The End of Lehman

As we speak, there are scores of bankers in conference rooms at Lehman trying to figure out the literal terminal value of the firm. If their conclusions point to a negative net worth, Lehman may be hosed. A credit downgrade and the desertion of clients will start a chain of events that quickly lead to complete insolvency. Lehman may be left to die alone. The assets will meet the liabilities in a brilliant explosion that burns away any remaining equity and potentially singes the debtholders as well.

Some have suggested that a stealth bailout may be possible, but even under this rosy scenario, Bank of America or some other unlikely 'savior' will simply use the government backstop to unwind Lehman to a modest profit.

Perhaps, in a boardroom at the Fed, the big boys will collectively recall that love is greater than faith. They will announce a plan whereby Lehman's equity will be replenished with warm and fuzzy feelings. The debtholders will receive coupons of hugs and a principal repayment in kisses. This is the best hope for my once mighty employer.