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September 12th, 2008

Fed and Treasury Aiding in Lehman Sale

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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.

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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