Lehman Open Market Shopping is Unsettling to Investors

This rapid sell off triggered prior to the Korean bank announcement certainly struck a since of urgency for Lehman to present a plan. The rapid decline in share value has now sent Lehman's market value below that of several discount brokers.

Markets never like public fire sales and Lehman has very much been that. Recent comparable collapses like Bear Stearns demonstrates a growing lack of balance sheets to shore up mortgage stressed financial institutions. This has investors in the US and overseas skittish and quick to exit falling positions. Lehman has also had public brush-offs by HSBC and Deutsche Bank.

Lehman chief executive Richard Fuld will have a tough audience as he attempts to assure investors that he has a plan to steady the institution. Analyst expect Lehman to lose more than $2 billion during the fourth quarter and estimates its troubled mortgage portfolio at $70 billion.

Nothing short of raising capital would seem to stem the downward spiral--a plan the as been shopped near and far. This challenge is likely to bring major credit rating agencies to take their own actions to downgrade the institution. Potentially leading to additional runs on the stock.

Taking the example of Bear Stearns, this might add yet another rescue to the books of the Treasury. Financial institutions are now in a vicious circle of selling illiquid assets to finance continually detriorating debt. This may be part of the plan we see today as rumor circulate that Lehman has also shopped a potential spin-off and sale of its investment management division.

It seems that the government still has some mopping up to do as its Fannie, Freddie bailout begins to show some signs of steadying the mortgage market and opening up more mortgage financing options for consumers.