now be permitted to upset the integrity of the sale order,” he wrote. Referring to the week of the bankruptcy, he wrote, “The sale process may have been imperfect, but it was still adequate under the exceptional circumstances of Lehman Week.” Judge Peck also rejected a separate claim by a federal trustee assigned to the Lehman case that Barclays owed his office about $7 billion.

Lehman sought to amend the sales order that Judge Peck had approved just days after the investment bank filed for bankruptcy. At the heart of its legal argument was what the estate contended was a $5 billion discount that Lehman executives had given to Barclays in the midst of completing the sale.

Barclays has argued that it was the only bidder for the Lehman business, and the failure to quickly gain approval of its offer would have led to the loss of thousands of jobs. The firm also argued that several of Lehman’s own advisers, including its chief lawyer, Harvey R. Miller of the law firm Weil, Gotshal & Manges, had supported the sale. However, US Bankruptcy Judge James Peck said in his opinion statement that while the deal had not been without flaws, it was sound overall. "The sale process may have been imperfect, but it was still adequate under the exceptional circumstances of Lehman Week," he said.

The deal was seen by many as vital for keeping the international banking system alive. Judge Peck there was an "undeniably correct" perception at the time that the sale "mitigated systemic risk," and helped avert "an even greater economic calamity". He said there was no better alternative to the sale, which avoided "a potentially disastrous piecemeal liquidation" and saved thousands of jobs in the financial services industry as reproted by BBC today
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