1. A Bedtime Story
"The discussions at this point aren't about our viability or the fact that we will be here or the fact that we have sufficient liquidity," said Lehman Brothers (LEH) CFO Erin Callan on a conference call with investors Monday. "I think we put that to bed on a number of different levels through our own actions."
In order to further reassure jittery investors about Lehman's ability to survive the credit crunch, the firm put Callan's job to bed four days later, along with that of COO Joseph Gregory.
So, how did Lehman put worries about its survival to bed? It did what any healthy finance firm does in a rough patch: It sold equity at a 20% discount to book value while diluting existing holders by 30%.Everything's under control, folks. This is just your typical, run-of-the-mill, cyclical downturn on Wall Street. Nothing to see here. Shares of Lehman, the fourth-largest U.S. investment bank, are down 61% for 2008, and 35% in the last 12 days alone. The selling has come mainly at the behest of rumor-mongering short-sellers who love to use the media to talk their books. It's a conspiracy that Securities and Exchange Commission Chairman Christopher Cox is busy investigating in the midst of a financial crisis after the CEO of Bear Stearns blamed its collapse on the same rabble-rousers. Oops, we're not supposed to mention Lehman in the same context as Bear Stearns. The two firms have nothing in common. Let's focus on David Einhorn, the media hound that is currently busy bullying Lehman. The firm lashed out at him for spreading scurrilous rumors that it was facing heavy second-quarter losses and that it would have to raise fresh capital. Einhorn was all over CNBC making forecasts that support his own financial interests, but unlike all the other people that go on television to make forecasts promoting their financial interests, Einhorn's comments quickly proved to be correct. Lehman said Monday it's raising a mind-boggling $6 billion in new equity and that it will likely report a second-quarter loss of about $2.8 billion -- its first loss since it went public in 1994. Its CEO, Dick Fuld, has not participated in the conference calls in which Callan and others put all the worries about the firm's survival to bed. He has been busy finding new positions at the firm for her and Gregory. Also, we're sure he has phone numbers handy for Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke. Dumb-o-meter score: 95. Sleep tight, Lehman. Don't let the bed bugs bite.