Lehman may have to raise capital if sells assets
By Dan Wilchins
PART I
NEW YORK (Reuters) - Lehman Brothers Holdings Inc is expected to follow in Merrill Lynch & Co Inc's footsteps and sell a lot of risky assets at a loss. But shedding the assets may create another headache for Lehman -- the need to raise large amounts of new capital, including common equity.
Any capital raise would be painful for Lehman and its shareholders, given that the company just raised $6 billion in June and trades at a significant discount to its book value, or the net accounting value of its assets.
But Lehman, the fourth-largest U.S. investment bank, may have little choice as it wrestles with roughly $65 billion in mortgage-related assets, particularly after Merrill Lynch agreed to shed $30.6 billion in toxic assets at a fire-sale price of 22 cents in the dollar, analysts said.
"Lehman's caught between a rock and a hard place. They're getting more and more pressure from regulators and investors to add reserves or mark these things down," said David Hendler, an analyst at independent research firm CreditSights in New York.
"In normal times, they could wait it out, but the market wants it done now," Hendler added.
The New York Post reported on Friday that Lehman was talking to potential buyers about selling $30 billion in assets. CNBC television reported Friday that Lehman was in talks with BlackRock Inc to sell mortgage securities and other assets. Both Lehman and BlackRock declined to comment.
Lehman's chief financial officer told Merrill analyst Guy Moszkowski recently that the investment bank was willing to sell assets at a loss if the deal materially reduced risk, the analyst said in a report. Lehman had roughly $65 billion in mortgage and real estate-related assets on its balance sheet as of May 31.
Continued...
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Iran Tests Anti-Ship Weapon, Repeats Stance on Hormuz (Update4)

By Camilla Hall

Aug. 4 (Bloomberg) -- Iran's military tested a new anti- ship weapon, the commander of the Islamic Revolutionary Guards Corps said as he repeated a warning that his forces could respond to any attack by closing the Strait of Hormuz, an oil transit point.

The weapon relies on technology that hasn't been used by other nations, Brigadier General Mohammad-Ali Ja'fari said today in comments carried by state-run news services including Press TV and the Islamic Republic News Agency. The weapon has a range of more than 300 kilometers (185 miles), IRNA said without giving details of the type of armament tested.

The Strait of Hormuz, at the mouth of the Persian Gulf, is a chokepoint between Iran and Oman through which about a fifth of the world's daily oil supply is shipped. Tensions over Iran's nuclear program escalated, helping to send the price of crude to a record, after Ja'fari's June 28 warning that Iran would ``impose control'' on the Gulf, including the strait, in response to any attack on its atomic installations.

The naval weapon ``is definitely capable of sending any warship within a distance of 300 kilometers to the bottom of the sea,'' Press TV cited Ja'fari as saying. ``The length of Iran's coastline along the Strait of Hormuz, its unique geographical position and the coastal heights make it possible for Iran to close off the strait.''

The announcement of the weapon test came as world powers were waiting for Iran's response to an offer from the U.S., Russia, China, France, the U.K. and Germany of economic and diplomatic incentives in exchange for the suspension of its uranium-enrichment program. European Union and U.S. officials gave Iran about two weeks to respond to the package during July 19 talks on the nuclear dispute in Geneva. ...

Greenspan says more banks, institutions may founder
Mon Aug 4, 2008 6:46pm EDT
PART I

LONDON (Reuters) - More banks and financial institutions are likely to face insolvency and need bailouts before the global financial crisis is over, according to former Federal Reserve chairman Alan Greenspan.
Writing in the Financial Times, Greenspan called the current crisis -- which started a year ago -- a once or twice in a century event and said insolvency would only end once U.S. house prices stabilized, underpinning mortgage-backed securities.
Until then, the threat of collapse among banks and other global financial institutions would persist.
"Fears of insolvency have not, as yet, been fully set aside," Greenspan wrote in an article published online on Monday. "There may be numbers of banks and other financial institutions that, at the edge of defaulting, will end up being bailed out by governments."
The former Fed boss, who stepped down as chairman in 2006 after nearly 20 years in the job, said a "sustained level of global equity prices" was critical if banks were to recapitalize themselves and reassure skittish investors.
By extension, continued falls in global equity prices would have a debilitating impact, he said, despite the offset of rising global savings rates.
"Lower global stock prices could impede the recapitalization of banks and other financial institutions. Debt issuance would also be suppressed as it leverages off the level of equity," he wrote.
"The price of equities worldwide will determine whether the international financial system can maintain a modicum of stability as it eases out of its credit crunch, or falls back into another period of angst and turmoil."
Greenspan said increased market regulation was not the answer, and could do more harm than good. Continued…………

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Greenspan says more banks, institutions may founder
Mon Aug 4, 2008 6:46pm EDT

PART II

"The cause of our economic despair, however, is human nature's propensity to sway from fear to euphoria and back, a condition that no economic paradigm has proved capable of suppressing without severe hardship," he said.

"Regulation, the alleged effective solution to today's crisis, has never been able to eliminate history's crises."

Instead of believing that more rigidity in the system would prevent breakdown, he said continued flexibility was required.

"We may not easily confront or accept the price dynamics of home and equity prices, but we can fend off cries of political despair which counsel the containment of competitive markets.

"It is essential that we do so. The remarkably strong performance of the world economy since the near-universal adoption of market capitalism is testament to the benefits of increasing economic flexibility."

(Reporting by Luke Baker; editing by Andrew Roche)
SOURCE :REUTERS...

Greenspan says more banks, institutions may founder
Mon Aug 4, 2008 6:46pm EDT
PART I

LONDON (Reuters) - More banks and financial institutions are likely to face insolvency and need bailouts before the global financial crisis is over, according to former Federal Reserve chairman Alan Greenspan.

Writing in the Financial Times, Greenspan called the current crisis -- which started a year ago -- a once or twice in a century event and said insolvency would only end once U.S. house prices stabilized, underpinning mortgage-backed securities.

Until then, the threat of collapse among banks and other global financial institutions would persist.

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