How often does the NY Post beat the Journal and the Times to a good financial story? Today they did, noting that Lehman tried to secure $5 billion of rescue capital from South Korea, but failed to do so:
Lehman Brothers’ embattled Chief Executive Dick Fuld nearly struck a deal to raise almost $5 billion from South Korean wealth funds and institutions but the pact disintegrated, according to sources familiar with the matter.
That’s the meat of the article. No word on why talks broke down, what Lehman was offering to sell the Koreans, etc. Speaking of the GSEs, the WSJ published a front page story today with this crucial paragraph:
[Freddie] had to pay hefty interest rates [in an auction of its debt yesterday]….Five-year notes were priced to yield 4.172%, or 1.13 percentage points above yields on safe Treasury notes, the highest “spread” Freddie has ever paid on such debt.
Among the largest buyers of GSE debt are foreigners recycling the dollars they collect as part of their trade surpluses. And the GSEs now finance virtually the entire U.S. mortgage market. If foreigners stop buying GSE bonds, the capital available to finance housing will be reduced significantly, and mortgage rates will spike. [Indeed, in this latest auction, Europeans/Asians bought 41% of Freddie’s debt, which is down from an average of 51% last year.] Anyone who thinks the fall in housing prices can’t get much worse hasn’t considered what will happen if mortgage rates go to 9-12%. More
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