Lehman Brothers Holdings Settling with JP Morgan and Reemerging as Asset Management Firm “Lamco” from World’s Largest Chapter 11

Interesting series of news this week around Lehman brothers Holdings – they are looking to reemerge from Chapter 11 and settle a fight with JP Morgan in the coming weeks. In the JPMorgan settlement, they will take back $9 billion in illiquid securities and real estate in exchange for cash and collateral. According to a BusinessWeek article, the judge responsible for mediation suggested “that the purpose of the deal with JPMorgan, which would saddle Lehman with billions of dollars in illiquid securities, might be ‘to prime the pump of Lamco.’”


“Lehman’s plan involves the creation of Lamco, a subsidiary that would serve as an asset-management adviser for the estate. It would oversee the commercial real estate, residential mortgages, private equity and other remaining assets and sell them off to generate proceeds for Lehman creditors.”* Sources seem to indicate that Lehman Brothers Holdings has $30 to $40 billion USD (depending on JPMorgan settlement) to spin off into Lamco. Other sources suggest Lamco is soliciting third-party assets to manage for a fee and is also seeking outside investors for Lamco. Are we witnessing a Pheonix rising from the ashes?

“According to the 93-page plan, filed Monday by Lehman's lead bankruptcy lawyers at Weil, Gotshal & Manges, Lamco will manage real estate, private equity, and derivatives assets held by the defunct investment bank in order to sell them off at a premium to generate proceeds for Lehman creditors.”**

Sources:
*http://dealbook.blogs.nytimes.com/2010/03/15/lehman-bankruptcy-estate-proposes-reorganization-plan/
**http://amlawdaily.typepad.com/amlawdaily/2010/03/lehmanreorg.html

Wachovia Latest Bank to Pay Big for Violating AML Abuses

In 2009, we saw record breaking fines against banks violating US anti-money laundering (AML) rules. A Wall Street Journal article noted that in a securities filing, submitted Feb. 26, Wells Fargo said that the Wachovia bank unit "is engaged in discussions to resolve this matter by paying penalties and entering into agreements concerning future conduct."

Eugene Yoo, an AML expert at Actimize, a financial crime and compliance software solutions provider to the financial services industry, recently shared his top trends in AML watch list filtering. He points to the fact that fines are growing, with two of the top three highest fines ever in 2009. Based on his prediction, we should expect mega fines in 2010, maybe even topping the astronomical half billion USD Credit Suisse was fined. Even though Wachovia’s alleged violations happened before the acquisition, this may not bode well for Wells Fargo shareholders.

US and UK Getting Tougher on Market Abuse and Insider Trading

Head of UK Financial Services Authority this week said that Britain’s insider trading within the financial services sector is at an “unacceptably high level” A recent article in UK MSN speculated that the recent conviction of insider trader Malcolm Calvert pushed the FSA into action. A 10% rise in regulatory fees will help fund a boost of FSA staff to 3,700, enabling it to become much more pro-active in “tackling the high-risk culture” in financial services.

Similarly, on the other side of the pond, the US financial crisis and the revelation of massive Ponzi schemes from the likes of Madoff and others pressed the SEC into action too. Securities Industry News reported that “a new market abuse unit is building a sophisticated database to go on the offense to catch insider trading.” The SEC will increase its annual spending 11 percent to $1.23 billion, which includes a $12 million boost for technology.

Is there such a thing as a completely fair and open market? Maybe not, but it is certainly something we must strive toward.

Obama and Bankers Peacocking on Capitol Hill

Obama’s meeting on this week with the CEOs of most of the major banks in the US was nothing more than political posturing from both sides – peacocking for Joe the Plumber by the financial services industry and Obama. A day before, Obama called bankers “fat cats” and after the meeting, the CEOs claimed there is a ‘disconnect’ between their personal wishes and the actions of the lobbyists their firms spent $300 million on to fight proposed regulatory reform.

The inherent conflict of interest between the financial services industry and that of the government is inevitable. For profit businesses exist to make money and consumers’ best interest is not always the most profitable route. The banks will continue to fight new regulations and Obama's reform plan, introduced earlier this year, will continue to be watered down as it finishes its cycles in the House and Senate.

It is time for the US to sever its ties with Israel

United States’ Parasitic Ally Has Become a Costly Distraction

It is sad to see the current healthcare overhaul debate between Democrats and Republicans take such a nasty turn. We are all Americans, right? Shouldn’t we provide for our own? The crux of the disagreement is cost, yet we spend more money per capita on Israeli citizens than we do on our own. Israel has become a costly distraction that we can no longer afford, not to mention that the relationship does not have the same geopolitical value it once did when Israel was our only Middle East foothold.

Let’s be honest. Israel is a selfish nation that is only interested in expanding its wealth, military power and geographical footprint. It will and can only do so at the cost of others. Consider a couple recent examples:

Israel consistently treats the civilian population in Gaza inhumanly, as documented by many sources, denying Gaza contact with the outside world by imposing blockades to stop humanitarian aid from entering the region. Israel’s 2009 Gaza invasion is probably the most sickening example - even Zionist Richard Goldstone, who led the United Nations Human Rights Council investigation, expressed shock over the “gross violations of the laws of war”.

On top of the atrocious crimes against humanity, think about how this affects the US taxpayer… We foot the bill for Israel’s invasion of Gaza by providing it with the military technology (i.e. planes, missiles, weapons, etc.) and financial and political backing. Using US planes and tanks, Israel crushed Gaza stone throwers and innocent civilians, then left the US to clean up its mess – which will now cost the US taxpayers an additional $900+ million USD on top of the usual $6 billion or so that we send annually.

From a geopolitical perspective, the US now has control of other Middle Eastern assets in Iraq and Afghanistan. Anyway you look at it, Israel is a bad ally and a bad investment. It is clearly time for the US to drop Israel from our ‘friends and family circle’.