June 09, 2008

Lehman finally comes clean

$20 bn in mortgage-related asset writedowns. $6 bn in new capital. Deleveraging complete to 22% of gross assets.

Which means that Lehman has $22 of assets floating on every $1 of equity. Which is a bit like a 400 lb man going ice skating. It can be done, but if there's any problem things get ugly fast.

For weeks, Lehman management has been saying that everything is just peachy. During that time, speculation has run rampant. While today's news is worse than expected, it's still not as bad as some of the rumors. This should provide some stability to the financial sector, at least in realizing that the remaining shoes yet to drop aren't the equivalent of a Bear Stearns type debacle.

Posted by mcblogger at June 9, 2008 01:09 PM

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