I joked last weekend with a friend before my weekly radio show about starting a pool to try to guess when the next big bank/brokerage firm would need a bailout. The wager was sealed before the ink on the Fannie/Freddie stories was even dry.
Little did we know at the time that our sidebar gentleman’s wager might come into play just a week later. Here we are, heading into another weekend, and the rhetoric about the Fed/Treasury now stepping into to bail out Lehman brothers is reaching fever pitch. In case anyone hasn’t noticed, their stock (NYSE:LEH) is down over 90% in the last year, and a whopping 70% in the past two weeks as their situation continues to deteriorate.
A required bailout of Lehman would bring the total bailouts for major firms this year to 4. Rumors on the street have it that Washington Mutual is next in line after Lehman. They’d better get one of those gadgets they use at the cold cut counter at the grocery store where you take a paper ticket then wait for them to call your number. I have a feeling these firms are about to start dropping like flies. Soon FDIC and PBGC will be at the Fed/Treasury begging bowl with hat in hand.
Disclosure: Short XLF