Pressure rises for Lehman Brothers

by Gill Montia

Story link: Pressure rises for Lehman Brothers

Widespread relief over the US Treasury’s rescue of mortgage companies, Fannie Mae and Freddie Mac, has been followed by fresh concerns over Lehman Brothers, which is currently seen as Wall Street’s most vulnerable investment bank.

The firm is widely seen as undercapitalised and reported a loss of $2.8 billion in the second quarter of 2008.

Shares in the bank plummeted yesterday on the news that Korea Development Bank had ended talks that were central to its fund raising strategy.

The credit crisis has already cost Lehman Brothers $7 billion in losses and writedowns and analysts are predicting further losses because the bank still holds around £37 billion of mortgage-related assets.

Speculation about the investment bank could prove so damaging that its third-quarter results will be announced today, one week earlier than scheduled.

Less than a fortnight ago, Lehman Brothers said it was planning to reduce its headcount by 1,200, adding to the 4,000 job cuts already made in 2008.