Lehman: Looking Strong on the Repo Front

If you thought a price-to-book league table was arcane, wait till you see what Heidi Moore has come up with: an excess-liquidity-and-other-unencumbered-collateral-to-total-repos league table! I'm impressed.

As Heidi explains, the proximate cause of Bear's (BSC) collapse was the fact that its repo lines were withdrawn, so the ratio of liquidity to repo lines is important: the higher the better. And this is where Lehman (LEH) looks much stronger than Bear. Bear's ratio here was 33%: it had three times as many repos as it had cash. Lehman's ratio, by contrast, is 107%: it could lose all its repos and still have cash left over. Yet more reason to believe the worst of the crisis is over.

Comments

[Tie D:]

E-Trade had write downs of about $500 million on a $3 billion CDO portfolio. That is about 16 percent.

Lehman has about $70 billion in exposure, and is only taking $1.8 billion in writedowns so far. That totals about 2.5 percent.

Do they expect us to believe that their Alt-A securities are comprised of more responsible stated income applicants than those in any other Alt-A class?

2008 Mar 19 08:14 AM