Did JPM Cash Call Bring Down Lehman ?

This continues to become ever more interesting . . .

“Lehman Brothers Holdings Inc.’s main lender and clearing agent, JPMorgan Chase & Co., caused the liquidity crisis that led to Lehman’s collapse, creditors said.

JPMorgan had more than $17 billion of Lehman’s cash and securities three days before the investment bank filed the biggest bankruptcy in history on Sept. 15, the creditors committee said in a filing Oct. 2 in bankruptcy court in Manhattan. Denying Lehman access to the assets on Sept. 12, the bank “froze” Lehman’s account, the creditors claimed.

JPMorgan, the biggest U.S. bank by deposits, financed Lehman’s brokerage operations with daily advances, while money market funds and other short-term lenders provided overnight loans, according to bankruptcy court documents. When JPMorgan shut Lehman off from funds, Lehman “suffered an immediate liquidity crisis that could have been averted by any number of events, none of which transpired,” according to the filing.

The creditors asked the judge in charge of the case to let them interview a witness and request relevant documents from JPMorgan and to pursue possible legal claims. U.S. Bankruptcy Judge James M. Peck is scheduled to hold a hearing Oct. 16 on that request, the creditors said.”

The Times of London added:

“Lehman’s collapse is fast emerging as the single biggest event of the credit crunch, sparking a number of unexpected effects. The unravelling of the firm’s prime brokerage operations has already forced a number of hedge funds out of business.”

Stay tuned — this charge may have legs . . .

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Sources: Lehman Cash Crunch Caused by Lender JPMorgan, Creditors Say Linda Sandler and Jeff St.Onge Bloomberg, Oct. 4 2008 http://www.bloomberg.com/apps/news?pid=20601109&sid=aOBEg1wAitck&

JP Morgan ‘brought down’ Lehman Brothers Iain Dey and Danny Fortson The Sunday Times, October 5, 2008 http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4882281.ece


Originally published at The Big Picture and reproduced here with the author’s permission.

2 Responses to "Did JPM Cash Call Bring Down Lehman ?"

  1. Guest   October 5, 2008 at 1:14 pm

    All these collapses trace back to Credit Default Swaps. CREDIT DEFAULT SWAPS. Amazing. The entire western worlds financial system was risked on over the counter, unregulated credit default swaps.

  2. Guest   October 6, 2008 at 4:48 am

    Somebody said that Lehman was doing business with Venezuela. That might have been a potential assasination reason. These days the financial market players are without morals,without ethics, without integrity and are outright indecent. Therefore most clients wish to leave the big brokerage firms and rightly so. The FRB should also be nationalized as it has become too political and JP Morgan has become a predator of the FED