Fed and Treasury Aiding in Lehman Saleby Tim Manni
The Federal Reserve and the Treasury Department are “actively helping” Lehman Brothers search for a buyer, a deal that the government hopes will happen this weekend, according to the Washington Post. Before you get too worked up, the Fed and the Treasury Department are searching for a private buyer for Lehman, one that does not involve taxpayer support. One possible scenario could involve multiple buyers which would take control of different parts of the company.
Unlike Bear Stearns, which suffered heavy losses when investors stopped investing in them, Lehman has been the victim of their own investments in real estate and mortgage backed securities. Although the government fully participated in the acquisition of Bear Stearns as well as the takeover of Fannie and Freddie, the same will be highly unlikely for Lehman Brothers:
Fed leaders do not want to provide financial backing for an acquisition of Lehman, as the Fed did for Bear Stearns. The government’s plans also stop far short of the full takeover that occurred with Fannie Mae and Freddie Mac. The Fed, which has faced criticism for its efforts to rescue large financial firms, does not want the markets to view it as an endless source of bailouts. But even helping engineer a buyout amounts to a form of government intervention.