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Bloomberg - The Bush administration will invest about $125 billion in nine of the biggest U.S. banks, including Citigroup Inc. and Goldman Sachs Group Inc., in the government’s latest attempt to shore up confidence in the financial system.
The proposed cash injections in exchange for preferred shares are part of a $700 billion rescue approved by Congress and follow similar moves by European leaders to unfreeze credit markets by helping beleaguered banks. The other companies are Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp., Merrill Lynch & Co., Morgan Stanley, State Street Corp. and Bank of New York Mellon Corp., said people briefed on the plan.
West Palm Beach (HedgeCo.net) - Lehman Brothers, Wall Street’s fourth biggest investment bank has filed for bankruptcy, making it the largest and highest-profile casualty of the global credit crisis, with approximately $639 billion in assets.
The bank said the Chapter 11 filing will not include its broker-dealer operations and other units, including Neuberger Berman. Lehman is looking at selling its broker-dealer operations, and is still in advanced discussions with a number of potential buyers of its investment management division.
Investors in recent weeks had grown increasingly jittery about Lehman’s $46 billion of mortgages and asset-backed securities, as well as its credit rating and its ability to raise capital.
Bankruptcy also represents a bad end to Chief Executive Dick Fuld’s four-decade career at Lehman. Fuld, who piloted the investment bank through prior crises with aplomb, was widely seen as too slow to recognize Lehman’s need to raise capital and shed bad assets.
Lehman listed its biggest unsecured creditors as Citigroup Inc, Bank of New York Mellon Corp, Aozora Bank, and Mizuho Financial Group Inc. Citi and Bank of New York Mellon are trustees for Lehman bonds.
The firm said that as of May 31, it owed about $110.5 billion on account of senior unsecured notes, about $12.6 billion on account of subordinated unsecured notes and about $5 billion on account of junior subordinated notes.
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Financial Times - Abu Dhabi Commercial Bank has filed a lawsuit against two US banks and two rating agencies over losses from a collapsed $6bn structured investment vehicle, formerly managed by London-based hedge fund Cheyne Capital.
In the suit in a US court, the bank, which is majority owned by the largest of the United Arab Emirates, is seeking unspecified damages from Morgan Stanley, Bank of New York Mellon, Moody’s Investors Services and Standard & Poor’s.
The suit alleges investors were misled over the quality of assets held by the SIV, a vehicle that was part of an industry that was worth $400bn before it was decimated by the credit crunch. The crunch cut the value of asset-backed and other financial debt these vehicles invested in, while also causing their funding to evaporate.
Bloomberg - Whenever pension funds, mutual funds and insurance companies decide they should own dollar assets that are out of favor with hedge funds, the hedge funds lose.
Institutional investors bought more dollars than they’ve sold this year, according to State Street Corp. and Bank of New York Mellon Corp., the largest money managers for institutions. That’s significant because speculators such as hedge funds raised bets against the greenback by 36 percent, data from the Commodity Futures Trading Commission in Washington show.
History indicates institutional investors may be on to something. The dollar gained in 71 percent of the quarters over the past decade when they were net buyers, according to Boston- based State Street. They bought more than they sold in all of the quarters when, like now, benchmark interest rates were below inflation and the current account deficit, the broadest measure of trade, exceeded 3 percent of the economy.
"The dollar can do quite well in this slow-growth environment,” said Richard Batty, global investment strategist at Standard Life Investments in Edinburgh, a mutual and pension fund that manages the equivalent of $283 billion. "We’ve had for some time a positive position on the U.S. dollar.”
After falling to a 13-year low of 78.993 in March, the dollar has gained 2.5 percent to 80.993, according to a trade- weighted index maintained by the Federal Reserve that includes the euro and yen. It has rallied by the same amount versus the euro to $1.5554 since hitting a record low of $1.6019 on April 22.
Bloomberg- Whenever pension funds, mutual funds and insurance companies decide they should own dollar assets that are out of favor with hedge funds, the hedge funds lose.
Institutional investors bought more dollars than they’ve sold this year, according to State Street Corp. and Bank of New York Mellon Corp., the largest money managers for institutions. That’s significant because speculators such as hedge funds raised bets against the greenback by 36 percent, data from the Commodity Futures Trading Commission in Washington show.
History indicates institutional investors may be on to something. The dollar gained in 71 percent of the quarters over the past decade when they were net buyers, according to Boston- based State Street.