bank run blog

In what some analysts are already calling a “stealth bailout”, it looks as though the Fed and the Treasury have secretly and improperly intervened on behalf of beleaguered Lehman Brothers Holdings. This morning the Wall Street Journal is reporting :

“In an apparent attempt to prevent a repeat of the cascading rumors that helped sink Bear Stearns Cos., the Federal Reserve last month quietly called one major bank to see if it had pulled a credit line from Lehman Brothers Holdings Inc., people familiar with the matter said.

Responding to a July rumor that Credit Suisse Group planned to pull a line of credit to Lehman, Federal Reserve officials called to see if it was in fact true, according to these people. Credit Suisse told Fed officials there was no truth to the rumor and it had no intention of pulling the line of credit, the people said.”

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Reuters notes that the contact with the Swiss bank came at roughly the same time as SEC subpoenas were issued in July :

“Fed officials contacted Credit Suisse last month, but it is unclear whether the move occurred before or after the U.S. Securities and Exchange Commission subpoenaed dozens of hedge funds and financial firms about four Lehman-related rumors, the paper said.”

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