Lehman's stock got crushed today and it's now down 15% from earlier in the week when they announced they had taken an investment of $6B from an unnamed source. I wonder how that unnamed source feels now that they have lost $900M in a week. Probably trying everything possible to get out of the deal. Not a pretty sight.
These large cash infusions from foreign central banks and investment funds, etc have been all the rage for large US banks. They've been able to raise money whenever they want to from investors who are driven by political and status motivations. However, losing $900M is losing $900M and the other deals done in the banking sector before Lehman are all down as well. My bet is that this will be the final straw and that pot of money will dry up for a while.
These foreign investment funds can't possibly be doing diligence on the mortgage portfolios of someone like Lehman. The portfolios are far too opaque, so they're betting on the franchise value of these banks. They market is telling them that is a poor bet. I wonder where these banks will turn if this capital source dries up? More side deals with the U.S. Government?
