Feds: No Need to Step in for Lehman Investors

U.S. regulators said Monday morning they did not see an immediate need to step in on behalf of investors in Lehman Brothers Holdings Inc.'s securities in the wake of the company's bankruptcy filing, which the parent company's broker-dealer is somewhat distanced from. However, there are fears that the move could eventually affect broader mortgage-related securities markets. On Monday morning, Moody's Investors Service analysts in London were examining what the impact of LBHI’s bankruptcy and a downgrade of LBHI's ratings might be on numerous structured finance transactions with exposure to Lehman entities. (The downgrade applied only to the company's corporate ratings, not the exposed structured finance ratings.) The analysts identified residential and commercial mortgage-backed securities as among the asset classes most likely to be affected. Analysts in the New York office of rating agency DBRS further warned "that the liquidation of Lehman's $639 billion balance sheet," which could result from the bankruptcy filing, could "add further pressure to asset valuations and ... also adversely impact other financial services firms, which will have to mark their holdings to market, thus exacerbating the capital and liquidity pressures facing the industry." Lehman's stock was trading at about 15 cents per share at midday Monday.