by D. Cupples | Earlier this year, the federal government intervened in the Bear Stearns mess. Last weekend, our government decided to take control of Fannie Mae and Freddie Mac. Now, investment-banking giant Lehman Brothers seems to be headed for a fall and hoping for a bailout. I'd say it's past time to be nervous.
The International Herald Tribune reports:
"Only days after the Bush administration assumed control of the nation's two largest mortgage finance companies, Wall Street was gripped by fears that another big financial institution, the investment bank Lehman Brothers, might founder — and that this time, the government might not come to the rescue.
"Waves of selling wiped out nearly half of Lehman's value in the stock market on Tuesday, leaving the firm, one of the nation's oldest and largest investment banks, in an all-out fight for survival.
"The plunge fanned worries about the troubles plaguing the broader financial industry and sent the Standard & Poor's 500-stock index tumbling 3.4 percent." (IHT)
High finance and banking are not among my areas of expertise. That and I haven't been following the Lehman story. So, I searched the IHT article for some clue as to what has been going wrong and found this paragraph:
"Since March, Lehman has been in a fight for its life, as some investors, including prominent short-sellers betting against the bank's stock, questioned how the firm was valuing some of its assets. Lehman lost $2.8 billion in the second quarter and was forced to raise $6 billion in new capital. But investors were not placated, and the firm was compelled to explore more extreme measures." (IHT)
Apparently, Lehman was questioned for over-valuing assets (i.e., making itself look more solid or profitable than it really was). Isn't this what executives and managers at many companies have done -- simply because doing so puts more money into their personal pockets?
If so, it seems that an element of fraud may be involved. If so, then those execs and managers responsible for such irresponsible (or fraudulent) conduct should be held accountable and with extreme prejudice.
And, of course, our politicians should stop licking the boots of such execs and managers and instead make laws that make it harder for execs and managers to engage in such conduct.
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