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Lehman Aug 26
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Lehman Can't Sue UK Biz But $41M Swaps Still Fair Game
Aug 25, 2015 | Law360
By Jessica Corso
A subsidiary of bankrupt Lehman Brothers Holdings Inc. cannot sue a British-owned company in the U.S. to claw back $41 million in credit default swaps, a New York bankruptcy judge ruled Tuesday, but her court still has jurisdiction over the money. Shield Securities Ltd., based entirely on the British-owned island of Guernsey... -
The Demise of Lehman Brothers
Aug 25, 2015 | Market Mogul
By Dimitrios Sotiriou
The aim of this article is to analyse the ignition of the 2009 crisis and Lehman’s role in it. Who is to blame? How did such a a successful broker firm sunk into the sea, dragging the rest of the world in a crisis? Is it just Lehman to blame? What about the role of the auditing firms and what initiatives and policy changes should be taken... -
John Kasich Balances His Blue-Collar Roots and Ties to Wall Street
Aug 24, 2015 | The New York Times
By Sheryl Gay Stolberg And Steve Eder
...Mr. Kasich’s life story that conflicts with this narrative: the nearly eight years he spent as an investment banker withLehman Brothers, the Wall Street firm. Mr. Kasich’s career at Lehman, neatly tucked between his time as a congressman and his election as governor, coincided with the bank’s messy collapse in September 2008... -
John Kasich Is About To Learn That Long-Ago Bromances With Dick Fuld Never Die
Aug 25, 2015 | Dealbreaker
By Thornton McEnery
We’ve talked before about how John Kasich’s run for the White House will force him to talk about the seven years he spent as a senior executive at Lehman Brothers. For a centrist, down-home Joe like John Kasich, that’s a tough line on the ol’ resume and presents a very soft underbelly for his anti-Wall Street opponents to poke at until they all give...
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Lehman Can't Sue UK Biz But $41M Swaps Still Fair Game
Aug 25, 2015 | Law360
By Jessica Corso
A subsidiary of bankrupt Lehman Brothers Holdings Inc. cannot sue a British-owned company in the U.S. to claw back $41 million in credit default swaps, a New York bankruptcy judge ruled Tuesday, but her court still has jurisdiction over the money.
Shield Securities Ltd., based entirely on the British-owned island of Guernsey, did not have the necessary U.S. connections — it had no offices, employees or property in the states — that would give a U.S. court jurisdiction over the company, U.S. Bankruptcy Judge Shelley C. Chapman said.
But Lehman Brothers Special Financing Inc. can still pursue the $41 million in credit default swaps distributed to Shield upon the financial institution’s collapse, according to the ruling, because the court has jurisdiction over the money due to LBSF's security interest in the property per documents it signed with original buyer N.M. Rothschild & Sons Ltd....LBSF filed the adversary action in 2010, hoping to claw back some of the $41 million released to Shield when Lehman went bankrupt.
LBSF argued that the transaction documents signed between itself and Rothschild, which later handed the credit swaps over to Shield, included unenforceable provisions on which parties received priority of payment, according to Tuesday’s opinion.
LBSF is represented by Paul R. DeFilippo, William F. Dahill and Joanna H. Schorr of Wollmuth Maher & Deutsch LLP.
Shield is represented by Timothy P. Harkness, David Y. Livshiz, Abbey Walsh and Shannon Leitner of Freshfields Bruckhaus Deringer LLP.
The adversary case is Lehman Brothers Special Financing Inc. v. Bank of America NA et al., case number 1:10-ap-03547, and the bankruptcy is In re: Lehman Brothers Holdings Inc. et al.,, case number 1:08-bk-13555, both in the U.S. Bankruptcy Court for the Southern District of New York.For full story: http://www.law360.com/articles/695034/lehman-can-t-sue-uk-biz-but-41m-swaps-still-fair-game
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Aug 25, 2015 | Market Mogul
By Dimitrios Sotiriou
The aim of this article is to analyse the ignition of the 2009 crisis and Lehman’s role in it. Who is to blame? How did such a a successful broker firm sunk into the sea, dragging the rest of the world in a crisis? Is it just Lehman to blame? What about the role of the auditing firms and what initiatives and policy changes should be taken to avoid such huge scandals.Business Model Shift
Initially, Lehman Brothers had a relatively low-risk brokerage model (purchased assets primarily to sell them to the markets e.g. underwriting and trading fixed income securities). The monumental increase in assets ($700 billion) along with the relatively small increase in equity ($25 billion) in 2007 demonstrates the high-leverage strategy it pursued by adopting a higher-risk banking model because of competition pressure for profits at that time. The bank possessed mismatched maturities of assets and liabilities and it is indicative that it even exceeded the its self-imposed limits and controls to pursue higher earnings. Lehman’s reliance/model of constantly refinanced short-term loans was “successful” as the bank achieved record profits in 2007. However, this success was dependent heavily on maintaining investor’s confidence, which eventually made its business model really risky.Repo 105
Lehman used the Repo 105 clearly as leverage-reducing transactions (through asset disposal in the financial statements) and not for financing; otherwise Lehman could have secured short-term financing at much lower rates. Traders could “rent the balance sheet” through Repo 105 in order to reach Lehman’s net leverage ratio targets. Lehman justified the transaction as a sale by taking higher haircuts of 5% and increased its use of Repo 105 transactions prior to reporting periods to reduce net leverage.
