America's Road to Fame

Chapter 204 The Precarious News Corporation

At this business gathering, William Chen met quite a few bigwigs. Of course, now he is also one of the bigwigs in the eyes of others.

The next day, he set off for New York.Because the night before, he got the same news from different channels——

On February 2, Lehman Brothers applied to the Federal Reserve to transform into a bank holding company in order to obtain the Federal Reserve's fund protection, but was rejected.

The reason why Lehman Brothers' rescue application was rejected this time is also very simple, because the US Treasury Department and the Federal Reserve's previous financial assistance to companies such as Bear Stearns, Citibank, and China Freddie has aroused dissatisfaction among the public.

During Morgan Stanley's acquisition of Bear Stearns, the U.S. Treasury Department provided more than $300 billion in financial support, and injected a total of $450 billion into Citibank in two installments. As for Freddie Mac and Freddie Mac, the government continued to provide financial support. It has received a lot of policy support and injected funds, and finally even decided to nationalize these two companies to underpin the losses they caused.

These policies have aroused strong criticism from members of Congress and caused great opposition from the public.

They believe that these rescue funds come from the taxation of all citizens, and the companies that are currently in crisis are all to blame.

Because of their own greed to create the status quo, and even in this situation, many corporate executives are still receiving huge dividends and generous rewards, and they should not be bailed out with the funds of the entire population.

Moreover, after injecting so much capital and bailing out certain companies, the American government has gradually discovered that, judging from the current actual situation, Lehman Brothers is by no means the last financial institution that needs bailout.

If it is shot again, it is very likely that the US government's finances will also be pulled into the water.If we want to prevent the further expansion of the financial crisis and save financial companies that are already in trouble, the government must consider the road to marketization.

Therefore, after the request for help was rejected, the next day, Lehman Brothers, facing a desperate situation, started negotiations with the Development Bank of South Korea, hoping to introduce strategic shareholders, but it is said that the negotiations did not go smoothly.

After returning to New York, William Chen immediately arrived at the Trump headquarters building.In his office, he met John Paulson, and the two needed to discuss the follow-up operation of shorting the stock market.

Among the major investment banks in the United States, William Chan's fund has four main short-selling targets, namely Bear Stearns, Citigroup, Merrill Lynch and Lehman Brothers.

Among them, Bear Stearns had closed all the corresponding short contracts before they were acquired.

The recent stock price of Citibank has also fallen by more than 90.00% compared to their previous high price. All short positions of the bank are closed.

Now among these four investment banks, only the short-selling contracts of Merrill Lynch and Lehman Brothers are left. Now the stock price of Merrill Lynch has fallen by more than 95%, and Lehman Brothers has fallen by more than 99%. Funds, then there is only bankruptcy all the way.

Therefore, John Paulson advocated taking advantage of the current opportunity to close the short positions of these two stocks. Otherwise, if things change again and they succeed in saving themselves, there will inevitably be a wave of rebound, which will reduce the current profit by a lot.

Although William Chen knew that in his previous life, Lehman Brothers eventually went bankrupt, while Merrill Lynch ended up being acquired.

But now the world has undergone many changes, so at this critical moment, he does not dare to operate according to the memory of his previous life, so the best choice is to be safe, and there are already extremely high profits, and there is no need to Take too many risks.

After much thought, he still made a choice and began to liquidate all the short contracts related to the stocks of Merrill Lynch and Lehman Brothers.

After getting confirmation from William Chen, John Paulson began to prepare for the operation.

Three days later, they got news that because Lehman Brothers believed that the bid of the South Korean Development Bank was too low, and South Korean financial regulators criticized the acquisition, and finally the South Korean Development Bank withdrew from this acquisition.

The withdrawal of the Development Bank of Korea dealt a heavy blow to Lehman Brothers, and its stock price fell by nearly 50% that day.

And John Paulson also took the opportunity to complete the liquidation of the short contracts of Merrill Lynch and Lehman Brothers stocks.

