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Report: Lehman Taps Fed's Discount Window; Goldman Next?

TSC Staff

Fresh off better-than-expected earnings reports Tuesday, Lehman Brothers(LEH Quote - Cramer on LEH - Stock Picks) borrowed a small amount from the Federal Reserve's discount window and Goldman Sachs(GS Quote - Cramer on GS - Stock Picks) is soon expected to do the same, The Wall Street Journal reported.

The borrowings are among the first since the central bank opened the discount window to primary dealers last weekend. The Fed's direct-lending mechanism was until then reserved solely for commercial banks and lenders, but the collapse of Bear Stearns(BSC Quote - Cramer on BSC - Stock Picks), sold to JPMorgan Chase(JPM Quote - Cramer on JPM - Stock Picks) on Monday for $2 a share, moved the central bank to act.

The Fed has also twice lowered the discount rate since Sunday, to 2.5%.

Opening the discount window to primary dealers like Lehman and Goldman are part of several extraordinary moves the Fed has taken in the intensifying credit crisis to provide liquidity to choked markets. While there has been a stigma attached to borrowing at the window in the past -- the window was viewed as a lender of last resort, thus marking borrowers with a sense of desperation -- investment banks have expressed enthusiasm for the idea.

Goldman CFO David Viniar, in a conference call Tuesday discussing the firm's first quarter results, called the move "a very good thing" that "will help our liquidity as well as the liquidity in the market."

Know What You Own: Lehman Brothers operates in the financial services industry, and some of the other stocks in its field include Citigroup (C Quote - Cramer on C - Stock Picks), Morgan Stanley (MS Quote - Cramer on MS - Stock Picks) and Merrill Lynch (MER Quote - Cramer on MER - Stock Picks). These stocks were recently trading at ($21.12, +1.98%), ($46.02, +7.35%) and ($46.56, -0.15%) respectively. For more on the value of knowing what you own, visit TheStreet.com's Investing A-to-Z section.