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By Pat Dorsey, CFA | 09-12-2008 03:34 PM

Weighing Outcomes for Lehman, WaMu

What may be next for the beleaguered financials firms. (9/12/2008)

Pat Dorsey: Hi, I'm Pat Dorsey, director of equity research at Morningstar. Looks to me like financial regulators are pretty much playing "whack-a-mole" with the financial services market right now. On Monday they thought they'd kind of cleaned up the Fannie and Freddie mess and removed a lot of uncertainty for the markets and what happens, Lehman LEHMQ and WaMu WM pop their heads up and have to be dealt with. Let's talk about those two in sequence.

Lehman, you know, the survival is looking fairly uncertain at this point, lot of rumors about whether the company will be purchased in whole or in part, the company has obviously been shopping itself and various bits of itself, especially its valuable Neuberger Berman asset management unit for some time. Hasn't been able to get a deal done and you know the problem when you're trying to do a deal, lots and lots of people say no and the next folks she talked to, they're probably going to wind up at a lower price.

So CEO Dick Fuld's negotiating hand at Lehman, not very strong right now. Odds are good that something will happen over the weekend, these things seem to happen over the weekends, while people have time to kind of take a deep breath and put things together. You know as treasury secretary Paulson has been out saying we will not be back stopping this one, we will not be doing the same thing that we did with Bear Stearns, personally I think that's a negotiating tactic, of course he's going to say that, he sort of has to say that in a way and you know even though he'd make the argument that today we have the Fed liquidity window open to back stop Lehman, didn't have that when Bear Stearns went through its troubles back in March.

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