LONDON: Financial market traders across London have been told by their firms to stop dealing with Bear Stearns, while dealers in New York scaled back their transactions with the ailing investment bank, sources in several dealing rooms said on Friday.
At least six major institutions in London — including Commerzbank , Royal Bank of Scotland and JPMorgan — had stopped giving prices to the U.S. bank, a credit trader at one European institution in London, who declined to be identified, told Reuters.
Credit Suisse had also stopped trading with Bear Stearns , a London-based equities broker said.
None of the institutions named by the traders would comment on the subject when contacted by Reuters.
A London-based government bond trader said banks had been withdrawing from transactions with Bear Stearns since Thursday. …
I am “hearing” that Lehman — which dropped 14 percent today — is currently “extremely” stable in cash terms, although I have no idea how any one person, even a very highly-placed one, could be sure of any major banking institution’s financial status. All the major financial institutions have sprawling off-balance-sheet vehicles, some of which are only known by certain parts of the respective banks.
As far as BSC is concerned, the regulators seem completely out to lunch. Apparently, BSC has a colossal subsidiary, or off-balance-sheet vehicle, or something, domiciled in Dublin, which has a leverage multiple in the hundreds. And it’s cooked. I believe that the regulators/ Fed have once again been fed woefully incomplete information on the true state of Bear’s finances.
My guess is that Lehman is the counterparty in some disproportionate number of the derivatives tied to BSC’s Dublin vehicle, which are now worthless because their counterparty, Bear, won’t be able to pay up.
In gold we trust …