Friday, October 03, 2008

Long and Short Fuses


In a separate bankruptcy case, Lehman Brothers Holdings Inc. creditors said they ``believe'' that JPMorgan, the investment bank's main lender and clearing agent, caused the liquidity crisis that led to Lehman's collapse.

Creditors want to investigate:

Creditors of Lehman Brothers have asked a judge to allow an investigation into whether JPMorgan Chase & Co. had a role in weakening Lehman as it headed toward bankruptcy.

The committee filed the request in court documents late Thursday.

The creditors committee believes Lehman Brothers Holdings Inc. had more than $17 billion in cash and securities held at JPMorgan before its Chapter 11 filing but that JPMorgan froze the assets Sept. 12, three days before Lehman filed for court protection. Its case is the biggest in U.S. history.

"The creditor's committee believes that as a result of JPMC's actions, LBHI suffered an immediate liquidity crisis that could have been averted by any number of events, none of which transpired," lawyers for creditors wrote in court papers.

"In freezing LBHI's assets, JPMC was purportedly holding all of LBHI's assets as a potential offset against any claims," lawyers said. JPMorgan provided billions in clearing advances _ short-term loans investment banks use to clear trades on a daily basis _ to Lehman in the days around its Chapter 11 filing.

Jim Chanos said Bank of America cut the line to Merrill Lynch in advance of swallowing them.

The SEC has announced its "longs only" boost will expire on the 8th; the expected extension to the 17th called off.

On Victorious Friday, Goldman Sachs cheered the troops with the promise of a "significantly deeper" recession than was previously expected.

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