Did JPM’s CIO Intentionally And Maliciously Start The Margin Call Avalanche That Crushed Lehman?

Via: Zero Hedge

It is conventional wisdom that in the days leading to Lehman’s bankruptcy filing on the night of September 15, 2008, sheer panic and utter confusion ruled ever back- and middle-office, over concerns that a counterparty, any counterparty, but especially Lehman, would end up being “not money good“, and the result was that trigger-happy margin clerks had the potential to make or break a company, by demanding just enough variation margin that would send the notice recipient promptly into bankruptcy. It is also conventional wisdom, that it was precisely several such margin calls mostly out of JPMorgan that precipitated the Chapter 7 filing by Lehman brothers, as the firm was finally unable to mask the fact that it was terminally overlevered, and even more terminally illiquid. It is certainly conventional wisdom, that Lehman was certainly massively overlevered, holding billions of overmarked CMBS on its balance sheet, and was doing everything in its power to hold on to precious liquidity, taking every opportunity to window dress its balance sheet as far better than it truly was (Repo 105 at the end of every quarter promptly comes to mind), over fears of avoiding precisely such a margin call onslaught, where the first margin call would cascade into many, likely lethal, margin calls.

Which is why, over four years after the filing of Lehman’s bankruptcy and the fight for who was responsible for what in the Lehman Chapter 7 saga still waging, most actively between the Lehman creditor estate and tri-party repo stalwart JP Morgan, we were not surprised to learn that the Lehman estate had attempted to force yet another sworn testimony from a (former) employee of JP Morgan, in hopes of catching the firm as engaging in a malicious act of defrauding Lehman of precious liquidity in its final hours, or said in layman’s terms, forcing it to liquidate.

What did catch our attention was that Lehman named the infamous JPM Chief Investment Office, and specifically its very infamous trader Bruno Iksil, accountable along with others for the London Whale fiasco, as the person responsible for an initial margin call to the tune of $273.3 million, made the same day “that JPMorgan made its first of two demands that week each for $5 billion of extra cash collateral that it had no right to obtain and that drained Lehman of $8.6 billion” (as per the Lehman filing). One could make the argument that this initial margin call was the straw that broke the camel’s back, as in the avalanche of money requests, every dollar flowing out of Lehman may have been the one that pushed it under.

If, of course, the Lehman estate claim was credible.

Read more: here

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Did JPM’s CIO Intentionally And Maliciously Start The Margin Call Avalanche That Crushed Lehman?

Via: Zero Hedge

It is conventional wisdom that in the days leading to Lehman’s bankruptcy filing on the night of September 15, 2008, sheer panic and utter confusion ruled ever back- and middle-office, over concerns that a counterparty, any counterparty, but especially Lehman, would end up being “not money good“, and the result was that trigger-happy margin clerks had the potential to make or break a company, by demanding just enough variation margin that would send the notice recipient promptly into bankruptcy. It is also conventional wisdom, that it was precisely several such margin calls mostly out of JPMorgan that precipitated the Chapter 7 filing by Lehman brothers, as the firm was finally unable to mask the fact that it was terminally overlevered, and even more terminally illiquid. It is certainly conventional wisdom, that Lehman was certainly massively overlevered, holding billions of overmarked CMBS on its balance sheet, and was doing everything in its power to hold on to precious liquidity, taking every opportunity to window dress its balance sheet as far better than it truly was (Repo 105 at the end of every quarter promptly comes to mind), over fears of avoiding precisely such a margin call onslaught, where the first margin call would cascade into many, likely lethal, margin calls.

Which is why, over four years after the filing of Lehman’s bankruptcy and the fight for who was responsible for what in the Lehman Chapter 7 saga still waging, most actively between the Lehman creditor estate and tri-party repo stalwart JP Morgan, we were not surprised to learn that the Lehman estate had attempted to force yet another sworn testimony from a (former) employee of JP Morgan, in hopes of catching the firm as engaging in a malicious act of defrauding Lehman of precious liquidity in its final hours, or said in layman’s terms, forcing it to liquidate.