Its accounting treatment is perfectly legal; the problem arises because Lehman never publicly disclosed its use of Repo 105 transactions and its accounting treatment for these transactions. It accounted for the Repo 105 transactions as derivatives and readers were thus unable to know that Lehman had engaged in Repo 105 transactions. Moreover, no obligation to repurchase securities worth of billions on a short-term basis was disclosed in its financial statements. Repo 105 usage was not improper (through the UK subsidiary) but it violated accounting principles that require all legitimate transactions to have a business purpose; Repo 105 solely existed to manipulate financial information, a significant violation of GAAP in the US.
...Judging based on OECD principles of corporate governance, there is huge blame on Lehman’s corporate board (only 1 out of 10 had direct experience in finance and nine of them were retired). However, it seems logical that they acted in self interest, as there are no consequences of breaking OECD principles. Additionally, regulators should perhaps realise that more consistency is vital between the law systems in terms of accounting treatments (case with Lehman subsidiary in UK). Lastly, regulators should positively incentivise whistleblowers to report violations, but also protect them (e.g. Mathew Lee was fired).
For full story: http://themarketmogul.com/the-demise-of-lehman-brothers/
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John Kasich Balances His Blue-Collar Roots and Ties to Wall Street
Aug 24, 2015 | The New York Times
By Sheryl Gay Stolberg And Steve Eder
As the people of Ohio already know — and Republican voters elsewhere are just beginning to find out — Gov. John R. Kasich grew up in working-class McKees Rocks, Pa., the son of a postal worker and the grandson of a coal miner. His grandfather was so poor, Mr. Kasich recently told voters in New Hampshire, that he would bring home scraps of his lunch to share with his children.
...But there is a chapter in Mr. Kasich’s life story that conflicts with this narrative: the nearly eight years he spent as an investment banker withLehman Brothers, the Wall Street firm. Mr. Kasich’s career at Lehman, neatly tucked between his time as a congressman and his election as governor, coincided with the bank’s messy collapse in September 2008, a downfall that helped throw the American economy into free fall.
...Far from treating his time at Lehman as a liability, however, Mr. Kasich has embraced it since announcing his candidacy last month, making it part of the image he seeks to project of a common-sense Midwesterner who can empathize with economic anxieties and has the business experience to allay them.
...Mr. Kasich, who with his wife has assets worth between $9 million and $22 million, according to a recent financial disclosure, is hardly the only 2016 Republican hopeful with business ties. Mr. Trump has flaunted his success and wealth, and Mr. Bush advised Lehman, earning $1.3 million a year for two years from the firm. (Mr. Kasich, whose 2008 tax return showed roughly $600,000 in salary and bonus from Lehman, recalls that their paths crossed there once, during a meeting with an industrial client in Wisconsin.)
But for Mr. Kasich, business was more a second career after a long string of successes in politics. He left Congress in January 2001 after an 18-year career that included a role as one of Newt Gingrich’s lieutenants when he was House speaker, a stint as House Budget Committee chairman and a failed bid for the Republican presidential nomination.Continue reading the main storyGraphic: Who’s Winning the G.O.P. Campaign?
A friend helped him land an interview at Lehman Brothers.
“I came away thinking: interesting guy, not like a major door-opener,” recalled Gary Weinstein, who interviewed him and became his boss. As to what the congressman knew about banking, Mr. Weinstein said, “Zero. It was shocking to me.”
Working in Columbus out of a two-man office, Mr. Kasich struggled at first to gain acceptance from New York bankers who seemed to have little use for him. “They didn’t welcome him into the club,” said Wilber James, the friend who helped arrange the interview.
But Mr. Kasich could still open some doors. He took bankers to California to meet Sheryl Sandberg, then a Google executive and a former Treasury Department official, which led to a small role for Lehman in Google’s 2004 public stock offering.
Here in Ohio, Mr. Kasich got Lehman involved in the public offering for Designer Shoe Warehouse, or DSW, a Columbus-based shoe retailer founded by the Schottenstein family, which employed Mr. Kasich after Lehman’s demise.
Mr. Kasich also made introductions for Lehman to Ohio state pension funds, which drew the ire of Democrats after the funds lost hundreds of millions of dollars in ill-fated investments with the bank. Mr. Kasich has said his contacts did not result in any business for Lehman.
