Friday, September 12, 2008

Lehman still has "junk in it's trunk" for the Fed

From Dealbreaker with an update:

Whatever else is going wrong at Lehman Brothers, the firm hasn't had to tap the Fed's primary dealer credit facility. A few moments ago the Fed released the latest numbers showing that the discount window for investment banks hasn't had any drawings at all. This news was somewhat telegraphed by the successful commercial paper offering from Lehman earlier today.

Commercial banks, on the other hand, are borrowing heavily from the discount window.

Update: There has been some speculation that Lehman cannot tap the discount window, either because it lacks adequate collateral or because the Fed has deemed that it is no longer eligible because it is not an ongoing concern. Our sources tell us that this is flatly wrong. The Fed takes a wide variety of collateral, which it values at prices far higher than the going rates in the markets. Lehman has plenty of junk in its trunk to trade for Fed ducets. And the "going concern" thing just hasn't come up and its highly unlikely that the Fed will turn off this money spigot on that basis.

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