No government assistance this weekend

As Lehman Brothers, one of oldest names on Wall Street, appeared to unravel on Sunday, anxiety over the bank’s fate — and over what might happen next — gripped the nation’s financial industry. By late afternoon, Merrill Lynch, under mounting pressure, entered into talks to sell itself to Bank of America.

While the New York Times waxed on about spoiled cocktail parties and canceled weekends in the Hamptons, Bloomberg noted that Lehman’s lawyers were prepping Chapter 7 paperwork and the Wall Street Journal said the Merrill Lynch board was nearing a vote on a $29/share sale to Bank of America.

After reviewing chatter around the web, I’ll say the consensus expectation is that Washington Mutual is a foregone conclusion, and that Wachovia and AIG are not far behind.

I guess the powers that be in the United Socialist State Republic of America figured they’ve already bitten off a century’s worth of meals with Fannie and Freddie.

UPDATE: The Fed has been clocking some overtime - according to their now regular Sunday press release, they are “broadening” the Primary Dealer Credit Facility and the Term Securities Lending Facility (i.e. the emergency conduits for the printing of money in return for collateral of declining value). In particular…

The collateral eligible to be pledged at the Primary Dealer Credit Facility (PDCF) has been broadened to closely match the types of collateral that can be pledged in the tri-party repo systems of the two major clearing banks. Previously, PDCF collateral had been limited to investment-grade debt securities.

Unless I am completely off base, this means that the PDCF will now accept equity securities in return for short-term loans. The tri-party repo system is run primarily by Bank of New York and JP Morgan Chase - this is the kind of move that would reflect either 1) declining confidence in their ability to continue clearing the transactions or 2) something done with their prodding in order to reduce their own counterparty risk.

Big stuff.

UPDATE 2: Lehman files Chapter 11.

When I first read the headline, I thought fair enough - if Bank of America backs out they should pay a breakup fee.

But alas, it’s Countrywide that will be doing the paying.

Potentially scary for the troubled mortage lender. While we don’t have full details, you might expect to see some type of minimum net asset clause and/or litigation contingencies in the deal sheet, meaning if Countrywide happened to have more skeletons in the closet they would wind up paying for it.

UPDATE: The Wall Street Journal agrees, and also notes that Countrywide stock price reflects a decent amount of skepticism.

Trading Rule #1: Never, Ever, Ever, Under Any Circumstance, Add to a Losing Position.

Yep. Number two would cut losses quickly, and number three would be double up on your winners. Even casual casino gamblers can win, if they do this while understanding and following game fundamentals.

UPDATE: The deal is now underway - it’s an all equity transaction at a hair under one share of B of A for each five shares of Countrywide priced out at around $7.20. CFC fell to $6.33 by the end of the day today, which could suggest some think the transaction will wind up more dilutive to B of A shareholders than management does. Meanwhile, Robert Shiller is questioning the whole deal - you can’t help but believe such skepticism has a solid foundation attached when it comes from him.

Close enough.

It’s come join the SuperSIV party, but not everyone is up for the cocktail:

Loomis Sayles & Co. declined to invest after receiving one of 16 invitations for a personal meeting last week with current Fed Chairman Ben Bernanke, said Daniel Fuss, who oversees $22 billion as chief investment officer at the Boston-based firm.

“It’s so nice to get a personal invitation to go to Washington and have a one-hour visit with Ben Bernanke,” said Fuss, who decided participating wasn’t worth the risk to his firm. “Oh, boy, did I feel important for about 27 seconds, and then you smell a rat.”

PNC Bank of Pittsburgh has noticed phishing emails bearing its name floating around, and is warning customers about it.

All I can say is “right on” - it is always good to see financial institutions taking proactive steps to protect their customers (particularly as the bank winds up paying for it in the long run, and passing the costs of fraud onto all customers in the form of higher rates and fees).

I’ve noticed other banks trying to head this problem off; CompassBank puts fraud warnings on their login pages, and Bank of America has gone with a funky multi-step login process, complete with image identification, that would be damn hard for a phisher to duplicate.

Now if my bank would only do the same.

***UPDATE***

You could also say it’s about time they got off their asses - bank attacks have surged in past year.

***UPDATE 2***

I guess I should be glad I don’t bank at the NAB. Now that I think of it, I was always a Westpac kinda guy anyway.

It took a while, but despite Bank of America’s public relations move in the security realm, they are not going to escape the legal system over their massive customer data “leak.”

After notifying each customer for which data was pilfered and offering free credit monitoring services, they are finally getting sued.

Hot on the heals of handing a pile of data over to crooks, Bank of America is launching a new identity theft protection initiative targeting users of their internet banking services.

The new service, dubbed SiteKey, uses a combination of an image, user-created phrase and three challenge questions to authenticate both the customer’s identity and the authenticity of Bank of America’s Web site when customers log on.

Techdirt called the reaction to identity theft misguided, and I have to say that this latest from Bank of America seems right in line. Create some spin around the lack of internet security and how you are going to solve that, while customer data flies out the back door.