The largest part of these short-selling contracts came from the US$16 billion invested by Chen William at that time, and he shorted four investment banks respectively.

The US$16 billion came from the agreement reached between Chen William and Goldman Sachs on the latter's repurchase of Goldman Sachs CDS bonds held by Meta Investment Company.

Goldman Sachs paid $6 million to buy back the CDS bonds, which totaled $10 billion in premiums, and lent $10 billion in low-interest loans to Meta Investments.

By the time all positions were closed, the US$16 billion had become more than US$80 billion. After the unprecedented plunge in the stock prices of the four investment banks during this period, the US$16 billion used by William Chen for short selling has more than quadrupled. profits.

At the same time, the short-selling contracts of these investment banks in the No. 2 and No. 3 funds of Meta Investment Company have also completed the liquidation. According to John Paulson's estimation, the profit of this part of the short-selling contracts has exceeded 50 billion US dollars. These funds also continued to be invested in shorting other stocks.

The impact of the subprime mortgage crisis on the economy is gradually spreading. Therefore, taking their short selling this time as an example, the real estate industry and the financial industry related to subprime mortgage mortgages are the first to be damaged.

Then, because the financial industry was hit, resulting in a lack of liquidity, more industries were involved, and finally manifested in the stock market, that is, the relay decline of various sectors, mutual influence, and ultimately a vicious circle.

Therefore, as long as we grasp the rhythm of the spread of the subprime mortgage crisis, we can completely invest in other sectors to continue shorting after the short contracts of real estate and finance-related stocks are closed, so that we can harvest round after round.

Now there are more than 80 billion US dollars in the account of Meta Investment Company, of which 10 billion US dollars is a low-interest loan from Goldman Sachs, but even though he has money now, William Chen is not in a hurry to repay this part of the loan.

Because we had negotiated with the other party at that time, the interest on this part of the loan was extremely low.Since this is the case, there is no need to rush to return it. Anyway, it is not long, so it would be better to use it first.

……

On February 2, Sean Hall, a reporter who first exposed the wiretapping of News of the World, a British newspaper affiliated to News Corporation, died at home.

Although the police claimed that his death was normal and not accidental, there were still many rumors about conspiracy theories in the media and the public. For a while, they all pointed to the unfavorable investigation of the matter by the British government and News Corp. Rampant attitude of doubt.

Under the pressure of the British royal family, opposition parties and public opinion, on February 2, the British Prime Minister announced that an independent investigation committee would be established to investigate a series of wiretapping scandals involving the popular newspaper News of the World.

On February 2, former News Corp. editor Neil Voss was arrested on suspicion of phone hacking. He was the ninth person arrested in this incident.

On the same day, Murdoch made a decision to close the 166-year-old News of the World after publishing the last issue the next day.

And he eventually dropped his protection of former News of the World editor Rebecca Brooks, accepting her resignation as chief executive of News International, which oversees the News Corp-owned UK newspaper.

Hours later, Les Hinton, who was chairman of News International at the time of the phone hacking, resigned as chief executive of News Corp.'s Dow Jones.

The news reports William Chen saw read:
"Media tycoon Murdoch and his son James attended a hearing in the British Parliament on the 19th and were questioned about the wiretapping scandal. James apologized to the victims. Murdoch said: This is the most humble day in my life."

"He himself will not take ultimate responsibility for the wiretapping incident, but he will hold his subordinates accountable and deny that his reporters wiretapped the victims of the 9-11 incident. There was also an unexpected episode in the hearing. A man threw a plate containing shaving cream. Looking at Murdoch, Murdoch's glasses seemed to be knocked off, and Wendi Deng reacted quickly, blocking the attacker with a movement similar to a volleyball smash."

"The scandal has plummeted the value of Murdoch's News Corp., led him to abandon a grand plan to buy a lucrative satellite TV business, destroyed his political influence in the UK, and may also give him global media dominance. The empire is in turmoil."

(End of this chapter)