Wall Street rallies to aid Lehman

Helen Power and James Quinn
London Telegraph
Tuesday, March 18, 2008

Wall Street's leading investment banks have rallied around ailing rival Lehman Brothers after the Federal Reserve Bank of New York urged them to support the institution in order to try and preserve financial stability.

It is understood the New York Fed contacted key executives at a number of leading banks, including Goldman Sachs, Citigroup and Morgan Stanley, to discuss Lehman's situation over the weekend.

By yesterday morning, the banks' prime brokerage departments - which service hedge fund clients - were under strict instructions not to do or say anything in the market that could damage Lehman.

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The intervention is important because Wall Street fears a repeat of the events which led to the weekend's rescue of Bear Stearns. The bank was fatally damaged when hedge funds closed out their positions, demanding immediate repayment of the cash.

One American banker said: "[We heard] from the top, 'Do not encourage calls to Lehman clients. We want to run that up the flagpole. We don't want another run on a bank.' "

As a result, it is believed that bankers were told not to solicit Lehman's clients for business or to give the impression the bank is uncreditworthy.

Full article here.

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