No Barclays Bid?

Now that we know there is no Barclays bid, should we just presume no bid? Sure seems that way. Without a buyer of Lehman Brothers (LEH - commentary - Cramer's Take) we will have chaos and dislocation, and whatever firms have provided financing to Lehman will have to take hits larger than they possibly can, and we will see what happens when a major owner of mortgages goes under.

Lehman owns hard-to-value assets and it borrows a lot of money to finance that inventory. We don't know who is lending to it, but theoretically, the Federal Reserve could lend the new entity the money it needs for a disorderly -- not orderly -- liquidation. (You would only get an orderly one with a real buyer.)

Obviously anyone owning mortgages takes a hit tomorrow with no buyer for Lehman. But how big a hit?

I think the missing element here is that Lehman was the worst mortgage lender among the majors. (Of course no one was worse than the Novastar/Fremont stooges, but they were not majors.)

Because as public sightseers we have no idea what Lehman really owns, we know right now that it must be pretty toxic. The perception is that we have a huge game of chicken going on here where the government is holding out the disruption of the banking system and the terrible hits the remaining banks will take vs. a smooth and orderly hit if the banks buy the whole shebang.

I think the banks are willing to take their chances because the real problems with Lehman are in Europe, not here, and they would rather pick up the Lehman assets without having to pay anything for them.

It's really hard to figure out how bad this will be, and I know there are tons of so-called counterparty risks, but I think, in the end, with no deal the market gets hit hard for a couple of days, the bears try to break Merrill (MER - commentary - Cramer's Take), AIG (AIG - commentary - Cramer's Take) (I hope there's some plan there, but I don't know.) and Citigroup (C - commentary - Cramer's Take), and then there's really no one else left that's in big trouble right now. Washington Mutual (WM - commentary - Cramer's Take)? Hard to break it from this level.

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