Lehman Shares Fall After Talks With Korean Bank End

“Analysts are predicting more writedowns because the firm still has about $65 billion in mortgage-related assets that are losing value with the collapse of the real-estate market. Most of the portfolio, about $40 billion, is tied to commercial real estate holdings, which Lehman may spin off into a new company.”

Lehman to Announce `Strategic Initiatives’ Tomorrow

“Lehman said in a statement that it will report the results at 7:30 a.m. in New York. The company said it will host a conference call at 8 a.m. to discuss the firm’s performance, ‘outlook and strategy.’ Lehman previously said it would release the figures on Sept. 18.”

U.S. Stocks Tumble as Lehman Brothers Rattles Banking Shares

“The KBW Bank Index, which rose almost 7 percent yesterday, lost 6 percent today as all of its 24 companies retreated. The S&P 500 Financials Index slumped 6.6 percent, its biggest drop since July 24.”

This article from March 17, 2008 had an $80 billion figure…

“As the biggest underwriter of mortgage-backed bonds last year, Lehman owned $80 billion of the assets at the end of November. Half were tied to commercial mortgages, whose prices declined by 19 percent in the past three months. About $5.3 billion of the holdings were backed by loans to subprime borrowers at greatest risk of default. Lehman limited its writedowns to $1.5 billion last year by using financial hedges.”

… you can see that when the numbers are this large, even small writedowns (in percentage terms) result in huge (crippling if not lethal) losses.

FAS 157 is light and enjoyable reading (if you didn’t take it to the beach with you this summer).

Aside for day traders: In one five minute period on Tuesday, LEH did over 77,000 trades — impressive activity which no doubt strained scanners throughout the land. Remember that Lehman bought RealTick back in 2005, probably in part for their HotTrend scanner (the best publicly available market scanner I’ve ever used).

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