Information on Lehman Bankruptcy and Related Issues

Updated: 9/15/08 1:00 PM EDT

News Items

  • 9/15/08: A group of global commercial and investment banks “initiated a series of actions to help enhance liquidity and mitigate the unprecedented volatility and other challenges affecting global equity and debt markets.” www.businesswire.com/news/home/20080914005082/en

Industry Information

Quick Links:

DTCC / FICC

  1. DTCC Website: www.dtcc.com
  2. 9/15/08: MBS Division of FICC Important Notice: “Lehman Brothers, Inc. currently is in full compliance with the membership requirements for an MBSD participant.  This is to inform you that at the present time, FICC is continuing to act for Lehman and will keep members informed of ongoing developments at FICC regarding Lehman.”
  3. 9/15/08: Government Division of FICC Important Notice: “Lehman Brothers, Inc., currently is in full compliance with the membership requirements for a GSD member…This is to inform you that at the present time, FICC is continuing to act for Lehman and will keep members informed of ongoing developments at FICC regarding Lehman…We also wish to emphasize that all transactions entered into by netting members in good faith with Lehman that have been compared by FICC remain fully guaranteed as to their settlement.”
  4. 9/15/08: NSCC Important Notice: “Lehman and Neuberger Berman are currently in full compliance with their respective NSCC membership requirements…This is to inform you that at the present time, NSCC is continuing to act for Lehman and Neuberger Berman and will keep members informed of ongoing developments regarding these entities…We also wish to emphasize that all transactions entered into by Members in good faith with Lehman that have reached a guarantee of settlement pursuant to Addendum K in NSCC’s Rules remain fully guaranteed as to their settlement.”
  5. 9/15/08: DTC Important Notice: “Lehman, Lehman Bank and Neuberger Berman are currently in full compliance with their participation requirements…This is to inform you that at the present time, DTC is continuing to act for Lehman, Lehman Bank and Neuberger Berman and will keep Participants informed of ongoing developments.” Note from SIFMA for fixed-income trades done ex-FICC: Trades in government securities or MBS conducted by FICC participants within FICC’s clearing and settlement system would be subject to FICC rules and procedures of insolvent counterparties should FICC determine that a counterparty is insolvent and FICC ceases to act for that counterparty (which has –not- happened at this time).  Trades that are cleared ex-FICC’s clearing and settlement systems would be subject to the terms and conditions of the governing documents of those trades, such as forward transaction agreements or master repurchase agreements, or other forms of documentation. As to specific transactions, those with questions should refer to their internal or external counsel.

Federal Reserve

  1. Websites: www.federalreserve.gov, www.newyorkfed.org
  2. 9/15/08: The Fed announced a number of steps to boost liquidity:
    • PDCF-eligible collateral to 'closely' match collateral accepted in BONY/Chase tri-party repo systems (no expiry noted)
    • TSLF schedule 2 auctions to allow all IG debt  (no expiry noted)
    • TSLF schedule 2 auctions to be held every week, upsized (no expiry noted)
    • Temporary exception to the limitations in Section 23A of the Federal Reserve Act to allow all insured depository institutions to provide liquidity to their affiliates for assets typically funded in the tri-party repo market. This exception expires on January 30, 2009
    • Statement: www.federalreserve.gov/newsevents/press/monetary/20080914a.htm
  3. Updated 9/15/08: Primary Dealer Credit Facility: Program Terms and Conditions
  4. Updated 9/15/08: Primary Dealer Credit Facility: Frequently Asked Questions
  5. Updated 9/15/08: Term Securities Lending Facility: Program Terms and Conditions
  6. Updated 9/15/08: Term Securities Lending Facility: Frequently Asked Questions
  7. Updated 9/15/08: Tentative TSLF Auction Schedule During Transition From Current Cycle (pdf)

International Swaps and Derivatives Association (ISDA)

  • ISDA Website: www.isda.org
  • 9/15/08: Comments on Recent Market Developments: “ISDA is working with all constituents across the industry to realize swift and smooth resolution in closing out bilateral derivatives positions in which Lehman Brothers Holdings Inc. is either a counterparty or reference entity.”
      http://www.isda.org/press/press091508.html

SEC

  1. Website: www.sec.gov
  2. 9/15/08: “The decision by Lehman Brothers Holdings Inc. to file for protection under Chapter 11 of the bankruptcy laws is expected to lead to the winding down of Lehman Brothers Inc., its U.S. regulated broker-dealer, outside of bankruptcy…In cases such as this, Lehman Brothers’ customers will benefit from their extensive protections under SEC rules, including segregation of customer securities and cash as well as insurance by the Securities Investor Protection Corporation.”

CFTC

  1. Website: www.cftc.gov
  2. 9/14/08: Statement: “The CFTC is closely monitoring the markets in connection with recent challenges faced by Lehman Brothers Holdings, Inc., and other market developments. The CFTC has been coordinating closely with other Federal and international regulators and self-regulatory organizations to ensure that customers of Lehman’s CFTC-regulated futures commission merchant are protected, and to take steps to maintain the stability and orderliness of the commodity futures and options markets.”

U.S. Treasury

  1. Website: www.treasury.gov
  2. 9/15/08: “These initiatives will be critical to facilitating liquid, smooth functioning markets, and addressing potential concerns in the credit markets.”

UK FSA

  1. Website: www.fsa.gov.uk
  2. 9/15/08: Statement: “The FSA is working with market practitioners, including the London Clearing House (LCH), to ensure the process connected with the winding down of this wholesale business is completed in an orderly manner to minimise any market disruption.”

LCH Clearnet Group

  1. Website: www.lchclearnet.com/ 
  2. 9/15/08: LCH Clearnet has posted a default notice in respect of Lehman Brothers International Europe
  3. 9/15/08: LCH Clearnet has posted a default notice in respect of Lehman Brothers Specialty Finance Inc.

Bank of England

  1. Website: www.bankofengland.co.uk/
  2. 9/15/08: Statement of BoE: Following the announcements overnight, the Bank of England will be monitoring carefully the conditions in sterling money markets and will take appropriate actions if necessary to stabilise those markets.  http://www.bankofengland.co.uk/publications/news/2008/048.htm

European Central Bank

BACKGROUND INFORMATION

Lehman Brothers Bankruptcy Filing

  1. 9/15/08: Lehman Brothers filed for Chapter 11 bankruptcy on September 15, 2008.
    • [link to “Lehman Bankruptcy Petition”, “Lehman Bankruptcy Affidavit”]
  2. 9/14/08: Press release from Lehman Brothers:

Bank of America’s Purchase of Merrill Lynch

  1. 9/15/08 Merrill Lynch Press Release:
  2. 9/15/08 Bank of America Press Release:

 

 

Contact Information

Staff Contact:
Rob Toomey

Chris Killian