America's Road to Fame

Chapter 207 The Collapse of Lehman Brothers
When this happened, in the eyes of the U.S. Treasury Secretary and the Chairman of the Federal Reserve, although it was regrettable that Bank of America gave up Lehman Brothers, at least Merrill Lynch was rescued.

The most important thing is that this process does not require money from the US government, which allows them to avoid being accused by congressmen and the public again.

Moreover, at this time, for Lehman Brothers, there is another option, which can also be said to be their last straw-Barclays Bank of the United Kingdom.

This bank does not have investment banking business. In order to enter the American market, they acquired it after Lehman Brothers proposed a plan to split the company's business.

The split plan was proposed by the CEO of Lehman Brothers. He planned to separate Lehman Brothers' problematic assets and assets related to mortgages from the company to form a "bad bank"; merge high-quality assets and profitable businesses into one "Good Bank".

Then sell the "good bank" to Barclays Bank in exchange for funds, which will be injected into the "bad bank" to complete the rescue of bad business.

To this end, Barclays is willing to pay 100 billion US dollars to acquire the "good bank" business they spun off.

So on the third day of the meeting, the chairman of the New York Federal Reserve announced the good news to everyone. Although everyone here has already known about this matter through their own channels-British Barclays Bank has drawn up a whole set of plans to acquire Lehman Brother's plan, and it's ready to be executed.

The only obstacle now is that the implementation of this plan requires other banks to provide enough funds to finance Lehman's distressed assets, which will require a total of about 330 billion US dollars.The chairman of the New York Fed hopes that the consortium present can give a figure and work together to solve this fund.

This event greatly encouraged the consortia present. Except for Merrill Lynch and Citigroup, two banks that had just completed self-rescue, who were unable to contribute capital, other bigwigs actively participated and quickly completed the fundraising.

Just when they thought everything was in place, the chairman of the New York Fed received a call from the head of the British Financial Services Agency, who told him that the British side would still assess whether Barclays had the right capital structure to take the risk of acquiring Lehman Brothers.

The chairman of the New York Federal Reserve who received the call rushed into the office of the US Treasury Secretary Paulson in a panic and told him the matter. Paulson was greatly surprised and immediately asked his subordinates to call the director of the British Financial Services Bureau again. After hearing the same reply, he personally called Darling, the British chancellor of the exchequer.

The other party also said that they were anxious about the potential risks brought about by this transaction, and that Barclays' acquisition of Lehman would pose a threat to Britain's financial security.

After hanging up the phone, US Treasury Secretary Paulson said harshly:
"We've been tricked by the British, they don't want to import our 'cancer'."

But Paulson even wanted to go to the commander-in-chief of the United States to put pressure on the British Prime Minister, but he realized from the tone of the British Chancellor of the Exchequer that the other party's attitude was very firm, so he finally gave up this idea.

Because on the phone, the British Chancellor of the Exchequer once asked him:
"We need to determine what will be undertaken and what the American government is willing to do."

To this, Paulson replied: "Then we can't do anything about it."

Therefore, if they themselves are unwilling to contribute funds to rescue Lehman Brothers, then the British side will naturally be even more unwilling to take the risk of introducing danger into the domestic financial system. After all, they still have a lot of troubles to solve.

Things developed to the present, the United States immediately realized that the bankruptcy of Lehman Brothers was inevitable.

As a result, the U.S. Treasury Secretary and the Federal Reserve Chairman, who were the original rescuers of Lehman Brothers, immediately turned into "extubators."

They urgently urged the board of directors of Lehman Brothers to file for bankruptcy as soon as possible, so as to prevent the spread of bad market expectations.

So today, that is, Monday, March 3, Lehman Brothers officially declared bankruptcy.

The collapse of the company with debts of up to 6500 billion U.S. dollars, in addition to the unemployment of more than 2 employees, also triggered a chain reaction in the financial market.

As soon as the market opened in the morning, the U.S. stock market encountered "Black Monday". The Dow Jones Index recorded the largest single-day drop in points and losses since the "9.11" incident, and global stock markets also plummeted.

Under the influence of such a situation, the stock markets in Europe and Asia are also doomed to be unavoidable, and it is believed that there will be sharp declines after the opening of the market at night.

Today, at the same time that Lehman Brothers announced to file for bankruptcy, Bank of America announced that it would acquire Merrill Lynch, the third largest investment bank in the United States, for a total price of US$450 billion.

Affected by the bankruptcy of Lehman Brothers, Goldman Sachs and Morgan Stanley, the only two remaining independent investment banks in the United States, also encountered a lot of trouble.