But friends say Mr. Kasich was most captivated — and perhaps influenced — by his work in Silicon Valley, where he had grown close to Mark Kvamme, a venture capitalist. “You’re from Silicon Valley. Are you rich?” Mr. Kvamme recalls the blunt Mr. Kasich asking when they first met.Continue reading the main storyRECENT COMMENTSvincentgaglione 8 hours ago
Kasich cuts an appealing persona. Some of his blue collar attitudes make him a comfortable figure to working class voters. His cut-throat...Tom Magnum 8 hours ago
John Kasich is on almost everybody's top five list. No matter what the writer of this article intended the effect was to vaccinate Kasich...r 11 hours ago
Everytime I see this guy I think he looks like he just lost his dog ... like needy or something.SEE ALL COMMENTS
Mr. Kvamme made introductions to other venture capitalists and tech entrepreneurs, and over time, Mr. Kasich and his longtime aide, Jai Chabria, the other half of the two-man Lehman operation in Columbus, eventually managed relationships with 45 companies.Continue reading the main storyFirst Draft Newsletter
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Then, in 2008, Lehman collapsed, a victim of its own risky mortgage investments, which Mr. Kasich said did not involve him. “I was a banker,” he said. “I wasn’t offering home loans to anybody.”
Like other Lehman employees who held stock options, Mr. Kasich lost money when the firm collapsed. (He also said he was “diversified,” with income from his work as a Fox News analyst, corporate boards and public speaking.) What he gained, he said, was an understanding “of the way C.E.O.s think.”
As governor, Mr. Kasich quickly put that understanding to use — and drew criticism from Democrats who said that he brought a Wall Street mentality to the job. With varying degrees of success, he pushed a series of economic initiatives, including a proposal to sell state prisons and use the Ohio Turnpike to issue bonds.
But perhaps his most contentious decision was to dismantle the state’s economic development agency and replace it with a private entity, JobsOhio, and put Mr. Kvamme in charge. Critics say the governor positioned his friend to benefit — an accusation Mr. Kvamme, who earned just $1 a year to run JobsOhio and now runs a venture capital firm, dismisses as “silly.”
As JobsOhio offered tax incentives and other inducements to lure companies to relocate or expand in Ohio, Democrats and advocates for openness in government complained it was cutting deals in secret. David Yost, the state auditor and a Republican, called for greater transparency in the agency’s activities, though Mr. Kasich insisted that JobsOhio was “very transparent.”
But, said David Pepper, chairman of the Ohio Democratic Party, “his mind-set was, ‘I’m just going to do what a business does, and if that means not sharing information, that’s fine — if that means hiring buddies, that’s fine too.’ ”
Today, as Mr. Kasich’s campaign seems to be gaining some traction in the early primary state of New Hampshire, Democrats — especially here in Ohio — are working hard to remind voters of his Lehman past. When Mr. Kasich vowed to reform Social Security by giving younger Americans “an opportunity to earn money through the strength of our American economy,” the Ohio Democratic Party accused him of trying to hand “Social Security funds over to the same Wall Street banks that caused the Great Recession — and coincidentally turned Kasich into a millionaire.”
Mr. Kasich shrugs it off. His strategy is, as it has always been, to strike an aw-shucks tone, and invoke roots in McKees Rocks.
“I made more money than I ever thought I would make in something like that, and I’m thankful for my experience,” he said of his time at Lehman, expressing astonishment that “little Johnny Kasich” had come so far. “I don’t know how much you’ve looked at McKees Rocks, but it’s been an amazing journey.”
For full story: http://www.nytimes.com/2015/08/25/us/politics/john-kasich-balances-his-blue-collar-roots-and-ties-to-wall-street.html
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John Kasich Is About To Learn That Long-Ago Bromances With Dick Fuld Never Die
Aug 25, 2015 | Dealbreaker
By Thornton McEnery
We’ve talked before about how John Kasich’s run for the White House will force him to talk about the seven years he spent as a senior executive at Lehman Brothers.
For a centrist, down-home Joe like John Kasich, that’s a tough line on the ol’ resume and presents a very soft underbelly for his anti-Wall Street opponents to poke at until they all give up and surrender to Emperor Trump.
So far, Kasich has been pretty coy about this time at Lehman, but that wasn’t the case when he was working there.
How do we know? Well, Kasich gave an interview to The New York Observer back in September of 2001 when he was a bouncy and excited new hire at a firm that was moving, like the Titanic, slowly towards its doom.
In the Observer piece, Kasich comes off like a fun bro who is just real psyched to have a such a sweet gig after a few years making like almost no money as a congressman form Ohio. He brags about passing his Series 7, takes a phone call about an IPO, gushes about Silicon Valley and makes an insidery joke about zero-coupon bonds.
All in all, Kasich in 2001 gave the overall impression of a guy who f*cking LOVED Lehman Brothers.
When it came to Dick Fuld, the future Darth Vader of Wall Street, Kasich was even less subtly enamored.
...We look forward to hearing more about what happened in the latter verses of The Ballad of John and Dick when the candidate is forced to show how he fell out with the man who became the face of all that is wrong with Wall Street.
For full story: http://dealbreaker.com/2015/08/john-kasich-is-about-to-learn-that-long-ago-bromances-with-dick-fuld-never-die/
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Financial Crisis
Comment - John Kasich
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