What did catch our attention was that Lehman named the infamous JPM Chief Investment Office, and specifically its very infamous trader Bruno Iksil, accountable along with others for the London Whale fiasco, as the person responsible for an initial margin call to the tune of $273.3 million, made the same day “that JPMorgan made its first of two demands that week each for $5 billion of extra cash collateral that it had no right to obtain and that drained Lehman of $8.6 billion” (as per the Lehman filing). One could make the argument that this initial margin call was the straw that broke the camel’s back, as in the avalanche of money requests, every dollar flowing out of Lehman may have been the one that pushed it under.

If, of course, the Lehman estate claim was credible.

Read more: here

The Ethics of Repudiation

Via: Ludwig von Mises Institute

Tuesday, February 26, 2013 by John P. Cochran

Do you ever get the feeling that no one in the Washington power elite is willing to seriously deal with the major economic threat to future prosperity facing the United States today: mounting government debt and the associated deficits? The problem, as pointed out by Murray Rothbard over 20 years ago:

Deficits and a mounting debt, therefore, are a growing and intolerable burden on the society and economy, both because they raise the tax burden and increasingly drain resources from the productive to the parasitic, counterproductive, “public” sector. Moreover, whenever deficits are financed by expanding bank credit—in other words, by creating new money—matters become still worse, since credit inflation creates permanent and rising price inflation as well as waves of boom-bust “business cycles.”

In 1992, when Rothbard wrote the above, the US debt was approaching $4 trillion (now nearing $17 trillion) and Federal Reserve policy was relatively benign compared to the current quantitative easing, which is effectively monetizing a significant portion of newly created government debt. The “peace dividend” from the end of the Cold War and the false prosperity from two Fed-created economic booms made the problem appear less urgent and allowed politicians to kick the can down the road. A solution is now urgent, but not likely. David Henderson’s “Must Default Be Avoided at All Costs?” is a great place to start in order to reinvigorate a serious discussion on a moral approach to shrinking the size of the federal government down to a less destructive level.

Read more: here

The Ethics of Repudiation

Via: Ludwig von Mises Institute

Tuesday, February 26, 2013 by John P. Cochran

Do you ever get the feeling that no one in the Washington power elite is willing to seriously deal with the major economic threat to future prosperity facing the United States today: mounting government debt and the associated deficits? The problem, as pointed out by Murray Rothbard over 20 years ago:

Deficits and a mounting debt, therefore, are a growing and intolerable burden on the society and economy, both because they raise the tax burden and increasingly drain resources from the productive to the parasitic, counterproductive, “public” sector. Moreover, whenever deficits are financed by expanding bank credit—in other words, by creating new money—matters become still worse, since credit inflation creates permanent and rising price inflation as well as waves of boom-bust “business cycles.”

In 1992, when Rothbard wrote the above, the US debt was approaching $4 trillion (now nearing $17 trillion) and Federal Reserve policy was relatively benign compared to the current quantitative easing, which is effectively monetizing a significant portion of newly created government debt. The “peace dividend” from the end of the Cold War and the false prosperity from two Fed-created economic booms made the problem appear less urgent and allowed politicians to kick the can down the road. A solution is now urgent, but not likely. David Henderson’s “Must Default Be Avoided at All Costs?” is a great place to start in order to reinvigorate a serious discussion on a moral approach to shrinking the size of the federal government down to a less destructive level.

Read more: here

The Bitcoin ATM has Arrived…Here’s How it Works

Via: Liberty Blitzkrieg

Posted on February 25, 2013

The more I learn about Bitcoin, the more I support it. In fact, the only donations we accept on this site are Bitcoin donations. As I mentioned in a post late last summer, I think it represents another way to fight back against the current repressive and immoral monetary system that has a strangle hold on the planet.

 Ever since WordPress.com (the extremely popular blogging platform and 22nd most popular site on the internet), decided to accept Bitcoin as payment last November the value of Bitcoins versus the U.S. dollar has more than doubled.

Read more: here

The Bitcoin ATM has Arrived…Here’s How it Works

Via: Liberty Blitzkrieg

Posted on February 25, 2013

The more I learn about Bitcoin, the more I support it. In fact, the only donations we accept on this site are Bitcoin donations. As I mentioned in a post late last summer, I think it represents another way to fight back against the current repressive and immoral monetary system that has a strangle hold on the planet.

 Ever since WordPress.com (the extremely popular blogging platform and 22nd most popular site on the internet), decided to accept Bitcoin as payment last November the value of Bitcoins versus the U.S. dollar has more than doubled.

Read more: here