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Lehman will be sold out, positions will unwind on mass.

Posted by Adrian on September 15, 2008

There is talk about systemic crisis in the whole banking system, if Lehman is allowed to fail or go bankrupt. Who cares. The banking system has been a dysfunctional mess since the Federal Reserve propped up Bear Stearns, bought Fannie Mae and Freddie Mac and has loaned out billions to every bank you can think of (in the States) to keep them alive. Hence creating a delayed (and contributing to) mega implosion of the banking system. With the US taxpayer sadly getting the bill, as the Fed’s balance sheet turns to nothing. Terrible situation.

So, the banking system is problematic, has been for a long time. Will Lehman’s filing for bankruptcy cause major turmoil in the markets? Particularly banking stocks? The answer, most probably. But with a false confidence that the Federal Reserve was going to bail out every second bank that was going to go bust. This has unfortunately shoved some delusional optimism into the markets that somehow the market will gradually unwind out of the credit mess. This as we know is fallacy.


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