The Fed, Investment Banks and Liquidity Challenges

Anyone growing concerned (more so than last month) with the Fed keeping the window open till the end of the year for credit facilities with the big investment banks?  The SEC is trying to prevent additional runs with the extension of the “naked short sell” rule, but that only has a short lifecycle left?

M. Baritomo interviewed a research analyst on CNBC and discussed the strained credit lines and Lehman’s ability to survive.  Story predicts 25 institutions will need to raise additional capital in the coming month(s)?

How is that possible in a totally illiquid market? As an optimisit, maybe this will jump start M&A in the financial sector which will serve as a catalyst for other transactions throughout the ecosystem? Wishful thinking…as firesales usually are not positive catalysts for market integration and rollup throughout the food chain?

Old news but scary nonetheless.

Time to buy MER or LEH? I am still a fan of Citi, but with upcoming write downs for CLOs (and any additional CMOs), hard to understand timing with these institutions?

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