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Lehman Brothers Losses $3.9 Billion

Published 09/10/08 Craig Harrington - Print Article
E-mail - editor@economyincisis.org

Amid $5.6 billion in third-quarter writedowns, troubled investment bank Lehman Brothers seems barely able to stay afloat after a disastrous year for the banking and financial sectors, according to International Herald Tribune.

With official losses standing at $3.9 billion ($5.92 per share) for the third quarter, Lehman Brothers may not be able to survive much longer. The firm lost an additional $2.9 billion in the previous quarter this year. Lehman has been prompted to shed its less profitable real-estate holdings into a new public company, and has confirmed suspicions that it will sell the majority of its investment management divisions.

Public shares of the firm are down nearly 85 percent since reaching their peak one year ago (similar to almost all major American financial institutions) and have seen their value halved each of the past two days.

Lehman’s struggle to stay afloat has pushed away many potentially interested parties and has led to the stagnation of a potential acquisition by Korea Development Bank. Lehman Brothers is the United States’ fourth largest investment bank and it is an integral part of the economy, but it should not expect a government bailout or takeover similar to the cases of Fannie Mae, Freddie Mac and Bear Stearns. For now, the firm will likely be left to anguish in the aftermath of the subprime crisis and recession.

Source International Herald Tribune:

The investment bank Lehman Brothers, in an all-out fight for its survival, said Wednesday morning that it expected a loss of $3.9 billion, or $5.92 a share, in the third quarter after $5.6 billion in write-downs.

The investment bank also said that it would spin off the majority of its remaining commercial real estate holdings into a new public company. And it confirmed plans to sell a majority of its investment management division in a move that it expects to generate $3 billion.

…

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.

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