But at this time, the urgent situation is American International Group (AIG), the largest industrial and commercial insurance institution in the United States and a deep participant in subprime mortgage bonds.

At that time, in order to earn two to three billion US dollars in premiums a year, this company guaranteed a large number of CDS bonds, and it was the company with the largest amount of CDS bond guarantees in the United States. Now, just the payment of CDS bond premiums is enough to drag this company into the abyss .

At that time, the CDS bonds purchased by Chen William's Meta investment company required more than US$20 billion in compensation from the company. Fortunately, they acted quickly and did not turn these insurance premiums into AIG's debt.

Now after Lehman Brothers filed for bankruptcy, a large number of financial institutions and counterparties who purchased such insurance have filed claims against American International Group.Without a financial bailout, the company may not survive for days, or even hours.

After introducing the situation with William Chen, John Drey said:
"This afternoon, the President convened Secretary of the Treasury Paulson, the Chairman of the Federal Reserve, advisory members, and representatives of other financial regulators to hold a high-level meeting in the Roosevelt Room of the White House to discuss these recent events."

"I heard that at the beginning of the meeting, the general manager changed his usual relaxed and humorous style, with a gloomy face, and asked bluntly, how did we get to where we are today? The Treasury Secretary and the Chairman of the Federal Reserve were speechless for a while. "

Hearing John Drey say so much to himself, he can understand that he must not only tell him the news he got.

From these news, Chen William can clearly see that the American government's response to the subprime mortgage crisis has changed in its attitude before, from the initial financial intervention to try its best to rescue the company, to avoiding government funding as much as possible after being criticized, mainly by The consortiums settle on their own.

Facing the government's attitude of seemingly letting go, those consortiums responded negatively, which eventually led to the bankruptcy of Lehman Brothers. Now this influence and destructive power have been fully revealed, and just now John Deretti Yes, the urgent meeting called by the Grand Commander is a signal.

The Minister of Finance and the Federal Reserve had previously proposed not to rule out the use of quantitative easing to solve the problem of liquidity depletion in the crisis, so now it seems that after the bankruptcy of Lehman Brothers, it seems that the era of flooding is finally about to begin.

This also means that the subprime mortgage crisis is about to pass through the second stage and begin to transform into the third stage.Therefore, his operating strategy also needs to be adjusted accordingly.

"William, I know you have been shorting, so you must have made a lot of money in this subprime mortgage crisis, as can be seen from the profits we invested in your private equity fund."

William Chen knew that the other party had told him so much, so he would definitely ask about these things, and he didn't need to hide it. Now almost everyone knew that he made a lot of money because he chose the right direction during the subprime mortgage crisis. Where does the money for constant buying, buying, and large investments come from?
It's just that as for the exact amount he earned, unless you talk to his company's top management, others can only guess. The most common view is that his profit exceeds 200 billion US dollars.

Sure enough, John Drey continued to ask: "It is said that your profit exceeds 200 billion US dollars?"

"In fact, all the funds combined, it will be more."

Hearing what William Chen said, John Drey nodded.

This is similar to what he guessed, except that when William Chen said this, he meant the funds he invested in, and what John Drey understood was that, with the profits of William Chen’s private equity funds, Therefore, Chen William's net worth in his mind will be far lower than his actual assets.

"However, William, what you need to pay attention to is that although your profits are obtained through legitimate means, under the current circumstances, some public opinion and public opinion have to be paid attention to, so you still need to do something .”

When John Drey and William Chen were talking about this, there was a sudden knock on the door of the study, so John Drey stopped and saw his assistant Kevin coming in.

"Mr. Dray, just now there was a call from Capitol Hill. Congress is going to hold an urgent meeting tonight, and you need to come over."

John Drey looked at the time, it was almost 08:30 in the evening.

"Why so late?"

"Yes, Mr. Dray, it is said that Mr. Treasury Secretary and the Chairman of the Federal Reserve are going to explain to Congress the proposed bailout of the American International Group. This matter is very urgent, and they hope to start tomorrow."

Sure enough, after hearing this, William Chen understood in his heart that after the market panic caused by the bankruptcy of Lehman Brothers, the American government still decided to rescue the larger American International Group.

At the same time, he also knew that the back-and-forth conversations between his uncle and his assistant should be intentional for him to hear, so as to get more information about the current situation.

"Okay, William, I have to go to Capitol Hill first, and it seems to be late tonight. You can stay here for a while. I have other things I want to tell you in detail, but I don't have time now. Just let Kevin talk to you."

(End of this chapter)