Quick Hits: Lehman Ducks, Lame Duck

"The worst is behind us," said CEO Richard Fuld in April at the annual shareholders meeting of Lehman Brothers Holding Inc. Oh, yeah? Then why did the Wall Street Journal report yesterday that Lehman may be issuing more common stock to raise $4 billion--just two months after a preferred-stock offering? The report sent Lehman's stock down almost 10% in one day, bringing the cumulative decline to over 50% since January 1.

Late yesterday Lehman, the fourth largest U.S. securities firm, denied rumors that it was borrowing from the Federal Reserve. "We did not access the primary dealer facility today," insisted Treasurer Paolo Tonucci. That lending facility allows an investment bank temporarily to swap illiquid assets for U.S. Treasuries, buying time until either the assets resume trading or the bank raises new capital.

Lehman next reports quarterly earnings on June 16, and losses are expected. By month's end Fuld may be gone, following Wachovia's CEO (G. Kennedy Thompson was dismissed Monday) into early retirement.

I'm here to give you some important advice, said President George W. Bush to Furman University's graduating class on Saturday. "My advice to you is not to dig a financial hole that you can't get out of. Live within your means."

Words from the master. During the Bush II adminstration the federal debt has increased by two-thirds to $9.4 trillion, and outstanding debt to foreigners has doubled. The private sector has followed suit, with home mortgage debt doubling and domestic financial debt (engineered by the likes of Lehman Bros.) increasing by two-thirds. These are staggering numbers. Says former comptroller general David Walker, "we have gone from a point where we were projected to pay off all the federal debt and have fiscal sustainability for 40-plus years to a point where we have large and mounting debt burdens and the simulation model that is used by GAO to project fiscal sustainability crashes in about 40 years."

[For more on Walker's concerns, see my Feb. 25 post.]